UnderStand UPSC GS 3 Day 2 PYQ Model Answers

Q.1. What are the salient features of ‘inclusive growth’? Has India been experiencing such
a growth process? Analyze and suggest measures for inclusive growth. (2017 /15)

Intro: UNDP defines inclusive growth as a process that allows all individuals and groups, regardless
of their circumstances, to participate in and benefit from the opportunities generated by economic
growth. It emphasizes the need to ensure that economic development translates into improved well-
being of the most vulnerable and marginalized populations.

Salient Features of ‘Inclusive Growth’:-

1. Reduction of Income Inequality: Inclusive growth aims to narrow the gap betweenthe rich
and the poor.
2. Poverty Reduction: Inclusive growth seeks to lift people out of poverty by providing them
with opportunities for education, employment, and social services.
3. Access to Basic Services: Inclusive growth ensures that all members of societyhave
access to essential services such as healthcare, education, housing, and clean water.
4. Social Protection: Inclusive growth promotes job creation and ensures that
employment opportunities are available to all segments of society, including women,
youth, and marginalized groups
5. Gender Equality: Inclusive growth promotes gender equality by ensuring that women
have equal access to education, employment, and economic opportunities.
6. Environmental Sustainability: focus on green growth such as Solar Energy
7. Financial Inclusion – Financial inclusion is crucial for inclusive growth because it
encourages saving, which fuels economic growth.

Evidence Showing India Experience Inclusive Growth: -

1. Reduction in Poverty Rates: According to the World Bank, the percentage of

India's population living below the national poverty line decreased from 21.9% in2011-12
to 13.4% in 2021-22.
2. Expansion of Social Protection Programs: National Social Assistance Programme (NSAP)
provide financial assistance to millions of vulnerable individuals. As of
2020, NSAP covers over 30 million beneficiaries.
3. Improvements in Health and Education: As per NFHS a decline in infant
mortality rate from 57 per 1,000 live births in 2005-06 to 32 per 1,000 live births
in 2019-20.
 4. Expansion of Financial Inclusion: The Pradhan Mantri Jan Dhan Yojana (PMJDY) has
led to the opening of over 438 million bank accounts as of May 2022,
5. Empowerment of Women and Marginalized Groups: Initiatives such as the BetiBachao
Beti Padhao (BBBP) campaign have contributed to improvements in sex ratio at birth in
targeted districts
6. Skill Development and Employment Generation: - The Ministry of Skill
Development and Entrepreneurship reported that over 76 million people have been trained
under the Skill India Mission since its inception.
7. Environmental Sustainability and Climate Resilience: According to the Ministryof
Environment, Forest and Climate Change, India has set ambitious renewable
energy targets, aiming to achieve 450 GW of renewable energy capacity by 2030.

Evidence Showing India not Experience Inclusive Growth: -

1. Persistent Poverty Rates: According to the World Bank, 8.4% of the population lived
below the national poverty line in 2021-22.
2. Limited Impact of Social Protection Programs: Inadequate coverage and targeting
of social protection programs may result in exclusion of marginalized groups.
3. Unequal Access to Healthcare and Education: Uttar Pradesh have a higher IMR of42
deaths per 1,000 live births, while Kerala has a much lower IMR of 7 deaths
per 1,000 live births.
4. Limited Financial Inclusion: According to the Global Findex database, around 19%of
Indian adults did not have an account at a financial institution in 2022.
5. Persistent Gender and Social Inequalities: the gender wage gap remains
significant, with women earning substantially less than men for similar work.
6. Unemployment and Underemployment: According to the Centre for Monitoring Indian
Economy (CMIE), the unemployment rate in India stood at 8.5% in
December 2022.
7. Informal Sector Dominance: According to the International Labour Organization(ILO),
around 80% of India's total workforce is engaged in informal employment.

Measures for inclusive Growth: -

1. Investment in Human Capital: Increase public expenditure on healthcare and
education to improve access and quality of services.(Raghu Bhalla committee)
2. Skill Development and Training Programs: to bridge the gap between educationand
industry requirements. (Subramanian Committee)
3. Inclusive Policies for Women and Marginalized Groups: such as MGNREGA also
prioritizes the participation of marginalized groups such as Scheduled Castes (SCs),
Scheduled Tribes (STs)
4. Labor Market Information Systems: Develop robust labour market information
systems to track demand and supply of skills in different sectors and regions. (Dr. Arjun
Sengupta)
5. Inclusive Policies and Governance:- Implement policies and governance
mechanisms that prioritize inclusive growth, address socio-economic disparities, and
promote participatory decision-making.

