Fiscal Policy

Dr. Neeraj
Assistant Professor
MSOB
News
Analysis of News
Learning Outcomes
Why Govt. Frame Fiscal Policy?
How Indian Govt. generate Revenue for capital
Expenditure?
To understand difference between fiscal and monetary
policy
Part of the economic policy of Govt.
Related to income and expenditure of Govt.
Also called as budgetary policy, Income & Exp policy
and Tax & expenditure policy
It all deals with the Taxation, Govt. Exp, Borrowings,
Deficit Financing and their Management.
Any Guess?
182 Meters (597ft)
World Tallest Statue
Cost more than 3,000 Cr

Over 128,000 tourists visited

1.9 million visitors 
15,000 direct jobs in Tourism
Every Sat and Sunday, over 7500
Objective of Fiscal Policy
To remove Poverty and Unemployment
To Promote capital formation
To reduce income inequality
Price stability
To increase rate of saving
The Two Main instruments of fiscal policy

• Govt. expenditure/Expenditure Budget

• Taxes/Revenue Budget
Government Expenditure:

o Also called Expenditure on public.

o It is of two types:
1.Capital and revenue expenditure
2.Plan and non-plan expenditure
182 Meters (597ft)
World Tallest Statue
Capital Expenditure
The result in creation of financial assets or reduction in
financial liabilities:

This includes
Expenditure on acquisition
Loan and advances by Central Govt. to state
Revenue Expenditure (DtD)
Other than creation of physical or financial assets of
Central Govt.
It includes
Expenses incurred on normal functioning of the Govt.
Interest payments on debt (Principle + Interest)
Grants given to state Govt.
Plan Expenditure
Five years plan
Relates to the expenditure on Central Plans and Central
assistance for State and UT

Non Plan Expenditure

No choice with Govt.
Defence Services
Pension
Salaries
Interest Payments
2.GOVERNMENT REVENUE :

It is of 2 types:

-Capital Receipts and

-Revenue receipts
Capital Receipts
Every receipts of the Govt. which Creates liability or
reduces the financial assets are termed as capital assets
Example -
 REVENUE RECEIPTS :

Every receipt of government which are non-redeemable i.e.

they cannot be reclaimed from govt.

They are of two types-

1.Tax revenue (Income tax, corporate tax, excise duties,
custom duty, service tax, wealth tax, gift tax)
2.Non-tax revenue(Interests, dividends, fees, cash grant-in
aids)

Central Govt. Assigns Loan to State Govt

Challan
Quiz
Fiscal policy is called as policy
Monetary
Budgetary
Industrial
economic
Fiscal policy refers to the policy of government
regarding taxation, public expenditure and
________ .
public debt
budgets
policies
Deposits
This is the Govt.’s strategy in respect of public
expenditure and revenue which have a significant
impact on business :
Monetary policy
Fiscal Policy
Trade policy
Foreign exchange policy.