FISCAL POLICY

8
SUBJECT-MATTER
Meaning. Objectives and Techniques of Fiscal Policy
Advantages and Disadvantages of Fiscal Policy
aMeaning and Characteristics of Budget 2016-17
Highlights of Budget 2019-20 and 2020-21
Highlights of Annual Fiscal Policy Report 2019-20

INTRODUCTION
Fcanomic policy is a course of action that
is intended to control
and
infuence the behavior of the economy. The economic
implemented and administered by the government of a policies
are

assess whether the economic policy has been country. To

effective or not we can
assess it in two ways known as
positive and normative economics.
The economic policies generally include the monetary and fiscal
policy for operating the economy. Fiscal
economic development through taxation and policy
deals
with the
public expenditures. The
objectives of economic policies are to increase capital formation in
the country by
encouraging
of retail investors in a
savings and investments. If the number
country increases, then the capital formation
in that
country can be easily increased.

LONG ANSWER TYPE QUESTIONS

. What doyou mean by the Fiscal Policy? Explain the
Cbjectives and
Ans.
Techniques of Fiscal Policy of India.
Meaning of Fiscal Policy : Fiscal policy in India is the guiding
C inat helps the government in deciding how much money they should
PA1O Support the economic activity in the country. In recent times, the
ance of fiscal policy has grown manifold. It is important to achieve
p economic gröwth both in India and around the World.
Achieving
107
 108 DEEPAK Business
Environment
rapid growth is o n e ofthe key goals o f the fiscal policy
by the government of India. Through the fiscal policy, the
which i [Fiscal PoliG
fo muato
a country controls the flow o f tax
revenues and the
navigate the economy. l f the government receives more
Go
public ev
mulatedof
nment
mento
spends then it is a
surplus. If the reveni.diture to
then it is a deficit.
government spends more than ite than
an itit
Definition : revenue
According to
Harvey and Johnson, "Fiscal policy
changes in incorporates
government expenditure and taxation designed
the pattern and level of activity.""
to inf e
Objectives of Fiscal Policy : The objectives of fiscal
follows : policy are.
as
(i) To maintain and achieve full
employment in the economy.
(ii) To stabilize the price 1evel in the
(iii) To stabilize the growth rate of theeconomy.
(iv) To maintain equilibrium level in the economy.
balance of payments
(v) To promote the economic
countries. developnment o f underdeveloped
(vi) To increase the national income and
(vii) To increase savings and investment per capita income.
activities in the country.
(viii) To reduce the inequalities between the
rich and the poor.
(ix) To e a r n enough revenue to finance
welfare projects. government expenditures on
The Techniques/Components/Scope/WorkingArea of Fiscal Policy :
important techniques of fiscal policy of India a r e a s
1. Taxation follows
Policy of GGover ment : Tax
collection is o n e ot
important sources of revenue for the n ct
taxes government. Both indirect and a
are
charged by the
government. Direct taxes
and n o s t of the
indirect taxes
are
progressive in na
important role in the regressive in nature. Taxation pla
are
mobilization
of resources for a n The
economic pie0. o f
importance o f tax revenue c a n be s e e n
the the revenue from the fact that alnmost
of Government of
India
/- ts.
Taxation policy is is collected through tax p a
important
a s it in he
the
distribution of income and helps in achieving the equal
wealth through the ssive

direct taxesand it also

helps in the attainment impositioon
of prO
ting
an
anti-inflationary
taxation policy. of price stability v
2.isExpenditure Policy of the Government: The public expenditure
which done by the government public ePnomic
plays a n important role
n o m i c

development ofa country 1ike India. in the

With a n increase in the ibilities s i b i l i t i e s

respo
 OM. 1st
M.CON
(SEMESTER FIRST) K.U.K. 109

vernment and
fthe govermment and their increased participation in economic activities
Oemment expenditure on economic activities is increasing at a higher
the
governm

n 093, the public expenditure of GDP was 30%. The public expenditure
ate. In 199
h e divided into two parts developmental and non-developmental
CAn

nenditure. The developmental expenditure of the government is done

expenditu

activities like infrastructure, industry, health and education. Non-

on
velopmental expenditure is done on law and order, defense,
administrative services etc. The public expenditure is done by the
aovemment of India on creating a serious impact on the production and
distribution pattern of the economy.
3. Deficit Financing: The Government of India has adopted a policy
for financing its developmental plan since its inception. In this, the
Government of India takes a loan from the Reserve Bank of India i.e.
issue a fresh dose of currency by RBI. D. V.K.R.V. Rao observed, "Deficit
financing is the name of the volume of those forced savings which are the
result of an increase in prices during the period of the government
investment. Thus deficit financing helps the country by providing necessary
funds for meeting the requirements of economic growth but at the same
time, it also creates the problem of inflationary rise in prices. Thus the
deficit financing must be kept within the manageable limit."
4. Public Debt Policey of the Government: As taxation has got its
imit in a poor country like India due to the poor taxable capacity of the
people. The government is taking public debt for financing its developmental
expenditure. The Central Government has been raising a good amount of
public debt on a regular basis to mobilize a huge amount of resources.
The total public debt of the Central Government includes internal debt
and external debt. Internal debt indicates that the loan is raised by the