6. Environmental Sustainability : such as Environmental Impact Assessment for

incorporation of project
Conclusion
Inclusive development supports the upliftment of underprivileged and marginalized communities,
elevating their quality of life. To enrich the well-being of Indians, both central and regional
administrations must persist in eliminating poverty and achieving sustainable progress."
Q.2. Is inclusive growth possible under market economy? State the significance of financial
inclusion in achieving economic growth in India. (2022 /10)

Intro: According to the World Bank, inclusive growth is "economic growth that is distributed fairly
across society and creates opportunities for all."

Milton Friedman describe market economy as "a system of economic organization characterized by the
private ownership of the means of production and distribution, the operation of a free market, and
competition for profits, which determines prices and production."
Inclusive growth under market economy
1. Increase in GDP due to Competition, Innovation, and Higher Efficiency by Private
Sector. According to a study by the World Bank the study found that a 10% increase in
competition can lead to a 1% increase in productivity growth.
2. Trickle-down Effect by Creation of Jobs and Increase in Income Levels: Research by
the International Labour Organization (ILO) found that a 1% increase in GDP can lead to a
0.6% increase in employment.
3. Increase in Tax-GDP Ratio to Fund Welfare Programmes : the OECD average tax- to-
GDP ratio increased from 24.7% in 2000 to 33.8% in 2022.
4. Indicative Planning (LPG-1991) to Achieve Inclusive Growth: India experienced
significant GDP growth and poverty reduction. For example, between 1993 and 2012, India's
GDP per capita increased by over 300%, and the poverty rate declined from 45% to 21%.
5. Infrastructure Development The Asian Development Bank estimates that every 1% increase
in infrastructure investment can lead to a 1.5% increase in GDP growth in developing
countries.
6. Investment in Human Capital: The World Bank reports that for every 1% increase in the
adult literacy rate, a country's GDP can grow by up to 2.5%.
Inclusive Growth and Market Economy may be contradictory as:
1. Limited Focus of Private Sector in Delivery of Public Goods and Services: private
schools and hospitals often cater to higher-income groups, leaving low-income individuals
with limited access to quality services.
2. Neglect of Rural and Underdeveloped Regions by Private Sector Fosters Regional
Disparities: The majority of private sector investments are concentrated in a few prosperous
states, exacerbating regional disparities in economic development.
3. Concentration of Wealth: The Credit Suisse Global Wealth Report 2021 highlights the
growing concentration of wealth globally, with the top 1% of wealth holders owning 43% of
global wealth.
4. Absence of Subsidized Prices Affects the Poor: For example, research indicates that the
removal of food subsidies can lead to increased food insecurity and malnutrition among
vulnerable populations.

5. Limited Government Role Goes Against the Social Welfare Objective: The OECD has
emphasized the importance of government intervention in addressing market failures and
promoting social welfare objectives.
Significance of Financial Inclusion : -

1. Reduction of Income Inequality: Financial Inclusion aims to narrow the gap betweenthe rich
and the poor. (Income Inequality Reduction Committee)
2. Poverty Reduction: Financial Inclusion seeks to lift people out of poverty by providing them
with opportunities for education, employment, and social services. (Poverty Alleviation and
Social Services Committee)
3. Access to Basic Services: Financial Inclusion ensures that all members of societyhave
access to essential services such as healthcare, education, housing, and clean water.
 (Basic Services Accessibility Task Force)
4. Social Protection: Inclusive growth promotes job creation and ensures that
employment opportunities are available to all segments of society, including
women, youth, and marginalized groups. (Social Protection and Job Creation Working
Group)
5. Gender Equality: Financial Inclusion promotes gender equality by ensuring that women
have equal access to education, employment, and economic opportunities. (National
Commission for women)
6. Environmental Sustainability: focus on green growth such as Solar Energy.
(Environmental Sustainability and Green Growth Task Force)
7. Financial Inclusion – Financial inclusion is crucial for inclusive growth because it
encourages saving, which fuels economic growth. (by Financial Inclusion and Economic
Empowerment Committee)
Conclusion :-
Since the 11th Five Year Plan, it has been emphasized that economic growth in India must be inclusive
to hold significance. While India's market economy has spurred significant growth, it's imperative
for the government to intervene to ensure financial inclusion and make this growth inclusive.

