UPSC CAPF AC 2018 Paper

According to the second volume of the Economic Survey 2016-17 tabled in Parliament in August 2017, the farm loan waivers will affect the aggregate demand in four ways:
● impact on private consumption via increases in private sector net wealth;
● impact on the public sector via changes in government expenditure or taxes;
● crowding out impact via higher borrowings by state governments, and
● crowding in impact via higher credit availability as bank NPAs fall.
The Economic Survey added that farm loan waivers and declining profitability in the power and telecom sectors would exacerbate the twin balance sheet problem — overleveraged companies and the pile up of bad debt at banks — and weigh on the economy.