Evenment of India within the country. As far as external debt is concerned

with help taken from financial bodies like IMF and World Bank to finance
their developmental projects.
the Role of Fiseal Policy in the Economie
.2.Describe
Development of India. Or
Evaluate the Fiscal Policy of India. [K.U.K. 2015]
Ans. Critical Evalution of Fiscal Policy : The main objective ot
theffiscal policy of any country is the promotionofeconomic development
such as budget taxation,
Duhli y. The various tools of fiscal poliey a long way tor
eXpenditure and public debt can help the country go forces.
ll without any inflationary and deflationary
to improve employment
To the the
Cne cconomic conditions prevailing in a country
 DEEPAK BusinessEnvironment
110 Fiscal Pollo
a lot of money for public expenditure hich it raise
government requires from Consortium of
a
of loans taken any
through the
Institutions
help
for earning revenuethegovernment
takes taxes Inane. Financia
lid polaisin
the government has to formulate raisin a
any loans. Forthis purpose,
that can lead to the economic development of
India. In the
the iey
preser age
the taxes are mounting like anything on people but the qual
of
age,life
remains the same. Fiscal policies have not achieved the oh0f life
removal of inequality and unemployment. Also, the fiscal policy has ledof bjectives of
to a high rate of inflation in the country.
Role/Advantages/Contribution of Fiscal Policy : The role ofe.
policy are as follows : iscal
1. Mobilization of Resources:
The first and foremost aim
of fiscal
in
policy underdeveloped countries is to mobilize the resources
in the
private and public sectors. In developing countries, the national incomee
and per capital income is very low due to the low rate
of savings. The
government of 20 countries formulate policies that lead to forced savines
and it pushes the rate of investment and
capital
formation in the country
which accelerates the rate of
economic development. It also undertakes a
policy planned investment in the public sector.
of
2. To Accelerate the Rate
of Economic Growth: The fiscal policy
helps in accelerating the rate of economic
investment in the public and growth by raising the rate of
private
economic growth in different sectors
sectors. In order to achieve balanced
of the economy the
invest in the basic and government must
capital goods industry and in social overheads
they are the pillars of because
3.To
economic
development underdeveloped countie
in
Encourage a Socially Optimal Investment:
countries, the fiscal policy
encourages
In underdevelog
channels which are investment into those proue
considered socially and This
means optimal investment which economically desirabie and
avoids wasteful and promotes economic developinc
fiscal policy should unproductive investment. In short, im ofthe
be to make an the
Overheads such as investment in social a economic

education, health andtransportation,

soil communication, tecnn training
aining
and widen
the market to conservation. They tend to raise
p r o d u c t i v i y

unproductive investment isenjoy external economies. At u tim

s a m e time,

socially desirable channels. checked and diverted towards productive a

4. Induce pi
a crucial role inCapital and Investment y plays
key industries underdeveloped
with the countriesFormation
making aninvest
investm
public utility. It also byhelps
to

mar"ng
, in 8*
ing assi
assista
a n c e
 111
(SEMESTER
FIRST) K.U.K.
M.COM.1st
industries and techniques
modern of production.
and int
introducing
r industries economic overheads helps in increasing social
in social and
newer

Investment in s o c i a l

Invesiroductivity with the help of private investment and capital

marginal

formation.
Fiscal policy helps
Provides More Employment Opportunities:
ievel in the country. The government spends more
employmernt
nincrease the
and to carry out those projects the government
and more money on projects
and

the people in the country get the benefit of

people. Thus,
equires
employment.
to Exports: The fiscal policy contributes to the
6. Encouragement
The government by reducing custom duty encourages
growth of exports.
The government gives various cash rebates
exDorters to export their goods.
the exporters which help in rising of exports.
and incentives to
theRegional Imbalance: India is a country with a lot
7.Reduces
of the regions are very developed while
of regional imbalances as some
backward. The government picks out those backward
some regions are

and tries to set up new industrieslot of government expenditure

by a
areas
who want
programs. They also give tax rebate and subsidies to companies
to set up a base in those regionns.
limitations of
Limitations/Disadvantages of Fiscal Policy : The
fiscalpolicy are as follows:
1.The Problem in Forecasting: It is observed that it is practically
to forecast which activity can cause
npossible for the government
economic instability. The success of a fiscal measure depends on the
accurate predictions of various economic activities. If there is no
Torecasting then the economy will be erratic.
2. Inadequacy of Fiscal Measures : During recessionary trends the