Q. 3. Explain intra-generational and inter-generational issues of equity from the perspectiveof

inclusive growth and sustainable development. (2020 /10)

Intro: As per World Bank, "Intragenerational Equity" refers to the fair and equitable distribution of
resources, opportunities, and benefits within the current generation.
As per UNDP, “Intergenerational equity” refers to the fairness or justice between generations,
particularly in terms of the allocation and use of resources.

Intra-generational issues of Equity

 From the perspective of inclusivegrowth:

1. Income Inequality: The World Inequality Report 2022 highlights that the top 10% of the global
population owns 76% of the world's wealth, while the bottom 50% owns just 2% .
2. Access to Education: UNESCO's Global Education Monitoring Report 2020 states that approximately
258 million children and youth were out of school.
3. Healthcare Disparities: According to the WHO's 2019 report, there is a significant disparity in
healthcare access within generation. Eg: Disparity in Healthcare services accessibility during covid-
19.
4. Disparities in Living Standards: Housing affordability and quality can vary greatly within a
generation, influencing overall quality of life. Eg: South Bombay & world’s largest slum area -Dharavi.

 From the perspective of Sustainable development:

1. Resource Depletion: The United Nations' Global Resources Outlook 2019 warns that current
patterns of resource use are unsustainable. Overexploitation by some groups can deplete resources,
impacting those with less access.
2. Biodiversity Loss: The Global Assessment Report on Biodiversity and Ecosystem Services by
IPBES (2019) highlights that one million species are at risk of extinction.
3. Pollution: The Lancet Commission on pollution and health reports that pollution is responsiblefor 9
million premature deaths annually.
Inter-generational issues of Equity
 From the perspective of inclusive growth:
1. Debt and Fiscal Responsibility: Public debt and fiscal policies passing on excessive financial burdens
to future generations. As per IMF, 30% of rural India are under debt burden.
2. Gender Inequality: The Global Gender Gap Report 2021 by the World Economic Forum indicates
that it will take approximately 135.6 years to close the global gender gap at the current rate of progress.
3. Disparity in Access to technology and Skills : This can impact opportunities for employment,
education, and participation in the digital economy of 21 st century.

 From the perspective of Sustainable development:

1. Environmental Degradation: Environmental damage such as climate change, deforestation, and
pollution can undermine the quality of life for future generations, depleting natural resources and
causing long-term ecological harm.
2. Infrastructure and Urban Development: Investing in short-term infrastructure without
considering long-term impacts can lead to inadequate or outdated facilities for future generations.
Eg: Unplanned development of Delhi city led to urban crisis in present time.

Way Forward for inclusive growth and sustainable development:

1. Enhancing Access to Quality Education: The National Education Policy (NEP) 2020 emphasises
universal access to quality education, reducing drop-out rates, and ensuring equity and inclusion in
education.
2. Improving Healthcare Access and Affordability: WHO underscores the importance of universal
health coverage to ensure that everyone can access necessary health services without financial hardship.
3. Boosting Infrastructure Development: The Kelkar Committee recommends enhancing investment
in infrastructure through PPPs, ensuring efficient project management, andimproving connectivity in
rural areas
4. Promoting Financial Inclusion: C. Rangarajan committee recommends expanding banking services
to underserved areas, increasing the use of digital financial services, and promoting micro finance
institutions.
5. Creating Employment Opportunities:The NITI Aayog's Strategy for New India @75 emphasises
skill development, entrepreneurship, and the promotion of labor-intensive sectorsto create jobs.
6. Ensuring Gender Equality: The World Economic Forum's Global Gender Gap Report 2021 stresses
the need for policies that promote gender equality in education, employment, and political
representation.
7. Strengthening Social Safety Nets: The World Bank's World Development Report 2019 emphasises
the importance of social protection systems to reduce poverty and inequality.

