The document discusses India's fiscal policy trends from post-independence to present day. It summarizes that early on, fiscal policy focused on stimulating growth and reducing inequality through high government expenditure and taxation. This led to budget deficits. Economic reforms since 1991 have focused on reducing deficits through tax cuts, expenditure reforms, and greater fiscal responsibility. The Fiscal Responsibility and Budget Management Act of 2003 aimed to further improve fiscal discipline.
Deficit financing is when a government finances its budgetary deficit through borrowing or increasing the money supply. In India it refers to expenditures exceeding current revenues, with public borrowing to cover the difference. The main types of deficits are the budget, revenue, fiscal, and primary deficits. Fiscal deficits in India have increased substantially over time, from 23 billion rupees in 1974-75 to over 5 trillion rupees in 2012-13. Deficit financing can be used to remedy economic issues but comes with adverse effects like inflation, reduced savings and investment, and higher production costs.
The document discusses India's economic policies before and after 1991. Prior to 1991, India followed a socialist model with a large public sector, import substitution, and strict regulations. This led to low growth, shortages, and a balance of payments crisis by 1991. India was forced to seek IMF/World Bank loans in exchange for reforms. The 1991 New Economic Policy introduced liberalization, privatization, globalization and stabilization measures. Key reforms included industrial deregulation, opening the economy to foreign trade and investment, tax cuts, and allowing private sector growth. The reforms aimed to make the Indian economy more competitive and efficient but were criticized for not sufficiently reducing inequality or boosting agriculture/industry.
Economic planning in India began in 1950 to address issues like poverty, low income, population growth, and problems from the country's partition. The Planning Commission oversees five-year plans that aim to boost economic growth, reduce inequality, spur modernization and development, and generate employment. The 11th five-year plan seeks to double per capita income by 2017 through 10% annual GDP growth, raise farm output, cut unemployment, and improve literacy, women's status, the environment, and other social indicators.
This document discusses fiscal policy and its objectives. It provides information on fiscal policy tools used by governments to influence economic growth, employment and prices. The key objectives of fiscal policy are mobilizing resources, accelerating economic growth, minimizing income inequality, increasing employment opportunities, and maintaining price stability. Examples of fiscal tools include taxation, public expenditure, borrowing. The document also summarizes Indian fiscal policy goals of rapid growth, employment expansion, reducing disparities.
The document compares the monetary and Keynesian approaches to economic stability. The monetary (or monetarist) approach is based on the role of money in stabilizing aggregate demand, and believes that limiting government intervention and controlling the money supply are key. The Keynesian approach focuses on the role of government spending in stabilizing aggregate demand, and does not restrict government intervention. It believes fiscal policy tools like tax rates and government spending are most important for achieving economic stability, especially during downturns when suggested solutions include increasing various types of spending.
This presentation explains various monetary instruments being adopted by the Reserve Bank of India. It also shows their impact on stock market. It also show the statistic trend of inflation, repo rate, reverse repo rate, etc in India.
Deficit financing is when a government finances its budgetary deficit through borrowing or increasing the money supply. In India it refers to expenditures exceeding current revenues, with public borrowing to cover the difference. The main types of deficits are the budget, revenue, fiscal, and primary deficits. Fiscal deficits in India have increased substantially over time, from 23 billion rupees in 1974-75 to over 5 trillion rupees in 2012-13. Deficit financing can be used to remedy economic issues but comes with adverse effects like inflation, reduced savings and investment, and higher production costs.
The document discusses India's economic policies before and after 1991. Prior to 1991, India followed a socialist model with a large public sector, import substitution, and strict regulations. This led to low growth, shortages, and a balance of payments crisis by 1991. India was forced to seek IMF/World Bank loans in exchange for reforms. The 1991 New Economic Policy introduced liberalization, privatization, globalization and stabilization measures. Key reforms included industrial deregulation, opening the economy to foreign trade and investment, tax cuts, and allowing private sector growth. The reforms aimed to make the Indian economy more competitive and efficient but were criticized for not sufficiently reducing inequality or boosting agriculture/industry.
Economic planning in India began in 1950 to address issues like poverty, low income, population growth, and problems from the country's partition. The Planning Commission oversees five-year plans that aim to boost economic growth, reduce inequality, spur modernization and development, and generate employment. The 11th five-year plan seeks to double per capita income by 2017 through 10% annual GDP growth, raise farm output, cut unemployment, and improve literacy, women's status, the environment, and other social indicators.
This document discusses fiscal policy and its objectives. It provides information on fiscal policy tools used by governments to influence economic growth, employment and prices. The key objectives of fiscal policy are mobilizing resources, accelerating economic growth, minimizing income inequality, increasing employment opportunities, and maintaining price stability. Examples of fiscal tools include taxation, public expenditure, borrowing. The document also summarizes Indian fiscal policy goals of rapid growth, employment expansion, reducing disparities.
The document compares the monetary and Keynesian approaches to economic stability. The monetary (or monetarist) approach is based on the role of money in stabilizing aggregate demand, and believes that limiting government intervention and controlling the money supply are key. The Keynesian approach focuses on the role of government spending in stabilizing aggregate demand, and does not restrict government intervention. It believes fiscal policy tools like tax rates and government spending are most important for achieving economic stability, especially during downturns when suggested solutions include increasing various types of spending.
This presentation explains various monetary instruments being adopted by the Reserve Bank of India. It also shows their impact on stock market. It also show the statistic trend of inflation, repo rate, reverse repo rate, etc in India.
Fiscal policy involves a government adjusting its spending and tax rates to influence the economy. The objectives of fiscal policy include full employment, reducing inequality, price stability, and economic development. Public revenue comes from tax receipts like direct taxes on individuals/corporations and indirect taxes on goods/services. It also comes from non-tax receipts like interest. Public expenditure consists of revenue expenditure on current needs and capital expenditure on infrastructure. India's fiscal policy has shifted from indirect taxes to more direct taxes since independence. The 2017 budget aims to transform, energize and clean the economy through initiatives for farmers, MGNREGA, affordable housing, and promoting a digital India.
trends in national income growth and structure Sweata Yadav
The document provides information about national income in India, including:
1. It discusses the definition and components of national income, as well as methods of measuring national income such as the income, expenditure and value added methods.
2. Estimates of national income in India are presented before and after independence, with the first official estimates published in 1951.
3. Trends in national income and per capita income over time are shown, with average annual growth rates provided for different planning periods.
