PRSENTATION ON

FISCAL POLICY

BY ANAND S. AWAR MBA 2nd SEM

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Contents to be covered:

Meaning & Objectives of Fiscal Policy Instruments of Fiscal Policy Meaning of Budget Sources of Revenue Public Expenditure Public Borrowings Public Debt

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What is meant by Fiscal Policy ? The word Fisc refers to State Treasury and Fiscal Policy refers to policy concerning the use of state treasury or the Government's funds to achieve economic goals. In other words, Fiscal Policy refers to that policy of the Government as regards taxation, public borrowing and public expenditure with specific objectives in view. These objectives are to produce desirable effects and avoid undesirable effects on the national income, production, employment, and general price level.

FISCAL POLICY Objectives of Fiscal Policy:

The following are some of the important objectives of fiscal policy adopted by the Government of India.

To mobilise adequate resources for financing various programmes and projects adopted for economic development.

 To promote necessary development in the private sector through fiscal

incentive.

 To raise the rate of savings and investment for increasing the rate of capital
formation.

 To control the inflationary pressures in the economy in order to attain

economic stability.

 

To remove poverty and unemployment, To reduce the degree of inequality in the distribution of income and wealth.

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Tools or Instruments of Fiscal Policy
The instruments of Fiscal Policy include:      Budget Taxation Public Expenditure Public Borrowings Deficit Financing

FISCAL POLICY 1.Budget- What is meant by Budget ?

The term Budget is derived from the French word Bougtte, which means a leather bag used to carry financial papers.

Meaning of Budget:
Budget is a master financial plan of the Government. It brings estimates of anticipated revenues and proposed expenditures , employing schedule of activities to be undertaken towards the direction of national objectives for the ensuing financial year before the Parliamnet. The Budget is presented by the finance minister before the Parliament on 28th February of every year. It is also known as Annual Financial Statement.

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Types of Budget:
Balanced Budget A balanced budget is said to be balanced when its tax revenue and expenditure are equal.

Surplus Budget

If the estimated receipts are more than the estimated expenditures, the budget is called a surplus budget.

Deficit Budget

If the estimated expenditures are more than the estimated receipts, the budget is called a deficit budget.

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Sources of Revenue

Revenue Receipts

Capital Receipts Non-tax Revenue

Tax Revenue Direct Taxes 1.Income Tax 2.Corporate Tax 3.Wealth Tax 4.Gift Tax 5.Expenditure Tax 6.Interest Tax 7.Estate Duty Indirect Taxes 1.Central Excise Duty 2.Customs Duties 3.Service Tax

1.Public Enterprises 2.Interest Receipts 3.Administrative Revenue 4.Railways 5.Post & Telegraph 6.Currency & Mint 7.RBI

1. Internal & External Borrowings 2.Small Savings 3.Provident Fund 4. Loan Recovery 5. Public Deposits

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Public Expenditure: The expenditure made by the central government can be broadly classified into two categories, viz., 1)Plan Expenditure 2) Non-plan Expenditure.
Heads of Expenditure

Plan Expenditure Central Assistance to States Central Assistance for U.T. Schemes

Non-plan Expenditure 1.Civil Expenditure 2.Defence Expenditure 3.Interest Payments 4.Subsidies 5.Grant -in- Aid 6.Loans and Advances 7.Misclaneous Expenditure

Central Plan Schemes

1.Economic Services 2. Social Services 3. General Services

FISCAL POLICY 3. Public Debt:

Public Debt refers to all types borrowings by the government from among the institutions, organiosations and the public. It plays an important role in a capital deficient country like India. The public debt of Government of India has been classified into : Internal Debt
It consists of all internal borrowings and market loans. It includes treasury bills issued by the Government of India to the Reserve Bank, State Governments, Commercial Banks and other parties.

External Debt

External Debt refers to borrowings of the Government of India from external sources, i.e., foreign countries and from financial institutions. It includes outstanding liabilities against the various small saving schemes , provident funds, deposits under the schemes, income tax annuity deposits schemes, reserve funds of railways and post and telegraph.

Other Liabilities

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Budget Deficits: Deficit Financing is the most useful method of promoting economic development. It may be used for the development of economic and social overheads such as construction of roads, railways, power projects, schools, hospitals, etc. 1. Revenue Deficit : Revenue deficit equals the difference between the revenue receipts and the revenue expenditure. 2. Budget Deficit : Budget deficit occurs when total expenditure exceeds total receipts. 3. Fiscal Deficit : It equals revenue receipts plus non-debt capital receipts minus total expenditure. 4. Primary Deficit : It is determined by arriving at the gap between the Governments total income and expenditure after excluding interest earnings as well as interest payments.

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QUESTIONS

SUS SUGGESTIONS

COMMENTS