DMPQ: What is fiscal consolidation? Provide the ways to achieve it? ( Economy)

Fiscal consolidation means providing ways and means to strengthen the government finance and reduction in both deficits and accumulation of debt stock. It is critical as it provide macroeconomic stability.

 

 

It can be achieve in simple terms by increasing the revenue and reducing the expenditure. The following are the ways through which FD can be achieved:

 

 

Revenue side:

  • Tax reforms both direct and indirect
  • GST
  • Simplification of filing return
  • Formalisation of economy
  • Rationalisation of tax exemptions
  • Improving efficiency of tax collection and tax stability
  • E assessment
  • Reduction of discretionary powers

 

Expenditure side:

  • Rationalisation of subsidies
  • Cutting out non essential and unproductive activities
  • Prioritisation of targeted areas
  • Reducing cost of services
  • Reduction of time and cost overruns on projects
  • Politically motivated decision should be avoided like farm loan waiver
  • Administrative reforms like use of IT infrastructure

 

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