4. The contribution of different sectors (primary, secondary, tertiary) to national income is shown over time, demonstrating a shift away from agriculture toward industry and services.
Fiscal policy refers to a government's spending and tax policies to influence macroeconomic conditions. The document discusses different aspects of fiscal policy including:
- Countercyclical fiscal policy aims to stabilize the economy by increasing government spending and reducing taxes during recessions, and reducing spending and raising taxes during expansions.
- Discretionary fiscal policy is used purposefully by governments to achieve macroeconomic goals like reducing inflation or boosting growth. Tools include changing spending, taxes, and borrowing.
- Non-discretionary or automatic fiscal policy relies on built-in stabilizers like income taxes that automatically influence demand over the business cycle.
- Large fiscal deficits can adversely impact growth by reducing funds for
The document discusses federal finance and fiscal relations between central and state governments in India. It covers key topics such as the principles of federal finance including autonomy, adequacy, equity, and accountability. It also describes methods of financial adjustments between central and state governments including tax sharing, reallocation of functions, state contributions, and grants-in-aid. Furthermore, it outlines the major sources of revenue for central and state governments in India and the roles and functions of the Finance Commission in the country's fiscal system.
This document provides an overview of India's industrial policies from 1948 to the present. It discusses the objectives and key features of various industrial policy resolutions enacted over time. The initial resolutions in 1948, 1956, and 1973 focused on expanding public sector involvement and prioritizing basic and strategic industries. Later policies in 1977, 1980, and 1991 aimed to liberalize the economy, encourage private sector growth, and attract foreign investment. The current scenario features fewer licensing requirements and greater openness to trade and globalization compared to earlier policies focused on import substitution and self-reliance.
The document discusses fiscal federalism in India. It defines fiscal federalism and explains its importance in India by enabling collaboration between central and state governments. It outlines the evolution of fiscal federalism in India from the pre-independence era of centralized British rule to the post-independence constitution establishing a federal system. It describes types of fiscal imbalances in India and central government transfers to states, including statutory transfers mandated by law and discretionary transfers for specific programs. It discusses performance-based grants and the 2017 M. Govinda Rao report recommending rationalizing transfers and introducing such grants. Finally, it outlines the terms of reference for India's 15th Finance Commission report on fiscal transfers from 2020-2025.
Here is a draft clause to address the issue of bogus Khadi units operating in India and claiming rebates from the Government of India under the existing Industrial Policy of India:
To promote authentic Khadi production and curb the operation of bogus Khadi units, the following measures shall be introduced:
1. The Khadi and Village Industries Commission (KVIC) will establish strict criteria for Khadi production units to be recognized as authentic producers eligible for Government rebates and incentives. These may include parameters around raw material sourcing, production processes, record keeping, etc.
2. All existing and new Khadi production units must register with KVIC and satisfy the recognition criteria to be able to claim any
Public debt in India has increased over 7 times from 1990-1991 to 2005-2006. It includes money borrowed by the government through internal loans within India and external loans from international organizations. There are several types of public debt like short-term, long-term, productive and unproductive debts. While public debt allows the government to fund development projects, it also burdens citizens with increased taxes and can adversely affect growth. Proper management of public debt is needed in India through reducing expenditures, encouraging foreign investment, and monitoring public spending.
Brief PPT on Balance of payment Vs Balance of TradeShubham Parsekar
The ppt is based on Balance of payment and Balance of trade, their meaning ,factors affecting them and difference between both i.e BOP & BOT.
i hope this presentation will be helpful to you , as everything is tried to fit in these slides. i suggest everyone to just go through the economics text book and gain more insights if one is very much interested in it.
please like the presentation and comment below your views about it.
follow me on slideshare for more informative power point presentations.
Permanent income hypothesis states that consumption is based on permanent income rather than current income. Permanent income refers to income that is expected to persist in the future, while transitory income does not persist. According to the hypothesis, people smooth consumption in response to transitory income variations by using savings and borrowing. The hypothesis assumes tastes and interest rates remain stable over time. In the short run, the consumption function shows consumption is less proportional to income than in the long run, where proportionality is achieved through savings adjustments. Critics argue the hypothesis ignores differences in preferences between rich and poor and does not account for effects of windfalls on consumption.
The industrial policy of a country aims to encourage development of the manufacturing sector and other parts of the economy. Major objectives of India's industrial policy include rapid industrial development, balanced growth across industries, preventing concentration of economic power, and balanced regional development. The industrial policy has evolved over time through various resolutions and statements starting in 1948, with recent policies in 1991 focusing on liberalization, enhancing small businesses, and making industries more competitive.
The document discusses key aspects of India's five year plans from 1951-1985. The first plan focused on developing the agricultural sector and increasing food production. Subsequent plans emphasized industry, infrastructure like dams and power plants, education, poverty alleviation and self-reliance. Defense needs interrupted some plans. Plans also aimed to strengthen the economy, boost growth rates and increase incomes.
Meaning, definition, nature, scope, importance and limitation of macro econo...Ashutosh Deshmukh
The document provides an overview of macroeconomics concepts taught by Dr. Ashutosh A. Deshmukh. It defines macroeconomics as the study of aggregates and averages covering the economy as a whole, such as total income, employment, output, prices. It discusses key events that influenced the development of macroeconomics like the Great Depression. It also outlines several macroeconomic topics, theories and models covered, including classical employment theory, Keynesian economics, economic growth, and limitations of the macroeconomic approach.
The document provides an overview of India's economic planning process since independence in 1947. It discusses the objectives and achievements of each of India's first 12 Five-Year Plans from 1951-2017. The planning process was established to rebuild and develop India's economy following independence, with a focus on industrialization, agriculture, infrastructure, and social development. Key highlights included the establishment of large dams and steel mills, the Green Revolution, nationalization of banks, and recent economic reforms beginning in the early 1990s.
Public expenditure by governments has increased over time due to various factors:
1. Population growth has led to increased spending on public services like schools, housing, and healthcare.
2. Defense spending has risen to protect countries from foreign threats, consuming a large portion of budgets.
3. The expansion of administrative systems with more departments and elections has grown public administration costs.
4. Economic development through infrastructure projects, industries, and programs has required significant government funding.