pansion off public spending and reduction in tariffs are the key elements.
The question which comes to the mind is how much public spending or
how much tax rebates will be
helpful for the economy. In case the injections
or withdrawals of money in the circular flow are more or less than required
he entire system will collapse and it will not move in the desired
ddirection.
to an
D 1nfation: Under fiscal policy the deficit financing has led
incre: the supply of money
h reasesin inflation. Due to this of deficit financing,value of money causes
an incre
and the value of money falls. A fall in the
an increases inin prices which creates an unfavourable situations for the
reases
cconomic development.
112 DEEPAK Business
4. Adverse Effect Debt
Environment [Fiscscal F
instruments during unemployment and
on

depression
Management:"
is
The us
often co of
Podlol)
nectediscal
the successive problem of debt
fiscal cure and public debt ismanagement.
made for
Deficit budgetin
is a
ed wi
normal
with
recovery under depression is lenthy, then itfinancing
ng it. If
If thehonal
the
will create a
debt repayment and debt
management. huoe process ofofo
nuge ess
problem
5.
Administrative Problems in Democratic
democracy, fiscal policy measures must be Countries
Legislative actions, administrative tasks anda tries Ina
time-consumino
often delayed and the the
executive proeproces
original estimates of ecutive proces
government expenditures evenue earni
revenue earnings are
relating to fiscal measuresoften become irrelevant.
The s and
the gap between results in
considerable erosion of operational
becomes vast. expected achievement and the real effect aandag
Q.3.What do attainment often
often
of Budget 2016-17.you mean by Budget?
Explain the
and
Ans.
Meaning of Budget: A Characteristies
expenses of the government budget is an estimation of the
compiled and evaluated on a over a
specified future period. It isrevenues
can be made
for a city, a periodic basis that is after one
state or a
usually
concept that shows a trade-off country. A budget is a year. Budgets
The budget is a when one good is
base for the fiscal microeconomic
information about the exchanged
policy of a country. It tellsfor another.
incurred by the revenue sources and complete
presented by the
government of a
country in a expenditures
which will be
the budget, the finance minister in the monthfinancial year. The budget is
of
Government of India considers february. Prior to making
expenditure
an
is to be made
along with the sectors on which the
important event the sources of
which sector is on for stock markets as well as
revenue. Abudget
the radar
for the now the
investors know
Characteristics
made by late of
Budget government.
finance minister Mr. 2016-17: The budget of 2016-17
2016-17 are as follows Arun wa
Jaitley. The characteristics ot e
1. Agriculture Sector: Duus
) Doubling the
(i) 28.5 hectares farmer
of land
income by 2020.
(ii) NABARD will set will be
brought
under
iv) The dedicated irrigationffundirmigao0
a
and government will cros
of7 20,000 crore
optimally utilize the water reorient interventions in the r m i n gS e c t o r

()
Implemented the Pradhan
resources. farn
before scheme
Mantri
total-to advanceto be allocated 19,000 Gram
ram Sadak Yojana
7,000 as
never

completion target to 2019 from

crores in FY17;*
21
Sadar000
croresin
crore
2022.
 K.U.K. 113
FIRST)
MCOM.
MC
1st(SEMESTER
after calamities and special focus was given
farmers
Support the
(vi) trillion in FY17.
a timely
flow of credit. The target is 9
toensure Make an e-market portal for connecting
breeders and farmers.
(vit)
visible rise in the yield
of honey.
(viit) A
domestic honey is now exported.
(ix) 90% of
35,984 crores for the farm sector.
()Allocating a fund of R
2. Rural Areas:
cluster-facilitation teams
should be put under MNREGA to
() The resources.
water
optimize the It is the
crores allocated for MNREGA in 2016-17.
() 38,500
if the entire amount is spent.
highest ever and
as grant-in-aid for gram panchayats
(ii) 2.87 trillion to given
be
of 228%.
municipalities. It is quantum jump
a
2018.
100% village electrification by 1 May
(v) Committedtoachieving
digital literacy in rural areas. The plan to launch
(v) Need to spread
households in rural areas.
a digital literacy
mission for more than 6,000
made essential. It was to be
Modernization of the land records
(vi)
sector scheme.
implemented as a central as a
clusters. It will concidered
(vii) Development of 300 'rurban'
with a population of 25000 to
cluster of geographical contiguous villages
15000 in deast, hilly or tribal
areas.
S0000 in plainor costal area and 5000 to

3. Social Sector
connections in women's
) Embarking a scheme to provide LPG
names.
that have given up LPG
(ii) Give gratitude to 75 lakh households
subsidies.
Services Programme
Ti) Propose a scheme to start National Dialysis
wIln funds that were generated under PPP scheme.
medicines under Prime
) 3,000 stores were opened for quality
Minister's Jan Aushadhi Yojana in 2016-17.
made to
focus on quality education -

