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Fiscal deficit in india
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  • 1. Fiscal deficit in India -K.AKHILA REDDY 11116030
  • 2. AgendaDefinitionFiscal deficit as a percentage of GDPElements of fiscal deficitCausesconsequencesReducing fiscal deficitConclusion
  • 3. DefinitionFiscal deficit is the difference between thegovernments total expenditure and its total receipts(excluding borrowing).If the Government spends more than it earns wehave a situation which is called a fiscal deficit.Fiscal deficit=government spending – governmentrevenue
  • 4. Fiscal deficit as a percentage of GDPGDP is the market value of all final goods and services produced in a country in a year. The GDP number includes both government spending and private consumption of goods and services.
  • 5. FISCAL DEFICIT FISCAL DEFICIT 6.5 6.04 6.25 6 5.9 5.85.6 5.45 4.9 5.1 4.6 3.34 2.93 2.5
  • 6. FISCAL DEFICIT AS % OF TOTAL RECEIPTS FISCAL DEFICIT AS % OF TOTAL RECEIPTS 73 68 62 47 33 23FY07 FY08 FY09 FY10 FY11 FY12
  • 7. Elements of fiscal deficitGenerally fiscal deficit takes place due to either revenuedeficit or a major hike in capital expenditure. Revenue Capital deficit expenditure
  • 8. Revenue deficitThe difference between the government’scurrent (or revenue) expenditure and totalcurrent receipts (that is, excludingborrowing)Revenue deficit=budget revenue- actual netrevenue
  • 9. EXAMPLEExpected ActualRevenue=Rs 100/- Revenue=Rs 90/-Expenditure=Rs 75/- Expenditure=Rs 70/-Net revenue=Rs 25/- Net revenue=Rs 20/- REVENUE DEFICIT=RS 5/-
  • 10. PERIOD REVENUE DEFICIT REVENUE 1985-2005 3.41 DEFICIT AS % VIII PLAN 2.8 OF GDP 1992-97 IX PLAN 1997- 3.95 2002 2002-03 4.44 2003-04 3.66BE-BUDGET ESTIMATE 2004-05 2.53 2007-08 1.1RE-REVENUE ESTIMATE 2008-09 4.5 2009-10 5.2 2010-11 3.3 2011-12(BE) 3.4 2011-12(RE) 4.4 2011-12(P) 4.3 2012-13(BE) 3.4
  • 11. BE-BUDGET ESTIMATE RE-REVISED ESTIMATEREVENUE DEFICIT AS % OF GDP 5.2 P-PROVISIONAL (in GDP) 4.44 4.5 4.4 4.3 3.95 3.663.41 3.3 3.4 3.4 2.8 2.53 1.1
  • 12. 100 120 0 40 140 60 -20 20 80 1985-2005VIII plan (1992-97) IX plan (1997-02) 2002-03 2003-04 2004-05 2007-08 2008-09 2009-10 2010-11 2011-12(BE) 2011-12(RE) 2011-12(P) 2012-13(BE) REVENUE DEFICIT AS % OF FISCAL DEFICIT OF FISCAL DEFICIT REVENUE DEFICIT AS %
  • 13. Capital expenditureCapital expenditure is the amount a company spends onbuying fixed assets, other than as part of acquisitions.The capital Expenditure is the fund used by anestablishment to produce physical assets likeproperty, equipments or industrial buildings. Capitalexpenditure is made by the establishment to consistentlymaintain the operational activities.
