Questions
- What is capital expenditure and how it gives a multiplier effect to the economy. Discuss the issues involved in actually going for capital expenditure. (15 marks)
- Geospatial technology is an ever evolving field with applications in many areas. Discuss the steps already taken by the government to develop this sector. (10 marks)
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Model Solutions
1. What is capital expenditure and how it gives a multiplier effect to the economy. Discuss the issues involved in actually going for capital expenditure. (15 marks)
Model Structure
Introduction
- Capital expenditure is the use of funds for long-term expenditure mainly to acquire, maintain and upgrade capital assets. It is like a holistic expenditure which results in enhancement of income, more employment and promotes productive economy resulting in demand led growth.
Main Body
- Capital expenditure is a virtuous cycle which improves ease of doing business and crowds in private investment and attracts foreign investment. It has many multiplier impacts like-
- Increase in income and purchasing power which promotes demand and consumption thus resulting in growth of affluent class.
- Studies suggest that the multiplier effect is in the ratio of 1:2.45 in the short and 1:4.8 in the long term.
- Better infrastructure and logistics thus decreasing cost of movement of goods and better preserved perishable goods.
- This expenditure in the health and education sector is pivotal for socio economic development of the country.
- But in any developing country like India, there are challenges involved in capital expenditure like-
- Disinvestment is one of the components adding to capital expenditure but missing the target last year meant reduced flow of capital receipts thus reduced capital expenditure.
- Revenue expenditure at 84% of government spending is very high which doesn’t create any physical infrastructure.
- Pandemic resulted in rolling out of more welfare measures thus more expenditures thus reduced capital spending.
- Invasion of Ukraine and other global uncertainties like Federal reserve increasing interest rates mean outflow of investments and increase in import bill and cost of production.
- Inflation since the last few quarters has been quite high and this clubbed with rising fiscal deficit has potential to reduce the capital expenditure.
Conclusion
- To shield the economy from external factors, it is imperative to improve revenue sources and revenue expenditure side of the budget. Also, Tarapore committee by RBI on partial capital account convertibility is also an option which can be explored.
2. Geospatial technology is an ever evolving field with applications in many areas. Discuss the steps already taken by the government to develop this sector. (10 marks)
Model Structure
Introduction
- Geospatial technology is an emerging field with modern tools like Geographic Information System, Global Positioning System and Remote Sensing which record spatial information in raw form and provide processed data to make tasks simpler and easier.
Main Body
- It is used in mapping and spatial analysis of Earth’s topography which helps manage scarce resources by improving efficiency. With growth in gig economy like food delivery and cab services, space exploration and tourism, the Indian geospatial economy is growing at a rapid pace providing valuable employment.
- It has also helped break the monopoly of few countries in geospatial data services and helped India develop its own technology which has potential to further leverage it in bilateral relations.
- In this context, governmental steps to develop this sector include-
- Recently, guidelines for geospatial data, 2021 were released which deregulated earlier protocols and introduced liberalization by eliminating need of permissions and scrutiny.
- NITI Aayog and ISRO have developed Geospatial Energy Map of India which will comprehensively provide data on energy production and distribution. This will help in planning and investing for energy security and also ensure better disaster management practices.
- Just like self regulation, there is a provision of self-attestation by companies by which they can declare sua sponte conformation to government guidelines.
- To make MGNERGS and other rural development schemes more effective, Yuktdhara portal was launched as a repository of assets (geotags) which will help in better planning for developmental works.
- Land reforms are long overdue and recent use of Kisan drones for land assessment and digitization along with proper dispersal of seeds, insecticides and nutrients can go a long way in doubling farm income.
Conclusion
- There are few studies which suggest the geospatial market to grow at 13% CAGR by 2029 due to upcoming investments in programs like city mapping. This can further supplement the efficiency of smart city initiative which will provide meaningful employment and better intelligence for the safety of citizens.
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