A commitment that is
mprove higher educational institutions.
(non-profit)
Decided to set up a highereducation financing agency
with an initial
corpus of 1,000 crores.
certificates or other
gital depositories for school leaving
acade
academic certificates.
in schooOS
education and trainingto be provided
and Entrepreneurship
and colleges.
114
DEEPAK Business Environment
4. Job Creation: Fiscal PolPoii
Fiscal
()Paying an EPF contribution of 8.5% for all new
EPFO to motivate emplove
employers. joining
(i) National Career
Service-Registered 35 million
Propose to interlink state employment job-seeit.
Service exchanges with National Caa
(ii) Retail trade became the
biggest
(iv) Small and medium shops shouldemployer in the
be
country,
open all 7 days on a voluntary basis. given the option to
remain
(v) Model shop's bill on a
5. Infrastructure voluntary basis for states was
and Investment: adopted.
() Nearly 85% of stalled
projects were back on track.
(in) Allocated 55,000 crores for roads
and highways.
15,000 crores were raised by the National Additional
(NHAI) through bonds. Highways Authority of India
(iit) The total allocation of 2.18 trillion was made for roads and
railways.
iv) The pace of completion of road
10,000kms in 2016-17. projects was to rise neariy

() The total outlay for infrastructure in the

2.21 trillion. budget was estimated a
vi) Passenger trafic on roads became more
efficient now. 1D
a totally unreformed sector.
(vii) Government achieved the wthin
over 2 decades. highest coal production grow
(viii) Comprehensive plan was made spanning 15-20 to

augment capacity in the

nuclear power sector.
i) Further reforms were made in FDI policy an arca
andpension, stock exchanges etc. ustry

() FDI policy should address

i n d u s t r y

100% FDI farmers, food processing

ng for tn
through the Foreign Investment Promotion
omotion
Board
route

marketing of food products produced and

and manufactured
ndia.
dia.

6. Financial Sector Reforms

Reroed n*
(i) The bankruptcy
up code is to be introduced. s t a t u t o

(iü) The
The RBI Act 1934 was to be to
provide
a

basi
basis for a amended wP
monetary policy framework. set.
(iii) The financial data management center was to be
 K.U.K. 115
(SEMESTER FIRST)
MCOM. 1st
to bec introduced.
New
derivative products
()
legislation to deal with fraudulent schemes
() Thecentral act the for more benches for the SAT (Securities
(vi)
SEBI to amend
Appellate 1ribunal).

be provided for the recapitalization of public

25,000 crores to
(vwi)

during the
sector banks.
year.
board bureau to operationalize
(vi The banking
massive rollout of ATMs for
the next 3 years.
(i) To undertake
the government will be
listed on stock
owned
firms by
(x) Insurance
exchange.
Business:
7. Ease of Doing subsidies
of
include the introductiontargeted delivery of
(Initiatives
social security platform
for use of Aadhaar; direct
Aadhaar, with a
through basis for fertilizers.
on a pilot
benefit transfers for
Bill to amend Companies enabling environment start-ups.
Act
() districts for Ek
Create a closer engagement
amongst states and
(iin)
Bharat, Shrestha Bharat.
in 2017- Ek Bharat, Shrestha
(iv) 70th anniversary of Independence
mission.
Bharat is a part of this
8.Fiscal Situation:
and Budget Management (FRBM) roadmap:
(i) Fiscal Responsibility
Prudence lies in adhering to fiscal targets.
made for FY15-16 at 3.9% and
(n) Budget and Revised estimates
were

3.5% of GDP respectively.

was estimated at
7 19.78 trillion.
ii) Total expenditure in the budget
at 3.5% for FY17.
(iv) Retaining the fiscal deficit target FY17-18.
classification should be abolished from
() Plan/Non-plan
of GDP.
(vi) Revenue deficit target was kept at 2.5% birth
each for celebrating
(Vi) Allocated more than 100 crores
anniv of Pandit Deendayal Upadhyay and Guru Gobind Singh.

