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6 Undoing the gains Intro:- Farm loan waivers- loan waivers of February 1990 by the National Front government led to sharp fiscal deterioration and the subsequent balance of payments crisis. Subsequent loan waivers had similar results. Finance Minister has spoken wisely that the Central government has no role to play. State governments are entitled to take such decisions but manage their financial consequences. Farm loan waivers are a subset of the broader issue of sustainable State finances. We need to address several issues 14th Finance Commission recommendations, the total State expenditure is higher than even the Centre s. Many State governments have adopted State-level fiscal laws and adhered to the 3% fiscal target under the State-level FRBMs (Fiscal Responsibility and Budget Management Act). Report of the RBI, State Finances: A Study of Budgets , has some worrying conclusions. The combined deficit of the States reached 3.6% of GDP in FY16, significantly higher than 2.6% in the previous year

7 Continue The fiscal consolidation of the Centre is more than offset by expansion of the States. Explained by the State power distribution companies (DISCOM) debt. Debt is considered sustainable if debt-gdp ratio is stable or on a declining path. Picture persists(बन रहत ह ), State debts will increase from close to 20% of GDP to 35% of GDP over the next 10 years. A significant consolidation by the States would be needed to keep the debt ratio stable. There are three short-term steps 1)-First, we must improve the due diligence(careful) by the Central government in giving consent to borrowings by States under Article 293 of the Constitution. Monitors of FRBM obligations-criteria must be transparent and apolitical in character. 2)-Second, whenever the Central government breaches(उल ल घन ) the fiscal norms, it secures parliamentary approval. State governments must be encouraged to adopt a similar practice by securing the approval of the State Legislature

8 Continue 3)-Third, regulatory measures can be devised to enable bond yields to be responsive to market signals and bridge the information asymmetry between markets and State finances of the concerned State governments. 15th Finance Commission must address the broader issue of adherence by States to fiscal obligations.

9 Continue The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) is an Act of the Parliament of India to institutionalize financial discipline, reduce India's fiscal deficit, improve macroeconomic management. The main purpose was to eliminate revenue deficit of the country (building revenue surplus thereafter) and bring down the fiscal deficit to a manageable 3% of the GDP by March However, due to the 2007 international financial crisis the deadlines for the implementation of the targets in the act was initially postponed and subsequently suspended in In 2011, given the process of ongoing recovery, Government of India to reconsider reinstating the provisions of the FRBMA. N. K. Singh is currently the Chairman of the review committee for Fiscal Responsibility and Budget Management Act, 2003, under the Ministry of Finance (India), Government of India.

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13 Impact of Fiscal Deficits

14 Deep-sea dive RIL-BP to invest $6 billion in Krishna Godavari basin After a lull of eight years, Mukesh Ambani-led Reliance Industries, along with partner BP Plc., has decided to invest $6 billion in the controversial KG-D6 gas block to bring new gas to production even as earlier $9 billion of investments in the block saw production falling to over one-tenth of an anticipated 80 mmscmd (million metric standard cubic metres per day). Aimed at developing about three trillion cubic feet of resources that will result in production of an additional million cubic metres of gas every day over three to five years. BP s purchase of a 30% stake in some of RIL s oil and gas production-sharing contracts in 2011, this pact signals a growing comfort with and acceptance of the Centre s new gas pricing policy Petroleum and Natural Gas Minister Dharmendra Pradhan had invited the two companies to invest in fuel retailing

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16 Q- Ans Two nation theory given by MA Jinnah The two-nation theory was the basis for the partition of India in After independence- Minister of Law B. R. Ambedkar Minister of Education Maulana Abul Kalam Azad M K Gandhi Birth- 2 October 1869 Porbandar Gujarat, India. Died- 30 January Gandhi Smriti formerly known as Birla House is a museum dedicated to Mahatma Gandhi, situated New Delhi, India Prohibits child labour in hazardous industries Fundamental Right under Article 24.

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