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Fiscal Policy

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  • 1. FISCAL POLICY
    Presented by
    SandeshKothavale - BT0942
    Shaniraj Babar - BT0944
    Sheetal Mehta - BT0945
    Sheetal Narkar - BT0946
  • 2. FISCAL POLICY
    The use of Fiscal Tools by the government constitutes what we call Fiscal Policy
    Fiscal Policy is a policy under which the government uses its revenue and expenditure programmes to produce desirable effects and avoid undesirable effects on national income, production and employment.
    Fiscal Policy is used as a balancing device in an economy
  • 3. OBJECTIVES OF FISCAL POLICY
  • 4. OBJECTIVES OF FISCAL POLICY
    • Objectives differ from country to country
    • 5. Major Objectives :
    Mobilization of Resources
    Acceleration of Economic Growth
    Minimize the Inequalities of Income and Wealth
    Increase the Employment Opportunities
    Price Stability
  • 6. x
    OBJECTIVES OF FISCAL POLICY
    1. Mobilization of Resources
    Level of Investment
    Raised
    Public Borrowings
    Taxation ,
    Fiscal Tools :
  • 7. OBJECTIVES OF FISCAL POLICY
    2. Acceleration of Economic Growth
    Higher Yield
    Mobilization
    of Resources
    +
    Direct resources
    to channels
    Goods are socially
    desirable
    Public
    Expenditure
    Programs
    Raise
    Production
    Potential
    Larger
    Incomes
  • 8. OBJECTIVES OF FISCAL POLICY
    3.Minimize the Inequalities of Income and Wealth
    Redistribution of
    Income
    Poorer Section
    of Society
    e.g. Government may collect larger revenue from the richer sections of the society and make use of revenue so raised to incur expenditure on the social welfare activities that largely benefit the poorer sections of the society.
  • 9. OBJECTIVES OF FISCAL POLICY
    4. Increase the Employment Opportunities
    Growth of
    Industries
    Fiscal
    Incentives
    Tax Rebates,
    Concessions
    High Employment Generation Potential
    • Public Expenditure can be incurred on
    employment – generating works
  • 10. OBJECTIVES OF FISCAL POLICY
    5. Price Stability
    • Fiscal tools can be judiciously employed to contain
    inflationary and deflationary tendencies
    Cut in Public
    Expenditure
    Anti – Inflationary
    Effect
    Boost to Economic Activity
    Increase in Public
    Expenditure
  • 11. OBJECTIVES OF FISCAL POLICY
    5. Price Stability
    Raise in Direct Taxes
    Inflation
    Reduction in
    Tax Rates
    Deflation
  • 12. Indian Fiscal Policy
  • 13. Indian Fiscal Policy
    Expansion in the public sector, public expenditure, public revenue
    Share of Public sector in NDP:5.4% to 26%
    Share of public expenditure in NDP:11.7% to 49.7%
    Share of Public revenue in NDP: 9.4% to 21.2%
  • 14. Goals of Indian Fiscal Policy
    Rapid economic growth
    Expansion of employment
    Reduction of disparities in income and wealth
    Prevention of concentration of economic power
  • 15. Ways to Achieve the Goals
    To create necessary social and economic overheads.
    To develop and promote basic industries.
    To create job opportunities.
    To improve the economic conditions.
    To reduce the income and wealth disparities
    To achieve self-sufficiency
  • 16. Public expenditure
    Expenditure of public authorities, i.e. central, state and local government, on various socio-economic and political activities with ultimate aim of public expenditure being promotion of public welfare.
  • 17. Principles of public expenditure
    Given by prof. Findlay shirras
    Principle of benefit
    Principle of economy
    Principle of sanction
    Principle of surplus
  • 18. Causes of growth in public expenditure
    Emergence of welfare states
    Rising defense expenditure
    Rise in price level
    Industrialisation
    Basic infrastructure
    Population growth
  • 19. Classification of public expenditure
    • Functional classification
    • 20. Plan
    • 21. Non-plan
    • 22. Economic classification
    • 23. final outlays ( gross capital formation and
    consumption expenditure )
    • Transfer payments
    • 24. Financial investments and loans
  • Budget
    The budget is a financial statement showing the estimates of receipts and expenditures
    It comprises of :
    -Actual figures for the preceding year
    -Budget estimates for the current year
    -Revised estimates for the current year
    -Budget estimates for the following year
  • 25.
  • 26.
  • 27.
    • Tax structure is rigid and narrow
    • 28. A sizeable portion of the developing countries is
    non – monetized.
    • Lack of adequate data
    • 29. Illiteracy Problem
    • 30. Large – scale Tax Evasion
    • 31. Corrupt and Inefficient administration
    LIMITATIONS OF FISCAL POLICY IN DEVELOPING COUNTRIES