Conclusion:
The ideas of inclusive growth and sustainable development are fundamental to the global welfare agenda,
driven by the principles of ensuring fairness both within the current generation and between future
generations. It will also help to achieve SDG-8 (Promote inclusiveand sustainable growth)
Q.4. Women empowerment in India needs gender budgeting. What are the
requirements and status of gender budgeting in the Indian context? (2016 /12.5)

Intro: UNDP defines Gender budgeting as an approach to budgeting that takes into account the impact of
budgets on gender equality and women's empowerment, ensuring that resources are allocated in ways that
promote gender-responsive policies and address gender disparities.

Women empowerment in India needs gender budgeting:

1. Addressing Gender Disparities: According to the Global Gender Gap Report 2021 India ranked
140th out of 156 countries
2. Economic Participation: Gender budgeting can help allocate resources towards programs that
encourage female employment and entrepreneurship.
3. Healthcare Access: According to the National Family Health Survey (NFHS-5) 2019-20,
only 78.9% of women received antenatal care. Gender budgeting can ensure better allocation of
funds towards maternal and child health services.
4. Education: Gender budgeting can enhance funding for girls' education and vocational training
programs.
5. Political Representation: Women constitute only 14.4% of the Lok Sabha as of 2021.
Gender budgeting can support initiatives aimed at increasing women’s political participation and
leadership roles.
6. Safety and Security: Gender budgeting can allocate funds for protective services, legal aid, and
support systems for survivors of violence.
7. Rural Women’s Empowerment: Gender budgeting can ensure that rural development programs
are designed to benefit women equally.

Requirements of Gender budgeting:

1. Political Will and Commitment: Government leaders must prioritize gender equality and
allocate resources accordingly.
2. Institutional Framework: Establishing dedicated institutions or units within the finance
ministry and other relevant departments to oversee gender budgeting initiatives.
3. Capacity Building: Training government officials and policymakers on gender analysis and
budgeting techniques.
4. Gender-Disaggregated Data: Collecting and analyzing data that is disaggregated by gender to
identify disparities and inform policy decisions.
5. Inclusive Policy Formulation: Involving women's groups, civil society organizations, and other
stakeholders in the budget formulation process.
6. Gender Analysis Tools: Developing and utilizing tools for gender analysis in budgeting.
7. Monitoring and Evaluation Mechanisms: Establishing robust monitoring and evaluation
systems to track the progress of gender budgeting initiatives.

Status of gender budgeting in India:

1. Allocation Trends: In the Union Budget 2021-22, the allocation for schemes
benefiting women was ₹1.41 lakh crore, an increase from the previous year.
2. Gender Budgeting Cells: Most states and union territories have established Gender Budgeting
Cells to facilitate gender-responsive budgeting.
3. Impact Assessment: Monitoring and evaluation mechanisms are essential to gauge the
effectiveness of gender budgeting initiatives.

Way forward:
1. The Standing Committee on Finance has suggested improving the collection and analysis
of gender-disaggregated data.
2. The National Mission for Empowerment of Women has recommended regular training
programs for policymakers.
3. The Planning Commission has recommended mainstreaming gender perspectives in all
 stages of policy formulation.
4. Budget documents should include detailed gender budget statements to ensure
transparency and accountability.
Since women comprise approx 48% of the population of India, it becomes important for their voices to be
heard. Gender based inequality will reduce provided this step is effectively implemented.

Q. 5 The public expenditure management is a challenge to the government of India in the context
of budget-making during the post-liberalization period. Clarify it. (15/2019)

Intro: Public Expenditure Management" refers to the process of planning, allocating, disbursing, and
accounting for government spending. It involves the efficient and effective use of public resources to achieve
public services, infrastructure development, and social welfare programs.

Challenges of budget making during post liberalization period:

1. Increase in Fiscal Deficit: The fiscal deficit increased from 5.7% of GDP in 1990-91 to 6.8% in
1991-92.
2. Subsidy Rationalization: The need to rationalize subsidies posed a challenge. For example, food
subsidies increased from ₹10,884 crore in 1990-91 to ₹14,948 crore in 1991-92.
3. Infrastructure Investment Needs: Meeting the infrastructure investment needs was a challenge.
For instance, there was a significant backlog in the construction of roads and highways. (Planning
Commission Reports)
4. Revenue Generation: Increasing public expenditure required generating additional revenue.
However, revenue generation faced challenges due to the slow growth of the economy.
5. Public Sector Reform: The need for reforming the public sector added complexity to public
expenditure management. Privatization and disinvestment efforts were initiated but faced
resistance.
6. Expenditure Prioritisation: Prioritising expenditure in critical areas such as education, health,
and infrastructure was challenging due to competing demands and limited resources.
7. Balancing Social Welfare and Economic Growth: Balancing social welfare expenditures with
expenditures that promote economic growth and development was a challenge in the post-
liberalization period.

