States to play a critical role in next-generation reforms: CEA Anantha Nageswaran

Syllabus: GS-III

Subject: Economic Development

Topic: Fiscal Policy and Budgeting.

Important points from the Discussion (Mains)

  1. Consultation with states crucial for next-gen reforms in health, education, MSMEs, land, and labour.
  2. Sustainable, moderate growth is favoured over unsustainable high growth for economic stability.

Important Terms (Prelims):

Counter-Cyclical Fiscal Policy:·         It adapts to economic cycles by adjusting taxation and government spending.

·         During recessions, it focuses on reducing taxes and increasing spending to stimulate demand and foster economic recovery.

·         In contrast, during economic booms, the policy aims to raise taxes and cut public expenditure to prevent overheating and curb inflation.

·         Allowing unchecked expansion during booms can lead to inflation and exacerbate debt crises.

·         The goal is to maintain stability and balance in the economy by countering the effects of both recessionary and expansionary phases.

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