Fiscal Policy


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Fiscal Policy

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