Fiscal Policy

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Fiscal Policy

  1. 1. Fiscal Policy Submitted to: Submitted by:Ms. Mudita Singh Monica Manoj Bheel Naman Bansal Namrata Dhadse Neha Khanuja
  2. 2. DefinitionO Fiscal Policy is defined as government policy concerned with raising expenditure and revenue collection (taxation) to influence the economy.O A policy under which government uses its expenditure and revenue program to produce desirable effects and avoid undesirable effects in the national income, production and employment. - Arthur Smith.
  3. 3. Meaning & Comprehension O Fiscal Policy is a vital instrument in modern times. O Fiscal Policy means relating to taxation and public expenditure. When these policies are used to achieve balanced economic development of any country it’s called as fiscal policy. O In developing economy, goals of the Fiscal Policy are to accelerate the rate of the economic growth, social justice and price stability.
  4. 4. Stances of Fiscal PolicyO The three main stances of fiscal policy are: O Neutral Fiscal Policy O Expansionary Fiscal Policy O Contractionary Fiscal Policy
  5. 5. Objectives of Fiscal Policy
  6. 6. O Development by effective mobilization of resourcesO Taxation : Direct and Indirect TaxesO Public savings : Public sector enterpriseO Private savings : Treasury bills , government bonds, loan from domestic and foreign parties
  7. 7. O Efficient allocation of financial resources O For development activities O Production of desirable goodsO Reduction in inequalities in income and wealth O Direct taxes on rich people O Indirect taxes on semi luxury and luxury items
  8. 8. O Balanced Regional Development O Cash Subsidies O Tax HolidaysO Reducing Deficit in the Balance of Payment O Exemption of income tax on export O Exemption of central excise duties and customs O Custom duties on Imports
  9. 9. O Capital formation O Encourage saving O Reduce spendingO Increasing national incomeO Development of InfrastructureO Foreign exchange earnings
  10. 10. Trends inIndian Fiscal Policy
  11. 11. Trends in Indian Fiscal PolicyO Revenue O Tax Revenue O Direct Taxes O Indirect Taxes O Non Tax Revenue O Capital ReceiptsO Expenditure O Plan Expenditure O Non - Plan ExpenditureO Fiscal Deficit
  12. 12. Revenue Trend140000012000001000000 800000 Gross Tax Revenue Non - Tax Revenue 600000 Capital Reciepts Total revenue 400000 200000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
  13. 13. Tax Breakup (%)45403530 Corporate Tax25 Income Tax20 Customs Excise Duty15 Service Tax1050 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
  14. 14. Direct Taxes Vs Indirect Taxes70605040 Direct Taxes30 Indirect Taxes20100 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
  15. 15. Expenditure Trend140000012000001000000 800000 Non- Plan Expenditure Plan Expenditure 600000 Total Expenditure 400000 200000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
  16. 16. Non Plan Expenses (%)45403530 Interest Payments25 Defence Expenses20 Subsidies Revenue Expenditure15 Capital Expenditure10 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
  17. 17. Fiscal Deficit (% of GDP) Fiscal Deficit7654 Fiscal Deficit3210 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
  18. 18. Highlights in Budget 2012O Fiscal Incentives & easy access to debt fund for Infra CompaniesO Another Tax-Free year for Power CompaniesO 2% hike in Excise Duty and Service TaxO Estimated Fiscal Deficit and Expenditures points to higher borrowings by Govt.O Relaxation in Income Tax for up to Rs 2 Lacs annual incomeO Direct Tax Code delayed
  19. 19. Features of Fiscal Policy
  20. 20. FeaturesO LONG TERM FISCAL POLICYO RELAINCE ON DEFICT FINANCINGO RELIANCE ON INDIRECT TAXO MOUNTING PUBLIC DEBTO BLACK MONEY
  21. 21. ConclusionO The objectives of fiscal policy such as economic development, price stability, social justice, etc. can be achieved only if the tools of policy like Public Expenditure, Taxation, Borrowing and deficit financing are effectively used.O Though there are gaps in Indias fiscal policy, there is also an urgent need for making Indias fiscal policy a rationalized and growth oriented one.O The success of fiscal policy depends upon taking timely measures and their effective administration during implementation.

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