This document defines and discusses fiscal policy in India. It begins by introducing fiscal policy and its objectives of stabilizing the economy. It then defines fiscal policy as involving government revenue collection through taxation and spending. The objectives and instruments of fiscal policy are outlined, including the budget, taxation, public expenditure, and public debt. Data on India's fiscal deficit is presented, showing it as a percentage of GDP from 2005-2014. The achievements and reforms of India's fiscal policy are highlighted, such as increasing resources and savings. The Fiscal Responsibility and Budget Management Act of 2003 is described as institutionalizing financial discipline and reducing deficits. Current fiscal policy targets reducing the deficit to 3% of GDP by 2017-2018.
The document provides information about terms of trade including:
- Terms of trade measures the price of a country's exports relative to its imports. It is calculated as the index of export prices divided by the index of import prices.
- Types of terms of trade include net barter, gross barter, income, single factorial, double factorial, real cost, and utility terms of trade. Each type has strengths and limitations in measuring trade.
- Factors influencing terms of trade include the elasticity of demand and supply for exports and imports, as well as the relative size of demand for exports and imports. Changes in terms of trade can impact standards of living, import prices, and a country's balance of payments.
The document discusses government budgets, deficits, and deficit financing. It defines different types of budgets - revenue and capital - and budget receipts and expenditures. It then defines and explains different types of deficits a government can run, including revenue, capital, fiscal, primary, effective revenue, and monetary deficits. It concludes by outlining the typical priority sources for deficit financing: external aid, grants, borrowings, internal borrowings, and printing currency as a last resort.
The Phillips curve describes an inverse relationship between unemployment and inflation, such that lower unemployment is associated with higher inflation. While observed to be stable in the short-run, it does not hold in the long-run. The document discusses the origins of the Phillips curve from William Phillips' 1958 paper and subsequent modifications by economists like Friedman and Phelps who argued it does not reflect long-run economic realities. It also examines shifts to the Phillips curve from supply shocks and how the relationship between unemployment and inflation is now understood with incorporation of inflation expectations.
The 1991 Indian balance of payments crisis occurred due to a combination of factors: a large current account deficit caused by rising oil prices after the Gulf War, declining exports, and a withdrawal of foreign capital. India's foreign exchange reserves fell dangerously low, forcing the government to undertake major economic reforms, including currency devaluation, trade liberalization, and industrial deregulation. In the following decades, these reforms helped stabilize the economy and shift to a market-oriented policy framework, leading to strong growth in foreign investment, exports, and overall macroeconomic indicators. However, some slowing was seen in the late 1990s due to global trade declines.
Fiscal policy involves a government adjusting its spending and tax rates to influence the economy. The objectives of fiscal policy include full employment, reducing inequality, price stability, and economic development. Public revenue comes from tax receipts like direct taxes on individuals/corporations and indirect taxes on goods/services. It also comes from non-tax receipts like interest. Public expenditure consists of revenue expenditure on current needs and capital expenditure on infrastructure. India's fiscal policy has shifted from indirect taxes to more direct taxes since independence. The 2017 budget aims to transform, energize and clean the economy through initiatives for farmers, MGNREGA, affordable housing, and promoting a digital India.
trends in national income growth and structure Sweata Yadav
The document provides information about national income in India, including:
1. It discusses the definition and components of national income, as well as methods of measuring national income such as the income, expenditure and value added methods.
2. Estimates of national income in India are presented before and after independence, with the first official estimates published in 1951.
3. Trends in national income and per capita income over time are shown, with average annual growth rates provided for different planning periods.
4. The contribution of different sectors (primary, secondary, tertiary) to national income is shown over time, demonstrating a shift away from agriculture toward industry and services.
Fiscal policy refers to a government's spending and tax policies to influence macroeconomic conditions. The document discusses different aspects of fiscal policy including:
- Countercyclical fiscal policy aims to stabilize the economy by increasing government spending and reducing taxes during recessions, and reducing spending and raising taxes during expansions.
- Discretionary fiscal policy is used purposefully by governments to achieve macroeconomic goals like reducing inflation or boosting growth. Tools include changing spending, taxes, and borrowing.
- Non-discretionary or automatic fiscal policy relies on built-in stabilizers like income taxes that automatically influence demand over the business cycle.
- Large fiscal deficits can adversely impact growth by reducing funds for
The document discusses federal finance and fiscal relations between central and state governments in India. It covers key topics such as the principles of federal finance including autonomy, adequacy, equity, and accountability. It also describes methods of financial adjustments between central and state governments including tax sharing, reallocation of functions, state contributions, and grants-in-aid. Furthermore, it outlines the major sources of revenue for central and state governments in India and the roles and functions of the Finance Commission in the country's fiscal system.
This document provides an overview of India's industrial policies from 1948 to the present. It discusses the objectives and key features of various industrial policy resolutions enacted over time. The initial resolutions in 1948, 1956, and 1973 focused on expanding public sector involvement and prioritizing basic and strategic industries. Later policies in 1977, 1980, and 1991 aimed to liberalize the economy, encourage private sector growth, and attract foreign investment. The current scenario features fewer licensing requirements and greater openness to trade and globalization compared to earlier policies focused on import substitution and self-reliance.
The document discusses fiscal federalism in India. It defines fiscal federalism and explains its importance in India by enabling collaboration between central and state governments. It outlines the evolution of fiscal federalism in India from the pre-independence era of centralized British rule to the post-independence constitution establishing a federal system. It describes types of fiscal imbalances in India and central government transfers to states, including statutory transfers mandated by law and discretionary transfers for specific programs. It discusses performance-based grants and the 2017 M. Govinda Rao report recommending rationalizing transfers and introducing such grants. Finally, it outlines the terms of reference for India's 15th Finance Commission report on fiscal transfers from 2020-2025.
Here is a draft clause to address the issue of bogus Khadi units operating in India and claiming rebates from the Government of India under the existing Industrial Policy of India:
To promote authentic Khadi production and curb the operation of bogus Khadi units, the following measures shall be introduced:
1. The Khadi and Village Industries Commission (KVIC) will establish strict criteria for Khadi production units to be recognized as authentic producers eligible for Government rebates and incentives. These may include parameters around raw material sourcing, production processes, record keeping, etc.
2. All existing and new Khadi production units must register with KVIC and satisfy the recognition criteria to be able to claim any
Public debt in India has increased over 7 times from 1990-1991 to 2005-2006. It includes money borrowed by the government through internal loans within India and external loans from international organizations. There are several types of public debt like short-term, long-term, productive and unproductive debts. While public debt allows the government to fund development projects, it also burdens citizens with increased taxes and can adversely affect growth. Proper management of public debt is needed in India through reducing expenditures, encouraging foreign investment, and monitoring public spending.
