Q. Consider the following statements regarding measures to achieve “Fiscal Consolidation” in India:
1. Cutting down the burden of salaries and pensions.
2. Cutting down the Administered Price Mechanisms.
3. Higher education declared as non-priority sector.
Which of the statements given above is/are correct?

[A] 1 only

[B] 1 and 2 only

[C] 3 only

[D] 1, 2 and 3

Answer: D

India started the politically and socially painful process of fiscal reforms, a step towards fiscal consolidation. A number of steps were taken by the government at the Centre in this direction and there had been incessant attempts to do the same in the states’ public finances too. Major highlights in this direction can be summed up as given below: 

Policy initiatives towards cutting revenue deficits: 

  • Cutting down the burden of salaries, pensions and the PFs (downsizing/ right-sizing of the government, out of every 3 vacancies 1 to be filled up, interest cut on the PF, pension reforms-PFRDA, etc.); 
  • Cutting down the subsidies (Administered Price Mechanism in petroleum, fertilizers, sugar, drugs to be rationalised, it was done with mixed successes); 
  • Interest burden to be cut down (by going for lesser and lesser borrowings, pre-payment of external debts, debt swaps, promoting external lending, minimal dependence on costlier external borrowings, etc.); 
  • General Services to be motivated towards profit with subsidized services to the needy only (railways, power, water, etc.); 
  • Postal deficits to be checked by involving the post offices in other areas of profit; 
  • Higher education declared as non-priority sector; fees of institutions of professional courses revised upward; etc. 

Source: Ramesh Singh