[Solved] Consider the following statements: Statement-I: India accounts for 3.2% of global export of goods. Statement-II: Many local companies and some foreign companies operating in India have taken advantage of India's Production-linked Incentive' scheme. Which one of the following is correct in respect of the above statements? Skip to main content

[Solved] Consider the following statements: Statement-I: India accounts for 3.2% of global export of goods. Statement-II: Many local companies and some foreign companies operating in India have taken advantage of India’s Production-linked Incentive’ scheme. Which one of the following is correct in respect of the above statements?

Question

Q19. Consider the following statements:

The ‘Stability and Growth Pact’ of the European Union is a treaty that

  1. limits the levels of the budgetary deficit of the countries of the European Union
  2. makes the countries of the European Union to share their infrastructure facilities
  3. enables the countries of the European Union to share their technologies

How many of the above statements are correct?

  1. Only one
  2. Only two
  3. All three
  4. None

Answer: 1

Detailed Explanation

  • The Stability and Growth Pact: Maintaining Fiscal Discipline in the EU
  • The European Union (EU) established the Stability and Growth Pact (SGP) in 1997 to promote responsible financial management (fiscal discipline) among its member countries.
  • This pact safeguards the stability of the Eurozone, the EU’s common currency system.

Why was the SGP created?

  • The pact emerged from concerns about high government deficits and national debt within the Eurozone.
  • These issues could destabilize the Euro and weaken the overall EU economy.

What are the SGP’s goals?

  • Encourage sound fiscal policies by member states
  • Prevent excessive government deficits and public debt

How does the SGP achieve its goals?

  • The SGP outlines specific fiscal rules for member states to follow.
  • These rules are enforced through two mechanisms:
  • Preventive Arm: This arm focuses on preventing problems before they arise. It sets a limit on budget deficits (below 3% of GDP) and aims for balanced budgets in the medium term.
      • Member states submit plans outlining their fiscal strategies for review by the European Commission.
  • Corrective Arm: This arm comes into play if a country breaches the fiscal rules. If a deficit exceeds 3% or debt surpasses 60% of GDP, the European Commission can take corrective actions, including issuing warnings, recommending adjustments, and potentially imposing fines or freezing EU funds.
  • Now, concerns for:
      • Defence spending
      • Ending austerity as population and infra is ageing
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