Brief PPT on Balance of payment Vs Balance of TradeShubham Parsekar
The ppt is based on Balance of payment and Balance of trade, their meaning ,factors affecting them and difference between both i.e BOP & BOT.
i hope this presentation will be helpful to you , as everything is tried to fit in these slides. i suggest everyone to just go through the economics text book and gain more insights if one is very much interested in it.
please like the presentation and comment below your views about it.
follow me on slideshare for more informative power point presentations.
Permanent income hypothesis states that consumption is based on permanent income rather than current income. Permanent income refers to income that is expected to persist in the future, while transitory income does not persist. According to the hypothesis, people smooth consumption in response to transitory income variations by using savings and borrowing. The hypothesis assumes tastes and interest rates remain stable over time. In the short run, the consumption function shows consumption is less proportional to income than in the long run, where proportionality is achieved through savings adjustments. Critics argue the hypothesis ignores differences in preferences between rich and poor and does not account for effects of windfalls on consumption.
The industrial policy of a country aims to encourage development of the manufacturing sector and other parts of the economy. Major objectives of India's industrial policy include rapid industrial development, balanced growth across industries, preventing concentration of economic power, and balanced regional development. The industrial policy has evolved over time through various resolutions and statements starting in 1948, with recent policies in 1991 focusing on liberalization, enhancing small businesses, and making industries more competitive.
The document discusses key aspects of India's five year plans from 1951-1985. The first plan focused on developing the agricultural sector and increasing food production. Subsequent plans emphasized industry, infrastructure like dams and power plants, education, poverty alleviation and self-reliance. Defense needs interrupted some plans. Plans also aimed to strengthen the economy, boost growth rates and increase incomes.
Meaning, definition, nature, scope, importance and limitation of macro econo...Ashutosh Deshmukh
The document provides an overview of macroeconomics concepts taught by Dr. Ashutosh A. Deshmukh. It defines macroeconomics as the study of aggregates and averages covering the economy as a whole, such as total income, employment, output, prices. It discusses key events that influenced the development of macroeconomics like the Great Depression. It also outlines several macroeconomic topics, theories and models covered, including classical employment theory, Keynesian economics, economic growth, and limitations of the macroeconomic approach.
The document provides an overview of India's economic planning process since independence in 1947. It discusses the objectives and achievements of each of India's first 12 Five-Year Plans from 1951-2017. The planning process was established to rebuild and develop India's economy following independence, with a focus on industrialization, agriculture, infrastructure, and social development. Key highlights included the establishment of large dams and steel mills, the Green Revolution, nationalization of banks, and recent economic reforms beginning in the early 1990s.
Public expenditure by governments has increased over time due to various factors:
1. Population growth has led to increased spending on public services like schools, housing, and healthcare.
2. Defense spending has risen to protect countries from foreign threats, consuming a large portion of budgets.
3. The expansion of administrative systems with more departments and elections has grown public administration costs.
4. Economic development through infrastructure projects, industries, and programs has required significant government funding.
This document defines and discusses fiscal policy in India. It begins by introducing fiscal policy and its objectives of stabilizing the economy. It then defines fiscal policy as involving government revenue collection through taxation and spending. The objectives and instruments of fiscal policy are outlined, including the budget, taxation, public expenditure, and public debt. Data on India's fiscal deficit is presented, showing it as a percentage of GDP from 2005-2014. The achievements and reforms of India's fiscal policy are highlighted, such as increasing resources and savings. The Fiscal Responsibility and Budget Management Act of 2003 is described as institutionalizing financial discipline and reducing deficits. Current fiscal policy targets reducing the deficit to 3% of GDP by 2017-2018.
The document provides information about terms of trade including:
- Terms of trade measures the price of a country's exports relative to its imports. It is calculated as the index of export prices divided by the index of import prices.
- Types of terms of trade include net barter, gross barter, income, single factorial, double factorial, real cost, and utility terms of trade. Each type has strengths and limitations in measuring trade.
- Factors influencing terms of trade include the elasticity of demand and supply for exports and imports, as well as the relative size of demand for exports and imports. Changes in terms of trade can impact standards of living, import prices, and a country's balance of payments.
The document discusses government budgets, deficits, and deficit financing. It defines different types of budgets - revenue and capital - and budget receipts and expenditures. It then defines and explains different types of deficits a government can run, including revenue, capital, fiscal, primary, effective revenue, and monetary deficits. It concludes by outlining the typical priority sources for deficit financing: external aid, grants, borrowings, internal borrowings, and printing currency as a last resort.
The Phillips curve describes an inverse relationship between unemployment and inflation, such that lower unemployment is associated with higher inflation. While observed to be stable in the short-run, it does not hold in the long-run. The document discusses the origins of the Phillips curve from William Phillips' 1958 paper and subsequent modifications by economists like Friedman and Phelps who argued it does not reflect long-run economic realities. It also examines shifts to the Phillips curve from supply shocks and how the relationship between unemployment and inflation is now understood with incorporation of inflation expectations.
The 1991 Indian balance of payments crisis occurred due to a combination of factors: a large current account deficit caused by rising oil prices after the Gulf War, declining exports, and a withdrawal of foreign capital. India's foreign exchange reserves fell dangerously low, forcing the government to undertake major economic reforms, including currency devaluation, trade liberalization, and industrial deregulation. In the following decades, these reforms helped stabilize the economy and shift to a market-oriented policy framework, leading to strong growth in foreign investment, exports, and overall macroeconomic indicators. However, some slowing was seen in the late 1990s due to global trade declines.
Global Financial Crisis and its Impact on the Indian EconomyShradha Diwan
The document discusses the global financial crisis that began in 2007 and its impact on the Indian economy. It provides background on the crisis, explaining that a loss of confidence in securitized mortgages in the US triggered a financial crisis that spread globally. It then examines four key ways India was affected: reduced global liquidity impacted foreign investment and lending; decreased consumer demand abroad hurt Indian exports; the IT industry saw clients like Lehman Brothers collapse; and foreign investment withdrawals led stock markets and the rupee to decline sharply. The response of Indian authorities and prospects for the economy are also assessed.
