Mains Paper 3: Indian Economy and issues relating to planning, mobilization of resources, growth and development, employment.
From UPSC perspective, the following things are important:
Prelims level: Fiscal Deficit and Fiscal Consolidation
Mains level: Steps to revive economy
- The article talks about the newly constituted Economic Advisory Council to the Prime Minister. It also talks about the future roles of this council.
What is the PM-EAC?
- The Prime Minister’s Economic Advisory Council was first set up in the year 2004 by the then PM Dr. Manmohan Singh. However, in 2014 it was disbanded by the government.
- The re-constitution of the PM-EAC came in the backdrop of growing concerns over the pace of growth in the economy and the slow pace of job creation.
- This council consists of Bibek Debroy (Chairperson) and members as Surjit Bhalla, Rathin Roy, Ratan Watal and Ashima Goyal.
What are its tasks?
- The council recognised the need to accelerate economic growth and employment over the next six months.
- The Council recognised the need for instituting an Economy Track Monitor, using lead indicators and triggers for action, based on informed assessment and analysis.
- It will provide specific recommendations for tackling the economic slowdown.
- The EAC identified ten themes on which reports will be prepared:
- economic growth;
- employment and job creation;
- informal sector and integration;
- fiscal framework; monetary policy;
- public expenditure;
- institutions of economic governance;
- agriculture & animal husbandry; and
- patterns of consumption & production and social sector.
- The Council will work in consultation with various stakeholders, including sectoral ministries, states, experts, institutions, regulators and the private sector.
The council has consensus on two things:
- There is economic slowdown in the country, we need to look into the causes.
- The government should not breach the targets of fiscal consolidation and fiscal deficit (3.2 per cent of GDP for current financial year).
- Fiscal Deficit: A Fiscal Deficit occurs when government’s total expenditures exceed its total revenues (excluding borrowings).
- Fiscal Consolidation: The steps taken by government to reduce its fiscal deficit and debt are known as Fiscal Consolidation. This includes raising taxes, dis-investment in PSUs, rationalisation of subsidies etc