Fiscal Policy Submitted to: Submitted by:Ms. Mudita Singh Monica Manoj Bheel Naman Bansal Namrata Dhadse Neha Khanuja
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.
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.
Stances of Fiscal PolicyO The three main stances of fiscal policy are: O Neutral Fiscal Policy O Expansionary Fiscal Policy O Contractionary Fiscal Policy
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
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
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
O Capital formation O Encourage saving O Reduce spendingO Increasing national incomeO Development of InfrastructureO Foreign exchange earnings
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
FeaturesO LONG TERM FISCAL POLICYO RELAINCE ON DEFICT FINANCINGO RELIANCE ON INDIRECT TAXO MOUNTING PUBLIC DEBTO BLACK MONEY
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.