Fiscally Imprudent Policies, Populism Affect The Poor: PM Modi

Relevance: GS3 - Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment. Inclusive growth and issues arising from it. Government Budgeting, Effects of liberalization on the economy GS2 - Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests. Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

(Source: The Hindu, 09/03/2023)

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Why in the news?

In recent remarks, Prime Minister Narendra Modi underscored the significance of the "Sabka Saath Sabka Vikas" (Together with All, Development for All) model, advocating for a shift from a GDP-centric approach to one centered around humanity. He cautioned against populism and fiscally irresponsible policies, highlighting their adverse and enduring impacts on the most vulnerable in society.

India's Role at the Helm of G-20

Presidency and Vision

• India assumed the Presidency of the G-20 in November 2022, a position it will hold until December 2023. While the G-20 traditionally focuses on economic matters, Prime Minister Modi posited that the world is experiencing a transformation from GDP-centric thinking to a more human-centric perspective. He likened this shift to the reordering of the world following World War II.

Historical Context

• The G-20, established in 1999, brings together major global economies to coordinate responses to economic crises. Under India's leadership, it is playing a pivotal role in catalyzing this transition towards human-centric values, strengthening the confidence of developing nations, and facilitating their developmental journeys.

The Essence of "Sabka Saath, Sabka Vikas"

Guiding Principle

• The "Sabka Saath, Sabka Vikas" model, championed by India, has evolved into a guiding principle for global welfare. India's journey from a nation grappling with hunger to one brimming with aspirational minds, skilled hands, and a youthful demographic has been transformative.

Global Provider of Solutions

• The COVID-19 pandemic emphasized the importance of addressing immediate challenges beyond economic crises. India transitioned from being viewed solely as a market to a provider of solutions for pressing global issues. Its G-20 Presidency allowed India to present its ideas and initiatives, contributing to a universally accepted roadmap for the future.

Showcasing India's Strengths

• India's Presidency has showcased its demographic dividend, democratic values, cultural diversity, and rapid development on the global stage. G-20 members' visits to various Indian cities provided insights into how India is swiftly implementing solutions to global crises.
• In summary, India's leadership at the G-20 reflects a broader shift towards prioritizing human-centric values over GDP-centric metrics, emphasizing inclusivity, innovation, and sustainable development on the global stage

Responsible Fiscal Policies

• Prime Minister Narendra Modi has cautioned against the allure of populism and irresponsible financial policies.
• He emphasized that while such policies might yield short-term political gains, they can have detrimental long-term social and economic consequences, particularly impacting the most vulnerable segments of society.
• He urged state governments to exhibit fiscal discipline and responsibility.

Political Stability and Economic Reforms

• The Prime Minister linked India's political stability since 2014 to the successful implementation of economic, educational, and financial reforms. Unlike previous governments, the current administration enjoys a stable mandate, enabling clearer and more efficient policy execution.

Vision for 2047: Inclusive and Innovative

• India envisions laying a strong foundation for global growth by 2047, which would benefit the world for centuries to come. This vision encompasses an inclusive and innovative economy, the elimination of poverty, corruption, casteism, and communalism, improving outcomes in sectors like health and education, and ensuring a high quality of life while preserving nature and culture.

Concerns Over Global Debt

• The Prime Minister expressed concern over the global debt crisis, particularly its impact on developing nations. Over 70 low-income countries face a collective debt burden of $326 billion.

India's Efforts and Debt Restructuring

• Under India's G20 presidency, efforts are focused on addressing debt vulnerabilities faced by nations of the Global South.
• India advocates for a new debt restructuring framework to help countries manage their debt. While many G20 countries support these efforts, China, a significant sovereign creditor, has shown reluctance.
• The IMF, World Bank, and G20 Presidency have initiated the Global Sovereign Debt Roundtable to expedite global debt restructuring.

Climate Action and Constructive Approach

• Prime Minister Modi emphasized the need for diverse approaches to combat climate change, acknowledging the importance of societal and climate diversity.
• He advocated for a constructive approach in climate negotiations, moving from prohibition to providing financial, technological, and other resources to nations for effective climate action. India has not only achieved its climate targets ahead of schedule but has also taken steps such as banning single-use plastic and improving sanitation and cleanliness.

Global Cooperation Against Cybercrimes

• Prime Minister Modi called for global cooperation to combat cybercrimes and ensure collective global well-being.
• In conclusion, Prime Minister Modi's address covers a wide spectrum of critical global issues, from responsible governance and economic growth to climate action, cyber threats, and terrorism, underlining the need for collective international efforts to tackle these challenges effectively.

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FAQs

MCQs

Question: Which one of the following statements appropriately describes the “fiscal stimulus”? (UPSC CSE 2011)

(a) It is a massive investment by the Government in the manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth

(b) It is an intense affirmative action of the Government to boost economic activity in the country.

(c) It is the Government’s intensive action on financial institutions to ensure the disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation

(d) It is an extreme affirmative action by the Government to pursue its policy of financial, inclusion

Question: Consider the following statements:

1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt-to-GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
3. As per the Constitution of India, it is mandatory for a State to obtain the Central Government's consent for raising any loan if the former owes any outstanding liabilities to the latter.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3