9.TaxReforms
and measures for moving
h e relief was given to small taxpayers was
toward society, reducing litigation, simplification oftaxation
pEnsion
taken.
lakhs
(i) e Ceiling of tax rebate at 5,000 for income less than 7 5
was kept.
 116 DEEPAK Business Environment [Fiscalp
scal Polo
(ii) Deduction for rent paid will be raised from
to? 60 20,000
tobenefit those living in rented houses. 60,000
(iv) Presumptive taxation schemes-to increase the
72 crore-relief for turnover limits
many in MSME category. tto
(v) Extend the presumptive taxation scheme
ror all
with gross
receipts up to 7 50 lakhs. professionals
onals
(vi) 100% deduction of
profits for start-ups adhering to certain
conditions. MAT will be
applied.
(vii)
To reduce customs
duty
exemptions for braille
on
refrigerated containers and
paper.
(vii) Exemption of service
tax for NPS, EPFO
to
(ix) 100% deduction on
profits for flats up to 30
employees.
cities from 2016-19; MAT will sq. meters in metro
apply.
() Relief on housing loans for to 7
up 50 lakhs.
(xi) Surcharge on luxury cars
costing more than 7 10 lakhs.
(xii) Pollution cess for all vehicles.
(xii) Impose additional duty on
xiv) Changing the excise duty onjewellery.
branded ready-made garments.
(xv) Reviving clean energy cess on
coal.
(rvi) Increase duty on tobacco
10. Reducing Litidation: products (other than beedi) by 10-15%
() Tax evasion will be looked
(ti) Limited period strongly.
income. compliance window to declare the undisei
(iii) 3 lakh tax cases
resolution scheme shall be set
pending before authority -

A new
a
pute
up where the taxpayer can settle tne case by
paying disputed tax and interest.
One-time scheme for
dispute resolution for pending re
p e c t i e

tax amendment case.

() Justice Easwar abolish 13% ces

levied by various
Committee recommendation to abolisn
ministries.
(vi) Rationalizing TDS
provisions for income
(vii) Non-residents without PAN
tax. on
apply

furnishing alternate ID. higher rate wo"

(viii) Amendment of customs act.
 cOM. 18t (SEMESTER FIRST) K.U.K.
MC
117
Give
04. highlights
the of the
budget of 2019-2020 and 2020-2021
presented by Mrs. Nirmala Sitharaman.
Ans. 1. Highlights of Budget of 2019-2020 The budget for
a19 2020 was announced by Smt. Nirmala Sitharaman the Union
inister for Finance and Corporate Affairs. The key highlights of the
union budget of 2019 are as follows
Vision for the Decade:
() Building a team in India with Minimum Government and
Maximum Governance.
(i) Achieving the goal of green Mother Earth and Blue Skies by
making India pollution-free.
(ii) Making digital India reach every sector of the economy.
(iv) Launching satellite programmes like Gaganyan, Chandrayaan,
and others.
(v) Building physical and social infrastructure.
(vi) Development of Blue economy.
(vii) Clean rivers and water management.
(viii) Emphasis more on MSMES start-ups, defence manufacturing,
automobiles, electronics, medical devices, under make in India.
(ix) Self-sufficiency and export of food-grains, pulses, oilseeds, fruits
and vegetables.
)Achieving a healthy society via Ayushman Bharat, will nourished
women & children, safety of citizens.
1. Direct Taxation:
) Interest deduction will be
Section 80EEA was
applicable on housing loan under the
increased by 7 1.5 lakh taken on
property by date of31/3/20. Houses costing7 45 lakhs
the self-occupied house
for this. will be eligible
n)
to Interchangeability of Pan and Aadhar to provide convenience
e taxpayers. Now, the Income-tax Returns can be filed
number. using Aadhar
(iii) To discourage the cash TDS of 2% on withdrawal
rules payments at
SSectionexceeding
194N
I crore
per annum from a bank account under a new

in the The
bracket
surcharge for individuals that are having a taxable income
of 7 2-5 crore increased to 25%.
Cror
Crore
()The surcharge for individuals
increased to 37%. having a taxable income of R 5-10
118 DEEPAK Business Environment
nt [Flsco
Fiacal Poli
(vi) An additional income tax deduction will be given of
lakhs on the payment ofinterest on the loan which is taken upto1s
to
electronic vehicles under Section 80EEB.
2. Infrastructure:
purchase
(i) A focus was given on investment in infrastructure

Highways and the aviation sector.

(i) The second phase of Bharat mala was commenced to de
National
ed to develo
state Highways.
(iin There was a comprehensive restructuring of national highu
tional highways.
3.Education:
(i) Major changes were made in both Secondary and : .
Education of the National Education Policy. Higher
(i) A digital education platform known as Swayam was promoted
(iii) Greater focus on research and development- National search
Foundation to fund and promote research - the pooling ofresearch grants
from various ministries and disbursing them, preventing duplication of
research projects.
4.Household:
() More than 7 crore LPG connections were delivered to rural
households.
(ii) Rainwater harvesting, groundwater recharge and management

of household water foragriculture was encouraged. Provisions

use in
were made for housing, electricity,
clean cooking facilities, safe and
India.
adequate drinking water, etc. to all the areas rural entry to all rural
of

(iii) Har Ghar Jal was launched to provide

water

households by 2024.
5.Pension: to 3 crore retal
() There was a proposed pension benefit given
traders and shopkeepers whose annual turnover was up to 7 1.5 crore

