(a) Discuss the changes made by the Government of India in the fiscal policy since liberalisation. How far these changes proved…

(a) Fiscal policy since liberalisation

Since 1991, India’s fiscal policy moved from a high-subsidy, plan-dominated model to deficit discipline, tax-base expansion and targeted welfare. Fiscal deficits were brought down from double-digit levels to single digits, and the FRBM Act, 2003 introduced a 3 per cent fiscal-deficit target, later amended in 2018 to a 3 per cent target by 2020-21 and a 40 per cent central-government debt ceiling by 2024-25, with deviation clauses. Customs duties were progressively reduced, integrating India into global value chains; GST in 2017 broadened the indirect-tax base and reduced cascading taxes; and subsidies for food, fertiliser and LPG were rationalised through targeted delivery. The plan/non-plan classification was dropped, and recent budgets have raised capital expenditure as a share of revenue expenditure for infrastructure. After the COVID-19 shock, when the Centre's fiscal deficit reached 9.2% of GDP in 2020-21, a glide path brought it below 4.5% by 2025-26, and from 2026-27 the Centre uses the debt-to-GDP ratio as its main fiscal anchor. On the tax side, the corporate tax rate was cut to 22% (15% for new manufacturing firms) in 2019, a simpler new personal income-tax regime was introduced and a new Income-tax Act was passed in 2025, and GST rates were rationalised in 2025 into two main slabs of 5% and 18%.

These changes supported growth, with GDP growth accelerating in the 2000s, by reducing inflationary pressure, improving credit availability and attracting investment. Yet social justice remains uneven. Growth has been jobless in parts, and inequality indicators such as the Palma ratio and Oxfam estimates show widening income gaps. The rural employment guarantee (MGNREGA, now succeeded by the VB-G RAM G Act, 2025), free foodgrains under PMGKAY, PM-KISAN and Ayushman Bharat act as corrective safety nets, and survey data show falling multidimensional poverty and consumption inequality, but rising debt and revenue deficits constrain fiscal space for welfare. Fiscal consolidation improved macro stability, but inclusion requires stronger social spending, progressive taxation and public investment in health, education and rural infrastructure. FRBM targets improved market confidence but sometimes constrained public investment; recent capex push aims to crowd in private investment. Subsidy rationalisation freed resources but required compensatory schemes.

(b) Corporate linkage for farmers’ income

Linking farmers with the corporate sector can raise income through contract farming under the Model APMC Act, 2003, the Model Contract Farming Act, 2018 and the Farm Acts, 2020 (repealed in 2021), FPOs, agri-startups, food-processing linkages and e-NAM. Corporates can provide technology, credit, quality inputs, cold chains, export-market access and assured markets, reducing marketing risk. FPOs can aggregate smallholdings, improve bargaining power and access credit. e-NAM can improve price discovery across mandis, while food-processing linkages under PM Kisan SAMPADA can add value to perishables.

However, corporate farming may favour large, irrigated farms and create crop-suitability mismatches. Small and marginal farmers, and tenants without land records, may face contract exploitation, input cost pressure, single-buyer dependence and weak enforcement. Hence corporate linkage is useful but not sufficient. Farmer-owned cooperatives such as Amul, SHG-based collectives, PM-KISAN, Bhavantar Bhugtan Yojana and public investment in irrigation, storage and rural infrastructure are equally necessary. Before deeper corporate integration, land records, irrigation, credit and contract enforcement must be strengthened. A mixed model—corporate efficiency with cooperative protection and direct income support—is more likely to raise farmers’ income inclusively.

(c) TRIMs and India’s interest

The WTO Agreement on TRIMs disciplines trade-related investment measures inconsistent with GATT Articles III and XI. It applies to goods, not services. Prohibited measures include local-content requirements, trade-balancing requirements, foreign-exchange restrictions, and restrictions on exports of goods for local production. It does not per se prohibit export-performance requirements, though export-linked measures must not operate as prohibited trade-balancing or export restrictions. TRIMs does not ban all investment incentives; it bans only those that distort trade, allowing WTO-consistent R&D, skill development and infrastructure support.

TRIMs constrains India’s policy space for infant-industry protection, technology transfer and domestic value addition. India had to phase out indigenous-content requirements in the auto sector, and its EPZ export incentives and software promotion policies were not per se TRIMs violations, but had to be designed so that they did not operate as prohibited trade-balancing or export restrictions; software as a service is outside TRIMs. India also lost the WTO case brought by the United States against the domestic-content requirement in its National Solar Mission (DS456, 2016). Residual tensions appear and Make in India/Atmanirbhar Bharat measures. In bilateral investment treaties, India must avoid TRIMs-like local-content or trade-balancing obligations. India should use subsidies that are specific but trade-compliant, and negotiate technology transfer through voluntary FDI, not local-content mandates. Therefore, while TRIMs promotes trade discipline, it limits India’s ability to use investment-linked industrial policy for inclusive manufacturing growth.