Score:
9/15
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Topper’s Copy
GS2
Indian Polity
15 marks
“Supplementary Demands for Grants are an important fiscal instrument for managing unforeseen expenditure.” In this context, examine the rationale behind additional allocations for fertilizer subsidy and compensation to oil marketing companies, and assess their implications for fiscal discipline and economic stability.
Student’s Answer
Evaluation by SuperKalam
Demand of the Question
- Examine rationale behind additional allocations for fertilizer subsidy and OMC compensation
- Assess implications for fiscal discipline
- Assess implications for economic stability
- Context of SDGs as fiscal instrument for unforeseen expenditure
What you wrote:
Supplementary Demands for Grants (SDGs) are Constitutional provisions under Article 115 that allow the govt. to seek parliament's approval for expenditures not anticipated during Budget formation.
Recent SDGs have included significant additional allocations for fertilizer subsidy and compensation to Oil Marketing Companies (OMCs).
Supplementary Demands for Grants (SDGs) are Constitutional provisions under Article 115 that allow the govt. to seek parliament's approval for expenditures not anticipated during Budget formation.
Recent SDGs have included significant additional allocations for fertilizer subsidy and compensation to Oil Marketing Companies (OMCs).
Suggestions to improve:
- Could enhance with recent data (e.g., FY 2023-24 saw ₹3.7 lakh crore in supplementary demands, with fertilizer subsidy accounting for significant portion)
What you wrote:
Rationale behind additional allocations -
a) Fertilizer Subsidy :
- India is heavily dependent on imported fertilizers & raw materials such as urea, DAP & phosphoric acid.
- Global price shocks after the Russian-Ukraine conflict sharply increased input costs.
- To protect farmers from rising prices & ensure food security, the government absorbed the burden through higher subsidies.
- This also supports agricultural output & controls food inflation.
b) Compensation to OMCs -
- OMCs were instructed to keep petrol, diesel & LPG prices stable despite rising international crude oil prices.
- This led to under-recoveries & financial stress for public sector OMCs.
- Govt. compensation was necessary to maintain their financial viability & ensure uninterrupted fuel supply.
Rationale behind additional allocations -
a) Fertilizer Subsidy :
- India is heavily dependent on imported fertilizers & raw materials such as urea, DAP & phosphoric acid.
- Global price shocks after the Russian-Ukraine conflict sharply increased input costs.
- To protect farmers from rising prices & ensure food security, the government absorbed the burden through higher subsidies.
- This also supports agricultural output & controls food inflation.
b) Compensation to OMCs -
- OMCs were instructed to keep petrol, diesel & LPG prices stable despite rising international crude oil prices.
- This led to under-recoveries & financial stress for public sector OMCs.
- Govt. compensation was necessary to maintain their financial viability & ensure uninterrupted fuel supply.
Suggestions to improve:
- Could include specific data (e.g., India imports 85% of crude oil and 70% of fertilizer requirements, making it vulnerable to global price volatility)
- Could mention recent schemes like PM-KISAN and DBT in fertilizers to show targeting efforts)
- Could reference specific OMC under-recoveries during 2022-23 crisis period)
What you wrote:
Implications for fiscal discipline & economic stability -
- Concerns for fiscal discipline -
- Repeated supplementary demands indicate weaknesses in expenditure forecasting.
- Higher subsidies increase the fiscal deficit & public debt, potentially crowding out private investment.
- Support to economic stability -
- In the short-term such spending helps contain inflation, protect farmers & consumers, & prevent supply disruptions.
- It also stabilises key sectors like agriculture & energy, which are critical for overall economic growth.
Implications for fiscal discipline & economic stability -
- Concerns for fiscal discipline -
- Repeated supplementary demands indicate weaknesses in expenditure forecasting.
- Higher subsidies increase the fiscal deficit & public debt, potentially crowding out private investment.
- Support to economic stability -
- In the short-term such spending helps contain inflation, protect farmers & consumers, & prevent supply disruptions.
- It also stabilises key sectors like agriculture & energy, which are critical for overall economic growth.
Suggestions to improve:
- Could analyze impact on agricultural productivity and rural employment (e.g., fertilizer subsidy supporting 146 million farming households)
- Could discuss energy security implications and impact on industrial competitiveness due to stable fuel prices
- Could mention fiscal multiplier effects and how these expenditures support broader economic activity
What you wrote:
While supplementary demands for fertilizer subsidy & OMC compensation are justified in exceptional circumstances, but frequent reliance on them can dilute fiscal discipline. Going forward better subsidy targeting, realistic budgeting & structural reforms are essential to balance welfare needs with fiscal sustainability.
While supplementary demands for fertilizer subsidy & OMC compensation are justified in exceptional circumstances, but frequent reliance on them can dilute fiscal discipline. Going forward better subsidy targeting, realistic budgeting & structural reforms are essential to balance welfare needs with fiscal sustainability.
Suggestions to improve:
- Could strengthen with specific reform suggestions (e.g., implementing nutrient-based subsidy system for fertilizers or adopting dynamic fuel pricing mechanisms to reduce OMC burden)
Well-structured answer with good constitutional foundation and balanced analysis. However, lacks specific data and examples that would strengthen the arguments and demonstrate deeper understanding of fiscal implications.
Demand of the Question
- Examine rationale behind additional allocations for fertilizer subsidy and OMC compensation
- Assess implications for fiscal discipline
- Assess implications for economic stability
- Context of SDGs as fiscal instrument for unforeseen expenditure
What you wrote:
Supplementary Demands for Grants (SDGs) are Constitutional provisions under Article 115 that allow the govt. to seek parliament's approval for expenditures not anticipated during Budget formation.
Recent SDGs have included significant additional allocations for fertilizer subsidy and compensation to Oil Marketing Companies (OMCs).
Supplementary Demands for Grants (SDGs) are Constitutional provisions under Article 115 that allow the govt. to seek parliament's approval for expenditures not anticipated during Budget formation.
Recent SDGs have included significant additional allocations for fertilizer subsidy and compensation to Oil Marketing Companies (OMCs).
Suggestions to improve:
- Could enhance with recent data (e.g., FY 2023-24 saw ₹3.7 lakh crore in supplementary demands, with fertilizer subsidy accounting for significant portion)
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