6.MSME
Large scale extension reforms were planned by the
governne
to create a platform for MSMEs payments.
MSMEs within 59 minu
i ) Loans ofT I crore could be availed by
(ii) Loans worth 350 crore were already disbursedSMES
croall
MESall

allocation for 2% interest subvention for all GST- registered M o "

on fresh or incremental loans.
7. Women Empowerment: t h e MUDRA

nc
) The loan amount up to 7 1 lakh was given under
Scheme for women
entrepreneurs.
 SEMESTER FIRST) K.U.K. 118
M.COM.1st
very Self-Help Group (SHG) women having a Jan Dhan
(i) Every Self.

was allowed
for 7 5000 overdraft facility.
count
it
(in) A committee was forme with public and private stakeholders
gender equality.
o promote
8.Railways:
A Railways 657 kilometers of Metro Rail operator in the country.
() The railway station imodermization scheme will be launched this

year
i In railways will be encouraged to invest more in urban and
suburban regions.

9.Banking and Financial Sector

Multiple reforms will be taken to strengthen the Governance of
Public Sector Banks. (PSBs)
(in NPAs of commercial banks reduced by 7 1 lakh crore over last
year.
(it) Record Recovery of over 4 lakh crore with IBS.
(iv) After the Consolidation of Public Sector Banks, now 7 70,000
crore of Capital boost for credit improvement of these banks.
() Smoothly cary out the consolidation of banks and reduce the
number of Public Sector Banks (PSBs) to 8.
(vi) The fundamental sound and we will get a fresh series of funding
from the government of71 lakh crore during the current financial
year.
(vi) The regulatory authorities from the National Housing Board
*ill be given to the Reserve Bank of India.
vii) Strengthening the regulatory authorities of RBI over NBFCs.
10. Electronic Vehicles:
() Lower the GST rate on electronic vehicles from 12% to 5%.
(i) Making electric vehicles more affordable by giving income tax
Geduction on? 1.5 lakh on interest paid on loan taken to purchase of
electric vehicles.
IL Highlights
of Budget of 2020-2021: The budget for 2020-2021
was announced by the Union Minister for Finance and Corporate Affairs
om. Nirmala
are as follows
Sitharaman. The key highlights of the union budget of 2020
1.Defence
Ihe defence budget was increased by the government to 3.37 lakh
crore for
the year
3.18 1akh crore. 2020-21. The amount kept for defence last year was
 DEEPAK Business Environment [Fisn
120 Fiscal Polioj
were set aside of the total for canital
al
(it) T 1.13 lakh crore
weapons,
aircraft and other military hardware outlay to
purchase new

2. Income Tax: introduced

tax scheme w a s
(i) New income tax
lakh: No
(a) Upto 7 5
income: It was reduced to 10% from 200
(b) 7 5-7.5 lakh
(c)T 7.5 lakh to 10 lakhs: It was reduced to 15 from 209
(d) 10-12.5 lakh: It was reduced to 20% from30%
25% from 30%
(e) 12.5-15 lakh: It was reduced to
There was no change
) T15 1lakh : 30%
distribution tax was abolished.
(ii) The Dividend
the country, tax burden on employees due
(iit) To boost start-ups in
to be deferred by five years or till thev
to tax on Employee Stock Options
whichever is earliest.
leave the company or when they sell,
Vishwas Scheme, the taxpayers were
(iv) Under the Vivad Se
tax. They will get a complete
required to pay only amount of disputed
waiver on interest and penalty.
verification of taxpayers was introduced.
(v) Aadhar based
3. GDP
estimated at 10% for 2020-21.
(i) The nominal GDP growth was lakh crore
estimated at 7 22.46
(ii) The receipts for 2020-21 were
rupees.
revisSed
(ii) The expenditure at 7 30.42
lakh crore rupees and
for FY21.
expenditures were estimate at 7 26.99 lakh crore

of 3.3% of GDP
(iv) The Fiscal deficit was at 3.8% vs target
tax was kept 15% which is lowest
in the worid.
(v) The corporate
4. Sports Budget rts

()The government allocated a budget of 7 2826.92 crore

for spo
for the next financial year. India
.
Khelo
(i) A substantial hike of 291.42 crore to its flagship a

programme was given by the government for development of spor

the grassroots and youth levels.
Incentives for sportsperson was slashed from 1lu crore
c
70 crore. d u c e d

)The budget for National Sports Development Fund wa

to 50.00
from the earlier 77.15 crore. reduced

() Funds allocated to Sports Authority of India (SA1) wa*

to 500 crores from 615
crore.
 K.U.K. 121
1st
(SEMESTER FIRST)
M.COM.

National
Welfare Fund for Sportspersons will be continued to
(17)
crore.