  • 14. CAPITAL EXPENDITURE OF CENTRE IN INDIAPARTIC 2006-07 2007-08 2008-09 2009-10 2010- 2011-ULARS 11(BE) 12(RE)A.NON 36690.69 41819 47379.08 62383.11 70106.40 90132.17DEVELOPMENTEXPENDITUREB.DEVEL 22602.49 65122.14 30110.85 38302.33 66990.08 62051.95OPMENTEXPENDITUREC.LOANS 8672.22 1385.55 6747.62 7034.35 16801.46 2130.22ANDEXPENDITURE SOURCE:MINISTRY108326.6 84237.55 107719.79TOTAL( 67965.4 OF FINANCE,GOVT.OF INDIA 153897.94 154314.34A+B+C) 9 Rs.in crores
  • 15. CAPITAL EXPENDITURE OF CENTRE IN INDIA180000 RS.IN CRORES160000140000120000 NON DEVELOPMENT100000 EXPENDIUTRE80000 DEVELOPMENT EXPENDITURE60000 LOANS AND ADVANCES40000 TOTAL20000 0 RE-REVISED ESTIMATES BE-BUDGET ESTIMATES SOURCE:MINISTRY OF FINANCE,GOVT. OF INDIA
  • 16. CURRENT SCENARIO MONTH-WISE GROSS FISCAL DEFICIT OF CENTRAL GOVERNMENT OF INDIAYEA AP MA JUN JUL AU SEP OC NO DE JAN FEB MAR RI Y E Y GU T V C RC L ST H2011- 746 560 3192. 6610 447 728. 2619 463 276 5392 586 161612 6.1 6.5 7 .0 7 7 .9 6 4.3 .1 3.82012- 671 743 488713 9.6 9.1 .3 RS.IN CRORES
  • 17. MONTH-WISE GROSS FISCAL DEFICITOF CENTRAL GOVERNMENT OF INDIA FISCAL DEFICIT80007000600050004000300020001000 0 Apr/11 Jun/12 Oct/11 Mar/12 Jun/11 Aug/11 Nov/11 May/11 Apr/12 Jul/11 Sep/11 Feb/12 Dec/11 Jan/12 May/12
  • 18. Causes of fiscal deficitPayment of interestPoor performance of public sectorExcessive government borrowingsTax evasionIncrease in subsidiesDefence expenditure
  • 19. Payment of interestOne of the major components ofgovernment expenditure is the interestpayment both on domestic loans andforeign loans. The government debt hasincreased considerably over the years. Thishas resulted in increased interest burden onthe government
  • 20. Poor performance of public sectorPolitical interferenceInefficiency and corruption of managementLack of professionalismSurplus staff
  • 21. Excessive government borrowingsThe internal and external debt of thegovernment has increased considerablyduring the past few decades. Due to thedebts; the government has to incur highexpenditure in form of interestpayments.
  • 22. Tax evasionIndian tax system is made up ofcomplex procedures with numerousexemptions. Corruptions is rampantat all levels, which leads to the fiscalimbalance.
  • 23. Increase in subsidiesThe major subsidies provided by the Central Government of India haveincreased over the years resulting in fiscal imbalance.period Total central government total central government subsidies subsidies2003-04 44323 2000002004-05 45957 1500002005-06 47522 100000 total centra2006-07 57125 50000 governmen 02007-08 70066 subsidies2008-09 1293332009-10 1413512010-11 164153 Rs in crore2011-12 143570
  • 24. Defence expenditureThe government has limited scope to reduce defence budget due to security problemsacross the Indian borders DEFENCE EXPENDITURE IN CRORES 180000 160000 140000 120000 100000 80000 60000 DEFENCE 40000 EXPENDITURE IN 20000 0 CRORES 2002-03 2007-08(BE) 2004-05 2008-09 2003-04(RE) 2009-10 2004-05(BE) 2005-06 2006-07(RE) 2010-11 2001-02 2011-12 SOURCE: ministry of defence,govt.of India
  • 25. ConsequencesDebt trapCut in capital expenditureNo increase in expenditure on education and healthHigh interest rates
  • 26. ConsequencesFiscal imbalance may lead to inflation in the economyHigh fiscal deficit may discourage foreign investmentin the country.The government has to borrow additional funds tosolve fiscal deficit, which put extra burden on thegovernment for payment of interest.
  • 27. Economic measures will help reducefiscal deficit: Pranab Mukherjee PTI Nov 14, 2012, 03.09PM IST
  • 28. NEW DELHI: President Pranab Mukherjee said measures like allowing FDI in multi-brand retail and civil aviation will help in reducing governments fiscal deficit and putting the economy back on high growth path."The government has recently unveiled several policy measures designed to put economy back on high growth trajectory," he said. PTI Nov 14, 2012, 03.09PM IST
  • 29. Govt plans to reduce fiscal deficit to 3% by 2017: FMGovernment would rely on aadhaarenabled direct cash transfers of subsidiesto eliminate duplication or falsification.Immediate corrective stepsIntroduction of the amended direct taxescode (DTC) bill PTI Published: Monday, October 29, 2012, 12:40
  • 30. Thank you