India faced a severe balance of payments crisis in 1991 that pushed the country to near bankruptcy. Foreign exchange reserves fell to only three weeks of imports and the government was close to defaulting. This forced major economic reforms, known as liberalization. The Narasimha Rao government deregulated industries, reduced import tariffs, allowed foreign investment, and privatized government businesses. While reforms faced opposition, they stabilized the economy and led to strong GDP growth in subsequent years.
1. This chapter discusses fiscal policy as a tool for stabilizing the economy through manipulating government spending and taxes.
2. It explores discretionary and automatic fiscal adjustments using the AD-AS model and covers problems like recognition lags that complicate fiscal policy effectiveness.
3. Evaluating fiscal policy involves examining standardized budgets that adjust for cyclical factors to determine if policy is expansionary or contractionary.
Industrial Policy, Fiscal Policy and Licensing PolicyPRASOON VERMA
The presentation on Industrial Policy of India, Fiscal Policy of India and Licensing Policy of India and can be used to learn and present as economics assignment
Fiscal policy in India aims to mobilize resources, promote investment and economic development, and achieve social objectives like reducing inequality and poverty. It involves decisions around tax revenue, spending, borrowing, and deficits. While fiscal policy has helped increase investment and savings, it has also faced issues like a reliance on indirect taxes, rising deficits, inflation, and losses in public sector enterprises. Reforms are needed like broadening the tax base, increasing direct taxes, simplifying the tax structure, reducing non-development spending, and improving public sector profitability.
Business Environment - Unit-5 - IMBA - Osmania UniversityBalasri Kamarapu
The document provides an overview of key topics related to business environment and economic policies in India. It discusses 5 units: 1) business environment analysis, 2) Indian financial systems, 3) economic policies of India, 4) liberalization, privatization and globalization in the Indian economy, and 5) economic survey and union budget. The final section focuses on fiscal policy, taxation, and key concepts like value added tax. It outlines India's direct and indirect tax structures and recent reforms to taxation.
This document summarizes an assignment submitted on economic policy modules, including privatization, fiscal policy, and monetary policy in India. It discusses objectives and instruments of fiscal policy like taxation, public borrowing, and expenditure. It outlines the Raja Chelliah Committee recommendations on tax reforms and the objectives of monetary policy like growth, stability, and employment. Tools of monetary policy discussed include bank rate, cash reserve ratio, open market operations, and moral suasion.
It gives me a pleasure to present the summary and analysis of Union Budget 2015.
While you may have the snapshot, here is a document which will not only give you crisp highlights, but would also decode the impact of Budget 2015 on You, Your company and Your sector.
Hope you find this analysis useful in taking business decisions and align your company's strategy with over all economic climate for the upcoming financial year.
Would love to hear your feedback on the usefulness of the same.
Fiscal policy deals with the taxation and expenditure decisions made by governments to influence macroeconomic variables. It has several components, including tax policy, expenditure policy, and debt management. The main objectives of fiscal policy are to achieve economic growth and stability, optimal resource allocation, income distribution, full employment, and poverty alleviation. Recent trends in India's fiscal policy include efforts to consolidate the budget and reduce the fiscal deficit through measures like rationalizing subsidies, increasing tax revenues, and easing inflation. The 2013-14 budget continues this consolidation with tax increases and reductions in customs duties on some goods.
Fiscal policy involves government spending and taxation. The main objectives of India's fiscal policy are development through resource mobilization, efficient allocation of resources, price stability, employment generation, and increasing national income. Expansionary fiscal policy increases spending or cuts taxes to boost aggregate demand, while contractionary policy reduces spending or raises taxes to curb demand and inflation. Taxes, government expenditure, and public borrowing are the main policy tools used by the government to achieve its fiscal objectives.
Business Environment and Value-Based Management is an educational PowerPoint presentation designed to teach students and professionals about how businesses operate and how they can be managed more effectively. It explains various factors that influence businesses, such as money, laws, and technology, in simple terms that are easy to understand. The presentation also introduces the concept of Value-Based Management, which focuses on making decisions that add value to a company. Through real-life examples and practical advice, learners gain insights into setting goals, making smart choices, and measuring success in the business world. This presentation serves as a valuable educational resource for anyone looking to improve their understanding of business management principles and practices.
The document discusses the rationale for India's economic reforms in 1991. It provides context around the economic crisis India was facing at the time including high fiscal deficits, a worsening balance of payments situation, and slow economic growth. It then outlines the major economic reforms introduced as part of the New Economic Policy in 1991 including liberalization of industrial policy, trade, and the financial sector. The reforms aimed to reduce government controls, encourage private sector growth, and make the Indian economy more globally competitive. The document also discusses some of the achievements and ongoing challenges of the economic reforms.
Fiscal policy involves manipulating government spending and taxation to influence the level of aggregate demand and economic activity. It can be used to achieve macroeconomic objectives like reducing unemployment and influencing inflation, as well as non-economic goals. Key tools of fiscal policy include altering tax rates, changing government spending, and borrowing to finance deficits. Maintaining prudent fiscal deficits and public debt levels is important for macroeconomic and financial stability.
The document presents information on fiscal policy, including definitions, objectives, tools, and how it can be used for economic stabilization and development. Fiscal policy refers to the government's use of taxing and spending tools to influence macroeconomic variables and achieve goals like economic growth and stability. The key tools of fiscal policy discussed are taxation policy, public expenditure policy, public debt policy, deficit financing policy, and fiscal deficit policy.
Fiscal policy deals with government taxation and expenditure decisions. The major instruments of fiscal policy include the budget, taxation, public expenditure, public revenue, public debt, and fiscal deficit. The objectives of India's fiscal policy are to promote economic growth, reduce income and wealth inequalities, generate employment, ensure price stability, correct balance of payments deficits, and provide effective administration. Fiscal policy aims to mobilize resources through taxation, public savings, and private savings to fund infrastructure development, employment programs, and social services.
Fiscal policy deals with government taxation and expenditure decisions. The major instruments of fiscal policy include the budget, taxation, public expenditure, public revenue, public debt, and fiscal deficit. The objectives of India's fiscal policy are to promote economic growth, reduce income and wealth inequalities, generate employment, ensure price stability, correct balance of payments deficits, and provide effective administration. Fiscal policy aims to mobilize resources through taxation, public savings, and private savings to fund development projects that boost growth.