Way forward to overcome these challenges:

1. Fiscal Consolidation: The Fiscal Responsibility and Budget Management (FRBM) Act, 2003
aimed at reducing fiscal deficit to a sustainable level.
2. Subsidy Reforms: Introduction of Direct Benefit Transfer (DBT) for subsidies like LPG, food, and
fertilizer.
3. Infrastructure Financing: Introduction of Public-Private Partnerships (PPPs) for infrastructure
development.
4. Revenue Enhancement: Implementation of Goods and Services Tax (GST) to improve tax
revenue collection.
5. Public Sector Reforms: Disinvestment of public sector enterprises to improve efficiency and
raise revenue.

6. Expenditure Prioritisation: Prioritize expenditures in critical sectors based on their impact on

economic growth and social welfare such as on health and education in budget allocations.
7. Balancing Social Welfare and Economic Growth: Implementation of schemes like
MGNREGA to provide employment and income support to rural households.
8. Managing Expenditure Quality: Implementation of outcome-based budgeting to improve the
effectiveness of public expenditure.

Conclusion: The Bimal Jalan Committee, focusing on expenditure management, suggests rationalizing
subsidies, adhering to fiscal targets, and strategic divestment. Sound public finance management is crucial
for unlocking India's economic growth potential.
Q.6.Distinguish between Capital Budget and Revenue Budget. Explain the
components of both these Budgets. (2021 /10)

Intro: Article 112 of the Indian Constitution mandates the President of India to cause the Annual
Financial Statement (AFS) to be laid before both Houses of Parliament. This AFS in economic terms
is also called as “Budget” which details the government's financial plan for the upcoming fiscal year.

Difference between Capital Budget and Revenue Budget:

Components of Capital and Revenue Budget:

1. Capital Receipts:
A. Borrowings: Funds raised through the sale of government bonds, treasury bills,
and loans from international financial institutions.
 Significance: Provides necessary funds for large-scale infrastructure
projects and development initiatives.
 B. Recoveries of Loans and Advances: Money received back from loans and
advances given to state governments, union territories, and other entities.
 Significances: Enhances the government's financial stability and
ensures funds are available for new projects.
C. Disinvestment: Proceeds from the sale of government stakes in public sector
enterprises.
 Significance: Helps in mobilizing resources without increasing public
debt and also improves efficiency by privatising non-core public sector
units.
2. Capital Expenditure:
1. Creation of Assets: Expenditure on building infrastructure such as roads, bridges,
schools, hospitals, and other public works.
 Significance: Directly contributes to economic growth, improves
quality of life, and boosts employment.

2.Investment in Public Sector Enterprises: Funds allocated to state-owned

enterprises for their expansion and modernization.
 Significance: Enhances the capacity and efficiency of public
sector enterprises, contributing to overall economic productivity.
3. Loans and Advances: Loans provided to states, union territories, and other entities
for various development projects.
 Significance: Facilitates development projects at the state and local
levels, ensuring balanced regional development.
3. Revenue Receipts
1. Tax Revenue
 Significance: Tax revenue forms a major part of the government's
income, funding various public services and infrastructure projects.
2. Non-Tax Revenue
 Significance: These are the income sources other than taxes that help
diversify the government's revenue base. Such as Dividends and profits
from public sector enterprises, fees and charges for services, interest
receipts, and fines.
4. Revenue Expenditures
 Significance: These are expenditures that do not result in the creation of
assets or reduction in liabilities. They cover the government's operational
and maintenance costs.

Conclusion: While the Capital Budget supports long-term economic growth, the Revenue Budget
ensures smooth government operations and public service delivery. Both are crucial for managing
financial resources, balancing expenditures, and meeting the country's diverse needs.