& 2
getnthe(vii)
get 7 50 crore were allocated for enhancement of sports facilities
Kashmir.
and
Jammu
n Laxmi Bai National Institute of Physical Education will, get
(vii) stood 50
crores.
The last year
amount
at crore.
55
5 .Agriculture:

The Finance
Minister listed outa l6-point action plan for farmers.

t aimed
towards the goal of doubling farmer's income by the year 2022.
set at F 15 lakh crore.
ci The agricultural credit target was
(i) Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan

PM KUSUM) was expanded

and it aimed to provide 7 20 lakh farmers
solar pumps.
up standalone
in setting
(iv) 2.83 lakh crore rupees were allocated for agriculture and allied
activities like irrigation and rural development.
(v) Balanced use of all fertilizers was encouraged which is a

excessive
necessary step to change the incentive regime which encourages
use of chemical fertilizers.
(v) Village Storage Scheme were run by SHGs, will provide holding
capacity for farmers, women in villages can regain their status as Dhaanya
Lakshmi.
(vi) Krishi UDAN scheme will be launched by the Ministry of Civil
Aviation on international and national routes which will improve value
realization in North Eastern areas and tribal districts.
(vii) Milk processing capacity will be doubled by 2025.
(ix) Indian Railways willset up Kisan Rail through PPP arrangement,
1or
transportation of perishable goods.
) Fish production to be raised to 200 lakh tonnes by 2022-23.
6.Education:
) 3,000 crore were allocated for skill development.
7) IND-SAT exam to be held in African and Asian countries, for
benchmarking foreign candidates who wish to study in India.
u Degree-level full-fledged online education programme will be
b y institutes that are in the top 100 in National Institutional
Ranking Framework.
(iv) The governmen announces 7 99,300 crore outlay for education
eclor in 2020-21.
 DEEPAK Business Environment [Fia
122
Flecal PoNo
() New Education Policy to be announced in 2020.
(vi) The urban local bodies across the country to provide
to young engineers for a period of upto l year.
(vi) 8,000 crore over a period of five years t
internstips
be provided for
uantum technologies and application.
7.Finance
() The deposit insurance coverage was increased
5 lakh.
from 1
akh to
(ii) Measures were taken to eliminate tax harassment.
(ii) To achieve the goal of higher export credit, a new
launched that provided higher insurance scheme w
small exporters and
cover and reduced premiumWas
simplified procedure for claim settlements.
(iv) R 27,300 crore for
development of industry and commerce were
allocated.
() Investment Clearance Cell was set up through a
porta which
willprovide end-to-end facilitation, support and information on land
banks.
(vi) Amendments were made to enable the NBFCs
to extend invoice
financing to MSMEs.
(vii) Government proposed to sell a
initial public offer to raise part of their holding in LICby
capital from the public.
8. Infrastructure:
i) More than 100 airports to be
UDAN scheme. developed by 2024 to support the
(ii) R 1.7lakh crore were
provided for transport infrastructure mu
coming financial year.
(iii) Tejas-type trains to connect iconic
(iv) The Delhi-Mumbai destinations were annon
expressway and two other projecis
completed by 2023.
()The monetization of 12 lots
before 2024. of highway bundles of over 6,0,000km
(vi) The National
create a single Logistics Policy will be released so1u thatw
window for e-logistics market.
(vii) project preparation
A "Preparation

of infrastructure facility was to be set upfor n g i n e e r sa n

projects. It will actively involve young c

management graduates.
(vii) National Gas Grid will be expanded from 16,200
Okn

27.00
r o m
16,200 kmto N
 (SEMESTER FIRST) K.U.K. 123
M.COM.1st
Nutrition:
Women and
9.
The gross enrolment ratio for Beti Bachao Beti Padhao' was
than boys.
for girls
higher 28,600 crore were provided for programmes that are specific

to women.

in35,600 crore were provided for nutrition-related programmes

2020-21
in the year
()Over 6 lakh anganwadi workers were equipped with smartphones

to
the nutrition status of over 10 crore households.
upload
10. Other Sectors:
85,000 crores were kept for the development of the scheduled
castes and other backward classes in 2020-21.
()T 53,700 crore for Scheduled Tribes.
(i) Enhanced allocation of 7 9,500 crore was made for Senior
citizens and Divyangs.
v) 2,500 crore were allocated to promote tourism, in 2020-21.
)7 3,150 crore were allocated for culture ministry in 2020-21.
(vi) Parameters and incentives were provided to those states that
have taken measures for cleaner air in cities above a population of
I million 4,400 crore were allocated for this.
Q.5. Explain the highlights of Annual Fiscal Policy Report 2019-20.
Ans. The highligts of annual fiscal policy of 2019-20 are as follows
()A stimulus of 1 lakh crore rupees was provided by lowering the
oporation tax rate to ensure that adequate surplus is available for private
Investments.
()Itwas anticipated that there will be a variation in the fiscal
i t of 0.5% in 2019-20 and 2020-21. The target for 2019-20 fiscal
deficit was revised at
3.8% of the GDP.
inin2010 government expenditure was proposed at7 27,86,349 crores
2019-20. This estimate
amount was 13.4% above the revised of2018-19.
The nominal GDP growth rate was estimated at 12% for 2019-20.
The normal
growth estimate for 2018-19 was 11.5%.
()The receipt ofthe government was expected to increase by 14.2%
Unta 7
upto
20,82,58
orporation tax and
crores due to the higher estimated revenue from
dividends.
vi)rcharge of 15% was charged on the income of individuals who
are eaning
s OVer R 1 crore. 10% surcharge was charged on the income of
 DEEPAK Business Environment [Fisrs
124 scal Polic
50 lacs to R I crore rupees. Surcharoe.
individual earning between e on ncone
between 2 to 7 5 crore was inor Co
tax for an individual earning
more than 7 5 crores was incraa
to2 ased 29%
and for persons that are earning eased to 3P%
(vii) To boost the economy additional tax deduction ofz eduction
of R 1.5
\
was provided on interest paid on loans for self-occupied house
houseaf
of owners
(vii) 100% of Foreign Direct Investment was permitted for i