Fiscal policy deals with government taxation and expenditure decisions. The major instruments of fiscal policy include the budget, taxation, public expenditure, public revenue, public debt, and fiscal deficit. The objectives of India's fiscal policy are to promote economic growth, reduce income and wealth inequalities, generate employment, ensure price stability, correct balance of payments deficits, and provide effective administration. Fiscal policy aims to mobilize resources through taxation, public savings, and private savings to fund development projects that boost growth.
The document discusses India's economic development strategies from 1947 to 1991 and the need for a policy shift in 1991. It outlines India's initial strategy of import substitution industrialization under planning commissions, which led to slow growth. Doubts emerged around poverty alleviation and public sector effectiveness. Reforms were initiated in the 1980s with committees on trade policy and the public sector. The 1991 reforms under liberalization, privatization and globalization aimed to make the economy more globally competitive by opening it up to foreign investment and trade. Key aspects of the 1991 reforms included trade liberalization, tariff reductions, industrial delicensing, and encouragement of foreign direct investment. The reforms led to increased exports, higher foreign reserves, and more foreign competition transforming the
Fiscal policy refers to government spending and taxation policies that influence macroeconomic conditions and economic activity. The key instruments of fiscal policy include the government budget, taxation, public expenditure, and public debt. In India, fiscal policy aims to achieve objectives like economic development, employment generation, and price stability. Recent fiscal reforms have focused on simplifying taxes, reducing deficits, and increasing the tax-to-GDP ratio through measures like rationalizing subsidies and disinvesting public sector units.
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2. Agenda of the Presentation
Section
C
Objectives of Fiscal Policy in India
Three Possible Stances & Methods of Funding
Two Main Instruments of Fiscal Policy
Post Independence: India’s Fiscal Policy
India’s Fiscal Policy: 1970-1990
Post Reform (1991): Fiscal Policy Changes , Trends
Suggestions & Budget Expectations
2
Group
06
3. Fiscal Policy & its Objectives in India
Fiscal policy refers to the overall effect of the
budget outcome on economic activity.
The idea of using fiscal policy to combat
recessions was introduced by John Maynard
Keynes in the 1930s
“Fiscal policy deals with the taxation and expenditure decisions of the
government. These include, tax policy, expenditure policy, investment or
disinvestment strategies and debt or surplus management.”
- Kaushik Basu ( Former Chief Economic Adviser )
Fisc : A French word means
‘Treasure of Government’.
Fiscal Policy= Revenue +
Expenditure Policy by
Government of India
Related to ‘Development Policy’
of the Nation.
3
4. Fiscal Policy & its Objectives in India
Increase in capital formation
To stabilize the growth rate &
degree of growth of an economy
To achieve desirable price level
To achieve desirable consumption level
To achieve desirable employment level
To achieve desirable income distribution
To maintain equilibrium in the BOP
4
5. Three Possible Stances & Methods of Funding
A Neutral position applies when the budget outcome has
neutral effect on the level of economic activity where the
govt. spending is fully funded by the revenue collected
from the tax. Where, G = T
An Expansionary position is when there is a higher
budget deficit where the govt. spending is higher than
the revenue collected from the tax. Where, G > T
An Contractionary position is when there is a lower
budget deficit where the govt. spending is lower than the
revenue collected from the tax. Where, G < T
G-Govt. Spending
T-Tax Revenue
5
6. Three Possible Stances & Methods of Funding
Methods of Funding
Governments spend money on a wide variety of things, from the military to
services like education and healthcare, as well as transfer payments.
This expenditure can be funded in a number of different ways:
Taxation Revenue
Seigniorage, the benefit from printing money
Borrowing money
Consumption of fiscal reserves
Sale of fixed assets (e.g., land) Types of Fiscal
Policies
Discretionary
policy
Automatic
stabilisation
6
7. Post Independence: India’s Fiscal Policy
Post-independence, with the gradual abatement of political and economic
uncertainty, stimulating and accelerating growth was one of the primary objectives of
fiscal policy.
In the then nascent economy where the income levels and financial savings were low,
the fiscal assumed the responsibility of creating the capital base in the form of
infrastructure to stimulate growth.
Thus, India embarked on a planning process since 1950 (the year of establishment of
Planning Commission of India) which assigned a large role to the public sector and
taxation was made the mainstay of public finances.
Conservative fiscal policy to keep deficits under control.
7
8. Post Independence: India’s Fiscal Policy
1953
Taxation
Enquiry
Commission
1957-58
Wealth Tax,
Expenditure
Tax, Gift Tax
1960-70
High Personal &
Marginal Income
Tax Rates
1960-80
Tax Revenue to
GDP Ratio
Improved from
6.3 % to 16.1 %
Excise Duty &
Customs Duty,
Cascading Effect
of such taxes
8
10. Post Independence: India’s Fiscal Policy
During the period 1950-51 to 1961-62, the Central Government revenue
expenditure showed a broad pattern of increase, followed by the prevailing
accent on social and developmental services.
The focus of government expenditure were education and health. 10
11. Post Independence: India’s Fiscal Policy
All capital expenditures were treated as developmental and all expenditure on
civil works were treated as non-developmental.
The developmental expenditure increased more rapidly than non-development
expenditure. The Government draft on real resources of the economy had not
only increased in absolute terms but also in terms of GDP.
During this phase, expenditure policy was shaped to achieve reduction in
income inequality and counter inflation. On the issue of price stability, the
emphasis was on long-term price stability through large expenditure on
production of goods and services.
Doubling of the plan outlay in the second plan and the subsequent increases in
successive plans necessitated generation of resources both internally and
externally, to meet the financing needs.
Deficit financing was used as a means to cover the gap between ambitious
investment plans and the low levels of savings in an underdeveloped economy.
11
12. Post Independence: India’s Fiscal Policy
This system turned out to be inefficient and unfair and also led to
widespread tax evasion. Growth remained anaemic.
MainRoleofFiscalPolicy
To transfer private savings
To cater growing consumption
& Investment needs
To cover social welfare
schemes
1
• Highly Redistributive Income Tax Rates
• High Import Tariffs
2
• Numerous Excises Besides the Sales Tax
• Administrative Controls on Various Industries
3
• Exemptions & Preferential Treatments Aiming
At Channeling Resources Towards Priority
Sectors
12
13. India’s Fiscal Policy : 1970-1990
Taxation & Expenditure Policies
more focused on achieving social
justice & equality
Public Expenditure were
constantly increasing in compare
with revenue generated from high
marginal tax
Public Finances was in a state of
disarray, persistent large deficits
1980s- A Decade of Fiscal
Deterioration, resulted in
macroeconomic crisis of 1991
Eleven Tax Brackets used as a
means to reduce income
inequality
Corporate Income Tax between
45-65 % for widely held
companies
The Direct Taxes Enquiry Committee of 1971 found that the high tax rates
encouraged tax evasion. 13
14. India’s Fiscal Policy : 1970-1990
1974-75: Based on committee’s
recommendation- personal tax
was brought down.
