Fiscal policy is the government's use of spending and tax policies to influence the economy. The Indian government uses fiscal policy to achieve objectives like economic development, resource mobilization, and regional balanced growth. Key aspects of India's fiscal policy include reliance on indirect taxes and deficit financing. While fiscal policy aims to accelerate growth, reduce inequality and ensure stability, India's mounting public debt and black money pose challenges.

1. Fiscal Policy
Submitted to: Submitted by:
Ms. Mudita Singh Monica
Manoj Bheel
Naman Bansal
Namrata Dhadse
Neha Khanuja

2. Definition
O 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. 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. Stances of Fiscal Policy
O The three main stances of fiscal policy are:
O Neutral Fiscal Policy
O Expansionary Fiscal Policy
O Contractionary Fiscal Policy

5. Objectives of Fiscal Policy

6. O Development by effective mobilization of
resources
O Taxation : Direct and Indirect Taxes
O Public savings : Public sector enterprise
O Private savings : Treasury bills
, government bonds, loan from domestic
and foreign parties

7. O Efficient allocation of financial resources
O For development activities
O Production of desirable goods
O Reduction in inequalities in income and
wealth
O Direct taxes on rich people
O Indirect taxes on semi luxury and luxury items

8. O Balanced Regional Development
O Cash Subsidies
O Tax Holidays
O 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. O Capital formation
O Encourage saving
O Reduce spending
O Increasing national income
O Development of Infrastructure
O Foreign exchange earnings

10. Trends in
Indian Fiscal Policy

11. Trends in Indian Fiscal Policy
O Revenue
O Tax Revenue
O Direct Taxes
O Indirect Taxes
O Non Tax Revenue
O Capital Receipts
O Expenditure
O Plan Expenditure
O Non - Plan Expenditure
O Fiscal Deficit

12. Revenue Trend
1400000
1200000
1000000
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. Tax Breakup (%)
45
40
35
30
Corporate Tax
25
Income Tax
20 Customs
Excise Duty
15 Service Tax
10
5
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

14. Direct Taxes Vs Indirect Taxes
70
60
50
40
Direct Taxes
30 Indirect Taxes
20
10
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

15. Expenditure Trend
1400000
1200000
1000000
800000
Non- Plan Expenditure
Plan Expenditure
600000
Total Expenditure
400000
200000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

16. Non Plan Expenses (%)
45
40
35
30
Interest Payments
25
Defence Expenses
20 Subsidies
Revenue Expenditure
15 Capital Expenditure
10
5
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

17. Fiscal Deficit (% of GDP)
Fiscal Deficit
7
6
5
4
Fiscal Deficit
3
2
1
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

18. Highlights in Budget 2012
O Fiscal Incentives & easy access to debt fund
for Infra Companies
O Another Tax-Free year for Power Companies
O 2% hike in Excise Duty and Service Tax
O Estimated Fiscal Deficit and Expenditures
points to higher borrowings by Govt.
O Relaxation in Income Tax for up to Rs 2 Lacs
annual income
O Direct Tax Code delayed

19. Features of Fiscal Policy

20. Features
O LONG TERM FISCAL POLICY
O RELAINCE ON DEFICT FINANCING
O RELIANCE ON INDIRECT TAX
O MOUNTING PUBLIC DEBT
O BLACK MONEY

21. Conclusion
O
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 India's fiscal policy, there is
also an urgent need for making India's 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.