intermediaries.
insurance
(ix) The statutory limit for Foreign Portfolio Investmen
increased from 24 % to sectoral limits.
was
(x) 1.25 lakh kilometers of roads will be upgraded at an asset
crore kilometers of road in the next five years under the Pradhan Manti
Gram Sadak Yojana.
(xi) A New Pension Scheme was launched under the Pradhan Mant
Karam Yogi Maandhan Yojana announced for traders and small
shopkeepers that have an annual turnover of fewer than ? 1.5 crores.

ActualsRevised Budgeted |Budgeted %change

Particulars
2017-18 2018-19 2018-19 2019-20 RE 2018
19 to BE
2019-20)
14.30%
Revenue Expenditure 18,78,83321,40,612 21,41,772 24,47,780
2,63,140 3,16,623 3,00,441 | 3,38,569 6.90%
Capital Expenditure
| Total Expenditure 21,41,973 24,57,235 24,42,213 27,86,349| 13.40%
Revenue Receipts 14,35,233 17,29,682 17,25,738| 19,62,761 13.50%
93,155 92,199 1,19,828| 28.60%
Capital Receipts 1,15,678
14,828 12.70%
Recoveries of Loans 15,633 13,155 12,199
80,000 1,05,000 31.30%
Other receipts 1,00,045| 80,000
(including
disinvestments) 18,17,937 20,82,589 14.200
| Total Receipts 15,50,911 18,22,837
(without borrowings) |
4,85,019
18.0
| Revenue Deficit 4,43,600 4,10,930 4,16,034
2.3
% of GDDP 2.6 2.2 2.2 2 9 0 %

7,03,760
10
Fiscal Deficit 5,91,062| 6,34,398 6,24,276 |
3.3/
% of GDP 3.5 3.4 3.3 43,289 -7.60

Primary Deficit 62,110 46,828 48,481 0.2

% of GDP 0.4 0.2 0.3
 1st(SEMESTER FIRST) K.U.K.
MCOM.
125

SHORT ANSWER TYPE QUESTIONS

Q.1. What is Fiscal Policy?
AnS. Fiscal policy in India is the
guiding force that helps the
gOvemment in
emment deciding
in decidi how much money they should
spend to support
the conomic activity
in the country. In
recent times, the importance of
fiscal poliey has grown manifold. It is important to achieve
rapid economic
growth both in India and around the World.
ne of the key goals of the fiscal policy which is
Achieving rapid growth is
government of India. Through the fiscal formulated by the
eovernment of policy, the Government of a
eNntry controls the flow of tax revenues and the
navigate the economy. If the government receives
public expenditure to
more revenue than it
SDends then it is a surplus. If the government
then it is a deficit.
spends more than its revenue
Q.2. Give any three limitations of Fiscal
Ans. The limitations Policcy.
of fiscal policy are as
follows
() The Problem in Forecasting It is
: observed
impossible for the government to forecast which that it is practically
economic instability. The success of activity can cause
a fiscal
measure
accurate
predictions of various economic activities. depends on the
If there is no
forecasting then the economy will be erratic.
(i)Inadequacy of Fiscal Measures: During
the
expansion of public spending and recessionary trends
elements. The reduction in tariffs
are the
question which comes to the mind is how key
spending or how much tax rebates will much public
case the injections or be helpful for the
economy. In
withdrawals of money in the circular flow
0r less
than are more
required then the entire
system will
move in the
desired collapse and it will not
direction.
n) Adverse Effect
Debt Management: The use
on
uruments of fiscal
the during unemployment and depression is often connected
successiveproblem of
fiscal cure and debt management. Deficit budgeting is
with
Cure public debt is made for a normal
recovery from depression financing
is long, then creation of
it. If the process of
after year budget deficit
and will
come and it will create a
and debt management. year
huge problem of debt
repayment
O0O