1978 -85: Number of Income Tax
brackets were reduced from 11 to
8 and finally to 4.
Highest Income Tax rate was
brought down from
97.5% to 50%.
14
15. 1991: Crisis & Actions Taken
1991- BoP Crisis
Gulf crisis of 1990--- increase in oil import bill
Exports were down significantly due to breakdown of Soviet Union
Deterioration in the Exchange Rate of Rupee
Growing deficit on capital account due to country's rising obligations to meet
amortization payments.
Action Taken
Acquisition of Foreign Currency
Devaluation of Indian Rupee
Encouragement to Inflow of Funds from Abroad
Compression of Imports
15
16. Post Reform: India’s Fiscal Policy
Reforms undertaken by the Central Government and State Governments
in India Since 1991
CENTRAL GOVERNMENT On the Revenue Front
1991-92 to 1995-96
• Reduction of maximum marginal rate of personal income tax to 40 per cent.
• Unification and reduction of the rates of corporate income tax for both widely held and
closely held companies to 46 per cent.
• Abolition of wealth tax.
• Reduction in import duties to 110 per cent in 1992-93, 85 per cent in 1993-94, 65 per cent
in 1994-95, 50 per cent in 1995-96.
• Introduction of service tax by imposition of a 5 per cent tax on amount of telephone bills,
premium payments for non life insurance and on brokerage charged by the stock brokers.
16
17. CENTRAL GOVERNMENT On the Expenditure Front
1991-92 to 1995-96
• Reduction in fertilizer subsidy.
• Abolition of cash compensatory support for exports.
• 5 per cent cut on the expenditure of all ministries/departments.
1996-97 to 1999-00
• Constitution of Expenditure Reforms Commission in 2000.
2000-01 to 2004-05
• Subjecting all existing schemes to zero-based budgeting.
• Ban on creation of new posts for one year.
• Ban on purchase of new vehicles for one year.
• 10 per cent cut in the consumption and allocation of funds
for expenditure on petroleum oil and lubricants (POL) for staff cars.
• Introduction of a new pension scheme in 2004.
Post Reform: India’s Fiscal Policy
17
18. Post 1991 Tax Reforms
Reducing the corporate tax rate on both domestic and foreign companies, corporate tax
rate was reduced to 50 percent and the rates for different closely held companies made
uniform at 55 percent.
Rationalization of capital gains tax and dividend tax and excise duties
Progressive reduction in the peak rate of customs duty on non-agricultural products
Value Added Tax (VAT), improving taxation of agriculture and strengthening tax
administration.
Minimum Alternate Tax was introduced in 1996-97. It required a company to pay a
minimum of 30 percent of book profits as tax
Total tax revenues of the centre were 9.7 percent of GDP in 1990-91. They declined to
only 8.8 percent in 2000-01.
As a part of the subsequent direct tax reforms, the personal income tax brackets were
reduced to three with rates of 20, 30 and 40 percent in 1992-93.
18
19. Post 1991 Tax Reforms
New tax savings instruments were introduced
Tax concessions were also given to non-residents to encourage flow of foreign exchange
remittances.
A modified system of Value Added Tax (MODVAT) was introduced in 1986 in a phased
manner.
Concern due to low elasticity of revenue from direct taxes
lowering the maximum marginal rate on personal income tax
Widening of the tax base by including
introduction of presumptive taxes,
Adoption of a set of six (one-by-six) economic criteria for identification of
potential tax payers in urban areas
taxation of services
19
21. Five Year Plans: Expenditure Patterns
First Five Year Plan (1951-1956)
Second Five Year Plan (1956-1961)
Third Five Year Plan (1961-1966)
Two Annual Plans (1967-68) & (1968-69)
Fourth Five Year Plan (1969-74)
Fifth Five Year Plan (1975-1980)
Sixth & Seven Five Year Plan (1980-1990)
Eighth Five Year Plan (1992-1997)
Ninth Five Year Plan (1997-200)
Tenth Five Year Plan (2002-2007)
Analysis of Pre-Reform Plans
The FRBMA
21
22. FIRST FIVE YEAR PLAN (1951-1956)
In determining an outlay on development of Rs. 2069 Cr. by public authorities
over this period, the main considerations said to have taken into account are
–
• The need for initiating a process of development that will form the basis of
much larger effort needed in future.
• The total resources likely to be available to the country for the purposes of
development.
• The close relationship between the rate of development and the
requirements of resources in public and private sectors.
• The necessity of completing the schemes of development initiated by
central and state governments prior to the commencement of the plan.
• The need to correct maladjustments in the country caused by War and
Partition.
For the FIRST FYP (Five year Plan), agriculture, including irrigation and power
had topmost priority.
22
23. SECOND FIVE YEAR PLAN (1956-61)
The principle tasks of the Second FYP were declared to be as
follows:
• To secure the increase in National Income by about 25% over
five years.
• To increase employment opportunities at a rate sufficient to
absorb the increase in labor force consequent in increase in
population.
• To take a major stride forward in the direction of
Industrialization so as to prepare the ground for more rapid
advance in the plan period to come.
23
24. THIRD FIVE YEAR PLAN (1961-1966)
In drawing up the Third FYP, the Planning Commission claimed to have kept in
view the following principal aims:
• To secure and increase in the national income of over 5% p.a., pattern of
investment being designed to sustain this rate of growth during
subsequent plan period.
• To achieve self-sufficiency in food-grains and increase in agricultural
production to meet the requirements of industry and export.
• To expand the basic industries like steel, chemical industries, fuel, power,
and to establish machine building capacity, so that requirements of further
industrialization can be met within a period of 10 years or so, mainly from
country’s own resources.
• To utilize to the fullest extent possible the manpower resources of the
country and to ensure a substantial expansion in the employment
opportunities.
