UrbanPro
true

Take Class 12 Tuition from the Best Tutors

  • Affordable fees
  • 1-1 or Group class
  • Flexible Timings
  • Verified Tutors

Search in

How Can The Fiscal Windfall Be Used To Solve The Problem Of Twin Balance Sheet?

Amruta M.
02/08/2017 0 0

By using the finances in the windfall for strengthening the government's balance sheet rather than for government consumption.

The Chief Economic Advisor suggests that:
"The best use of windfall would be to create a public sector asset reconstruction company so that it can addresses the twin balance sheet problem and facilitate credit which will eventually lead to investment revival in the economy"

First, let's understand what the terms actually mean,

Fiscal windfall: These are the extra earnings of the Government through some unusual means like the demonetization (this also included the deposits made by black money holders in the PMGKY account), fall in the oil prices globally etc. These add to the revenues of the government.

Twin balance sheet problem :

In simple terms :

  • Banks gave loans to corporates.

  • Corporates invested in commodities and infrastructure.

  • Both the sectors faced slump years and thus corporates couldn't get enough profit.

  • Corporates unable to pay back the loans.

  • The assets of banks, viz. Loans, turn into Nonperforming assets or NPA.

  • Thus we have two problems here:

  1.     Banks are in terrible condition with mounting NPAs.

  2.     Corporates are debt laden and thus unable to invest, thus slowing down the growth.


This is what is the twin balance sheet problem in short:

The twin balance sheet problem of India is huge and by no means seem to be able to solve the issue. The banks have been giving the corporates loans again and again so that they could invest and thus make profits if growth picked up, eventually to pay back the debts. But this is not happening and as a result, the NPAs are rising ever since the twin balance sheet problem was brought to notice.

Also for banks, it becomes cumbersome to look after the rising NPA problem and their usual business. The loans cannot default as this would mean favoritism on the part of banks and government. So one way to get rid of the problem is to constitute Asset reconstruction companies (ARCs have their own problems and issues. But this seem to be the only way out according to the CEA as mentioned in ES).
 
 

0 Dislike
Follow 0

Please Enter a comment

Submit

Other Lessons for You

Indian Economy on the Eve of Independence
Questions: What was the focus of the economic policies pursued by the colonial government in India? What were the impacts of these policies? Ans: The economic policies developed by the British...


Why Study Economics?
Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. Probably the most important reason for studying economics...

What is the difference between GDP and GNP?
GDP is Gross Domestic Product. It is the total value of goods and services produced within the boundaries of a nation in a given time period. E.g. 1 year The value of goods and services produced by both...
M

Maroof A.

0 0
0

Statistics
Measures of Central Tendency: There are three measures of central tendency that are: Mean: It is used to represent the average of the data. Median: It is used to represent the middle value. Mode:...
X

Looking for Class 12 Tuition Classes?

The best tutors for Class 12 Tuition Classes are on UrbanPro

  • Select the best Tutor
  • Book & Attend a Free Demo
  • Pay and start Learning

Take Class 12 Tuition with the Best Tutors

The best Tutors for Class 12 Tuition Classes are on UrbanPro

This website uses cookies

We use cookies to improve user experience. Choose what cookies you allow us to use. You can read more about our Cookie Policy in our Privacy Policy

Accept All
Decline All

UrbanPro.com is India's largest network of most trusted tutors and institutes. Over 55 lakh students rely on UrbanPro.com, to fulfill their learning requirements across 1,000+ categories. Using UrbanPro.com, parents, and students can compare multiple Tutors and Institutes and choose the one that best suits their requirements. More than 7.5 lakh verified Tutors and Institutes are helping millions of students every day and growing their tutoring business on UrbanPro.com. Whether you are looking for a tutor to learn mathematics, a German language trainer to brush up your German language skills or an institute to upgrade your IT skills, we have got the best selection of Tutors and Training Institutes for you. Read more