Indian Economy

Q. Do you think the twin goals of being popular and being effective in financial governance are mutually incompatible in Indian democracy and create impediments to development ? Give reasons in support of your answer. 7.5 marks

5 thoughts on “Indian Economy”

  1. The twin goals of being popular and effective are the ideal scenario for a democracy. In the context of Indian scenario, aiming for both can be a hindrance to the functioning because :
    1. More focus to winning popularity can paralyze the working of the government as the leaders would focus more on connecting to the people and create a ‘fan base’.
    2. Personality cult problems would arise, credibility of a party would decrease which is a negative for a democracy like India.
    3. Leaders would promote schemes that earn more people than those schemes which are beneficial. Example, loan waivers by successive governments in various states is harmful to the financial institutions and the economy at large but earns votes.
    4. Measures against the popular sentiments would be avoided, pleasing people would become priority. Example, the Juvenile Justice Act 2015, though a measure to punish guilty and passed under public pleasure was a tough call.

    A government that is effective will definitely be popular in a long run but immediate results may not be achieved as in the case of a popular government. Achieving both together may not be possible, but striving for effectiveness would definitely be the better alternative.

  2. Well thought answer. Points are reflective. Second part is not properly addressed. How populous approach hamper development needs better explanation. 3.8 marks.

  3. Though both popularity and effectiveness in financial governance seems to be mutually incompatible but create impediments to development only when principle of good governance is missing. Following illustrations help elaborate above statement.

    1. Popular leaders showing ineffectiveness in financial management – Indian democracy witnesses use of vote bank politics as an instrument by popular leaders who during elections resort to distribution of freebies to specific communities for retaining their seats. This leads to financial losses which could have otherwise been used for necessary developmental projects such as strengthening of health infrastructure and education etc
    2. Popular companies showing ineffectiveness in financial management – Many popular companies avoid internal and external auditing of their accounts and even avoid scrutiny of financial records to avoid paying genuine taxes (accruing more profits)

    As Indian democracy is a vibrant democracy, hence, its not immune from evidences whereby popular institutions have continued playing effective role in financial governance (mutually compatible roles and functions). Following instances strengthen the above stance.
    1. RBI is a classic case that has continued issuing directives from time to time for strengthening financial governance infrastructure of country
    2. Regulators like SEBI in order to bring in transparency and accountability in financial governance keeps check on trading activities of companies in stock markets and does not shy away from imposing trade restrictions and penalties on those who violate rules and guidelines.

    To conclude India is a country undergoing internal changes owing to effects of globalization, hence mutually incompatible relationship between twin goals of being popular and being effective in financial governance are not exclusive.

  4. Contents are sufficient . Expression should be more penetrating and impressive. Concluded properly, over all a good answer. 4 marks.

  5. Twin goal of being popular and being effective in finacial governance are incompatible in Indian scenario because In recent cases of farm waiver loan by different state goverments on one hand provides relief to the farmers in present time but there is clear suspicion about the long term effectiveness of this measure.Even those who can afford to pay may not;in the expectation of the waiver.it clealry erodes our economy.mostly political parties choose this form for their electoral gain .Being popular is good but at what cost..??with eyes on 2019 Lok sabha election..many state goverments keep on increasing their voice louder .
    CAG has criticised the way these farm loan waiver scheme is implmented and found many irregularities .these way of political parties popularism is good for state subjects but it should not be borne by banking system of the centre which are struggling from bad loan problem i.e NPA.Root causes behind this is political interfernce with commercial decision for electoral gain .It increase fiscal deficit of the country.
    Country like India needs massive investment in infrastructure which are ignored due to diversions of funding in subsidies, Farm loan waiver etc.
    Same with GST..it became complicated tax structure because of political interfence by state goverments for political gain .
    So being populist and being effective in finacial govrnance seems to be a combination of bad politics and bad economics in present context.

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