• To establish progressively greater equality of opportunity and to bring
about a reduction in disparities in income, wealth and a more even
distribution of economic power. 24
28. SIXTH FIVE YEAR PLAN (1980-85) AND
SEVENTH FIVE YEAR PLAN (1985-90)
28
29. EIGHTH FIVE YEAR PLAN (1992-97)
• The eighth five year plan
reflected the process of fiscal
reform and also economic
reforms which reflected
government’s attempt to
accelerate economic growth and
improve the quality of life of the
common man.
• There was a slight improvement
in the allocation for social
services to 19% in this plan so as
to improve “human capital”
especially by improving literacy.
Also outlay on energy was
increased in order to reduce
infrastructure constraint. 29
30. NINTH FIVE YEAR PLAN (1997-2002)
• During this period, infrastructure
which became a major constraint due
to inadequacy of complementary
private investment, was paid due
attention. There was a re-orientation
of plan priorities and hence the
change in public outlay was distinct.
• By allocating 72% of the plan funds to
irrigation, energy, transport and
communication and social services
this plan stressed on the development
of infrastructure.
30
31. TENTH FIVE YEAR PLAN (2002-2007)
• The main objective of the tenth plan
has been to set at least an 8%
growth rate for the state’s economy
as compared to the previous plans
with the aim to “catch up” with the
rest of the country. The first priority
would therefore be generation of
more wealth. Basic needs and equity
objectives in the state will be better
achieved in an environment of high
growth.
31
32. AN ANALYSIS OF PRE REFORM PLANS
• Except during the first plan when agriculture and irrigation were allotted 30% of total
outlay, all other plan allotted between 20-24% of outlay.
• The allocation on power development was unfortunately low during the first four plans
between10-15% of the total outlay. The low priority given to the power development was
on the ground that industries had not come up so fast and the progress in rural
electrification, use of electric power in railway transport system was inadequate. It was
only in the seventh plan that the allocation on power was raised steeply to28% of the
total outlay.
• The high priority given to the agriculture in the public sector programs in the first plan was
at the cost of low priority given to the industries. But from the second plan onwards the
relative share of industries and minerals was raised sharply from 6% in the first plan to
24% of the total plan outlay in second plan. In the next two plans, outlays to industries
declined steeply.
• The allocation in transportation and communication was quite high during the first two
plans-between 25 to 28%. But since then their share has declined. However the country
was regularly facing serious transport bottlenecks which resulted in retarded output and
income. Consequently, the Eighth plan pushed up the outlay to 23%.
32
33. The FRBMA
• The Fiscal Responsibility and Budget Management Act, 2003
(FRBMA) was enacted by the Parliament of India to
institutionalize financial discipline, reduce India’s fiscal deficit,
improve macroeconomic management and the overall
management of the public funds by moving towards a
balanced budget.
• The main purpose was to eliminate revenue deficit of the
country (building revenue surplus thereafter) and bring down
the fiscal deficit to a manageable 3% of the GDP by March
2008.
33
36. Budget Deficit & Balance of Trade
India recorded a trade deficit of 8320 USD Million in January of 2015. Balance of Trade in
India averaged -1951.70 USD Million from 1957 until 2015, reaching an all time high of 258.90
USD Million in March of 1977 and a record low of -20210.90 USD Million in October of 2012.
36
37. Early 2000
Fiscal Responsibility and Budget Management (FRBM) Act, 2003 by the Government
of India (GOI).
Fiscal Legislations at State levels: Karnataka & Maharashtra (2002), Kerala & Punjab
(2003), Tamilnadu & UP (2004)
Task Force on Direct Taxes:
Abolition of surcharge on Income Tax, Exemption limit for senior citizen, Reduction in
corporate taxes from 36.75% to 30% for domestic companies.
Abolition on wealth tax
37
39. Suggestions on Fiscal Policy
in India, as in many developing countries, fiscal policy does not operate in isolation as it
has close macroeconomic linkages with real, monetary and external sectors. Thus, the
macroeconomic impact of fiscal policy is critical for achieving the broader economic goals.
1) fiscal policy can be a powerful tool for accelerating growth, provided resources are
raised efficiently without causing distortions and utilised for delivering public goods and
services, including physical and social infrastructure and helping the underprivileged.
Total government expenditure as proportion of GDP needs to be maintained, and raised
at the State level.
2) Adherence to fiscal legislation, both at Centre and State level, is critical for
macroeconomic, financial, external sector and budgetary sustainability.
3) fiscal empowerment i.e, expanding the scope and size of revenue flows into the
budget, through tax reforms appropriate user charges and restructuring of public sector
undertakings assumes critical importance.
4) The approach to fiscal federalism, both in terms of addressing the vertical and
horizontal imbalances, would have to focus on institutional reforms which align needs
with revenue capacities. 39
40. New Govt. Fiscal Policies – Budget Expectation
Focus on boosting demand & investments , Put GDP back on high growth track
Period for investment allowance should be increase from 2 to 5 years because of
higher gestation period.
A rebated income-tax for small start-up businesses called START (STArtup Rebated
Tax), on lines of similar schemes in Singapore and China can be introduced.
There is a need to examine setting up of at least one long term lending financial
institution for businesses (for example, like IDBI in the past).
Creation of a specialized entity called National Asset Management Company
(NAMCO) to effectively tackle the issue of large NPAs.
Continued movement on path of Fiscal Consolidation
Widening of the tax base and formalization of the informal economy to improve
Tax to GDP ratio.
Proposed implementation of GST 40
41. Analysed & Presented By,
Kashyap Shah
K.Sriram
Bilash Das
Divya Saxena
Harsh Jain
Debanjan Banerjee
41
Editor's Notes
In 1970-71, direct taxes contributed to around 16 percent of the central government's revenues, indirect taxes about 58 percent and the remaining 26 percent came from non-tax revenues
By 1990-91, the share of indirect taxes had increased to 65 percent, direct taxes shrank to 13 percent and non-tax revenues were at 22 percent
The fiscal deficit
to GDP ratio was reported at 4.6% in 2013-14 and the target for 2014-15 was kept at 4.1% in the last year's Union
Budget. The fiscal deficit to GDP ratio is estimated to be further brought down to 3.6% and 3.0% in 2015-16 and 2016-17
respectively.
The fiscal deficit
to GDP ratio was reported at 4.6% in 2013-14 and the target for 2014-15 was kept at 4.1% in the last year's Union
Budget. The fiscal deficit to GDP ratio is estimated to be further brought down to 3.6% and 3.0% in 2015-16 and 2016-17
respectively.