SYLLABUS SECTION: GS III (ECONOMY)

WHY IN THE NEWS?

India’s macro risks have reced but the fiscal deficit target being breach may be misplace, the Finance Ministry assert.

Macro risk has receded, inflationary pressure continues and the rupee depreciation,

Along with the elevated global commodity prices has made imports costlier.

Agriculture is picking up momentum with the revival in monsoon and Kharif sowing,

And favourable terms of trade for agricultural commodities has triggered a recovery in rural demand

The services sector recovery is continuing and manufacturing strength is steady.
The share of the Indian private sector in total investment proposals reached a record high of 85%, rising from an average of 63% in the preceding four quarters.
The robust GST collection, increase in customs duties, and imposition of windfall tax are expecting to boost government revenues and assist in keeping the fiscal deficit to GDP ratio unchange from its budget level.

As long as retail inflation in India continues to be higher than RBI’s tolerance level of 6%, stabilisation policy measures will need to continue.
Recent moderation in the international prices of food items, industrial metals, and even crude oil are welcome developments for India’s inflation control.
This would weaken inflationary pressures in India and rein in inflation. The report added India has also diversified its crude imports, increasing its sourcing from Russia.

A fiscal deficit is a shortfall in a government’s income compared with its spending. The government that has a fiscal deficit is spending beyond its means.
A fiscal deficit is calculated as a percentage of gross domestic product (GDP), or simply as total dollars spent in excess of income.