2. FISCAL POLICY
MEANING
• Fiscal policy is the means by which a government
adjusts its spending levels and tax rates to monitor
and influence a nation's economy. It is the sister
strategy to monetary policy through which a central
bank influences a nation's money supply.
• It is the policy concerning the revenue expenditure
and debt of the government for achieving certain
objectives like control of inflation, public expenditure.
3. DEFINITION
According to Prof. D.C. ROWAN, “fiscal policy is defined as the
discretionary action by the government to change (1) the level of
government expenditure on goods and services and transfer
payment and (2) the yield of taxation at any given level of output”.
Fiscal policy is defined as “the conscious attempt of government
to achieve certain macro goals of policy by altering the volumes
and pattern of its revenue and expenditure and balance between
them”.
4. OBJECTIVES OF FISCAL POLICY
Full employment
It means that man power is ready to work at a prevailing wage rate
without any dispute.
Government increase pubic expenditure to raise demand and tax
rate decreased. Results private sector gets incentive to spend more
when aggregate demand increases and total production and
employment increases. e.g.mgnrega
Reduction in economic inequality
The prominent aim of fiscal policy is to remove economic inequality.
so, that the burden of such taxes generally falls on rich people.
5. Price stability
When price rises then inflation exist in economy. Its aim is to
decrease the demand and expenditure and tax rate increase.
extra purchasing power of people goes into the hand of general
public and demand decreases because of excess supply,
prices automatically godown because of fear of stock.
Economic development
To achieve development of a country, fiscal policy acts as a
source of capital formation because as capital formation is
increased, production and employment also increased.
6.
7. PUBIC REVENUE
Income of government from all the sources is called
public revenue. These are of two types-
1) revenue receipt
2) capital receipt
1) Revenue receipt- Government receipts which neither
(i) create liabilities nor (ii) reduce assets are
called revenue receipts. These are proceeds of taxes,
interest and dividend on government investment, cess
and other receipts for services rendered by the
government. These are current income receipts of
the government from all sources. E.g., taxes, interest
received, fees and fines etc.
8. A) Tax- is a financial charge or other levy imposed
upon a taxpayer.
Direct tax- these are taxes that are directly paid to the
government by the taxpayer. It is a tax applied on individuals
and organizations directly by the government E.G. Income tax,
corporation tax, wealth tax etc.
Indirect tax- these are applied on the manufacture or sale of
goods and services. E.g., sales tax, custom duty, etc.
B) Non tax- receipts are those revenue receipts
which are not generated by taxing the public. Interest
which the government earns on the money lent by it
to external or internal borrowers. e.g., interest
receipt, fees and fines, external grant, etc.
9. CAPITAL RECEIPT
Capital receipts refer to those receipts which
either create a liability or cause a reduction in the
assets of the government.
Examples-
Recovery of loans
disinvestment
borrowings
provident funds
10. PUBLIC EXPENDITURE
Public expenditure is spending made by the government
of a country on collective needs and wants such as
pension, provision, infrastructure.
a) Revenue expenditure
b) Capital expenditure
11. REVIEW OF INDIA'S FISCAL POLICY SINCE
INDEPENDENCE
In initial years of India's planned development strategy, the
growth was ineffective.
Indirect taxes were larger sources of revenue than direct
taxes.
The fiscal deficit for 2010-11decline to 5.1% of GDP. The
2011-12 fiscal deficit target was set at 4.6% of GDP.
1970-71 1990-91 1995-96 2005-06
Direct tax 16 13 20 35
Indirect
tax
58 65 54 43
Non tax 26 22 26 22
12.
13.
14. SPECULATION
Budget would use the potential gain of demonetizations to
give a successive push to economic growth.
-There are no farm loan wavier ,no transfer of
demonetization gains to Jan- Dhan accounts, no
announcement of universal basic income.
Budget would be populist budget aimed at the upcoming
elections in Uttar Pradesh and else.
15. CHALLENGES FOR INDIA THIS YEAR
monetary policy of US Federal reserve to increase
policy rates may be lead to lower the capital
formation and higher outflows from India.
uncertainty – An increase in oil prices would have
an impact on all the sectors of India's economy.
16. BUDGET 2017-18
Agenda of this budget theme is TEC (Transform,
Energize and Clean).
Presentation of budget has been advanced to 1 Feb..
Merger of railway budget with general budget.
Doing away with plan and non plan classification of
expenditure.
. Budget has intended to reassure international investors
that India will continue to be a bright spot in the world
economy. Why? Foreign exchange reserve have reach to
US $361billion,6TH largest manufacturing.
Foreign investors will be impressed with the stability of
the centre’s finance.
Fiscal consolidation road map by pegging fiscal deficit
at 3.2% of gross domestic product (GDP) for 2017-18,
deferring the 3% of GDP target by a next year.
17. For farmers,
Agriculture growth rate target at 4.1% in the current year.
About 40% of the small and marginal farmers avail credit from
cooperative structure.
Government will- set up new mini labs in krishi vigyan
Kendra's (kvk) for soil testing.
MGNREGA
India's biggest anti-poverty scheme, the Mahatma Gandhi
National Rural Employment Guarantee Act or MGNREGA, has
been given its "highest allocation ever" of 48,000 crores in the
government's annual Budget presented
participation of women has increased to 55% from less than
48 % in the past.
18. Mission Antyodaya
Government bring One crore households out of the poverty and
making 50,000 gram panchayat poverty free by 2019.
Infrastructure
A total allocation of Rs. 39,61,354cr has been made.
budget 2017-18, grant ‘‘affordable housing”.
why
-to facilitate higher investment in the sector to achieve the
ambition goal of ‘ housing for all ’.
- the grant of infrastructural status would means builders will be
eligible for many govt tax and subsidy incentives and
institutional funding at affordable rate for low- cost homes.
19. CHANGE IN TAX RATE
- relief for those
whose earning
2.5lakh -5lakh
- the tax rate for
MSME, (viable&
encourage)with encouragement) with
annual turnover
of upto Rs.50cr
has been reduced
to 25% from 30%.
- surcharge 15%
20. For Youth
With introduction of system of measuring annual
learning outcome with and innovation for secondary
education .
Colleges will be identified based on accreditation
Courses for foreign languages will be introduced.
Will take steps to create 5000 PG seats per annum.
For Defense
defense sector get an allocation of Rs.2,74,144cr.
For railways
Railways sector get an allocation of Rs. 1,31,000cr.
21. For Digital India
To promote BHIM app, government will introduce
two schemes – referral bonus for users and cash
back for the traders.
To cleanise the system of political funding, a
Rs.2000 ceiling for cash donation to parties.
The SIT setup by the government on black money
has suggested that no transaction above Rs. 3lakh
should be permitted in cash.
Government accepted proposal and decision come
into effect on 1st April 2017. it is suitable for income
tax.
