Fiscal Policy

and it’s
impact on
India
Fiscal Policy is the
government programme of
making of making
discretionary changes in the
pattern and level of its
expenditure, taxation and
borrowings in order to
achieve certain economic
goals such as economic
growth, employment,
income ,equality, and
stabilization of the economy
as a growth path.
How Fiscal Instruments Affect
Target Variables ?

A Change in one policy variable affects all other macro

variables, The extent of effect depends on the extent of
their relationships. For example, a change in taxation
changes first the disposable income which in turn changes
the consumption expenditure, savings and investment.
The interdependence of target variables- Disposable
income, consumption expenditure, savings, investment,
imports, and price level- can be demonstrated by using
the aggregate demand function :
AD = C + I + G + X – M
Where, C = Consumer demand, I = investment, G = public
spending, M = imports, and X = exports.
 Fiscal Reforms in India

• Simplification of taxation system

• Improving tax to GDP ratio
• Reduction in rates of direct taxes
• Reforms in indirect taxes
• Introduction of service tax
Achievements of Fiscal Policy in
India

• Mobilization of resources
• Increase in savings
• Increase in capital formation
• Incentives to investment
• Reduction in Income and wealth
Inequalities
• Reduction in inter regional variations
Government present
Rs 2,786,349 crore
budget for 2019-20
Major Expenditure Items

 Centrally sponsored schemes have been allocated

Rs 331,610 crore.
 Defence budget is Rs 305,296 crore .
 Amount of Rs 174,300 crore has been approved for
pension in the budget 2020.
 The government has allocated Rs 184,220 crore for
food, Rs 79,996 crore for fertilizer and Rs 37,478 crore
for petroleum subsidies
Micro , Small and Medium
Enterprises(MSMEs) and Traders

 Government has proposed granting of loans up to

Rs. 1 crore for MSMEs within 59 minutes through a
committed online portal.
 The Government e- marketplace (GeM) is being
extended to all Central Public Sector
Enterprises(CPSEs), providing more opportunities for
MSMEs to sell their products.
Tax Proposals

 Individual taxpayers of annual income Rs 500,000 will

get full tax rebate.
 TDS (Tax deducted source) of 2% on cash
withdrawal exceeding Rs. 1 crore to promote less
cash economy.
 Limit for applicability of lower corporate tax rate of
25% increased from Rs 250 crore to Rs 400 crore.
 Aadhaar and PAN(Permanent Account Number) to
be interchangeable.
Growth in GDP
Moody’s cuts India outlook to
negative to predicts,
‘prolonged slower growth’.
 The SGX Nifty 50 Index Futures declined 0.4% in Singapore as of 6:57 a.m. in Mumbai.
The dollar-rupee one-month non-deliverable forwards rose after the Moody’s
statement.

 “A prolonged period of slower economic growth would dampen income growth

and the pace of improvements in living standards, and potentially constrain the
policy options to drive sustained high investment growth over the medium-to long
term,” William Foster, vice president of Moody’s Sovereign Risk Group, wrote in a
statement.
 The government said Friday it took note of the Moody’s revision, while flagging the
economy continues to be among the fastest-growing major ones in the world.
 “India’s relative standing remains unaffected,” the Finance Ministry said in a
statement. Steps taken by the government to strengthen the economy “would
attract capital flows and stimulate investments,” it said.
 The downgrade puts additional pressure on authorities to kickstart the economy,
although they have limited room to move. The Reserve Bank of India has already cut
interest rates five times this year, though lenders aren’t passing on that easing to
customers.
 Sources :
• www. Times of
India.com
• Macroeconomi
cs book by D.n.
Dwivedi.
• Business
Standard
article.com
• Ministry of
Finance.com
• www.
Hindubusinesslin
e.com
• www.
Slideshare.com
 PRIYANSHI
CHATURVEDI.
Submitted ANJALI MAURYA
by: HIMANSHU RATNANI
MANISHA JHA
DIVYA ROY