fiscal policy in a developing country 2014

8/12/2019 Fiscal Policy in a Developing Country 2014

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FISCAL POLICY IN ADEVELOPING COUNTRY


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Economic policyEconomic policyrefers to the actions thatgovernmentstake in the economic field

Economic policy consists of :-

fiscal policies , andmonetary policies .
http://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Government


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WHAT IS FISCAL POLICY ?It is the means by which a governmentadjustit level

of spending in order to monitor and influence a

nations economy

A government's program with respect to

(1) the purchase of goods and services and spending on

transfer payments, and

(2) the amount and type of taes!


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Objective of Fisc! Po!ic"Mobilization and efficie#t !!octio# of

$eso%$ces

Minimization of i#e&%!ities of i#co'e #(

)e!t*

Increasing e'+!o"'e#t o++o$t%#ities

Increasing o%t+%tand accelerating economic

growth

Eco#o'ic stbi!it"

P$ice stbi!it"


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T"+es of Fisc! Po!ic" ,-

1 Contractionary fiscal policy :It is a government policy of reducing government expenditure or

spending (G ) and raising taxes(T ). A reduction in G reduces the

AD and the output directly, while higher taxes force the household

and consumers to pay larger proportion of their income towards

taxes which reduces disposable income and expenditure.

Thus, contractionary fiscal policy reduces the output, employment

and inflation rate in an economy.

Such policies are pursued to stabilize a booming economy,experiencing a high growth rate of output but also a highrate of inflation.


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2 Expansionary fiscal policy :It happens when the fiscal balance is in deficit (i.e.,government spending increases (G ) and government earning

through tax reduces (T ) ) and the extent of deficit is increasing

or the extent of surplus is decreasing compared to previous period

.Such policy effect AD to increase and consequently raise the

overall price level and inflation rate and boost up the output,

income and employment level in an economy

Such policies are pursued by the government in anrecessionary economy representing by negative growth rateof output, deflation and high level of unemployment.


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How Fiscal Policy work ?


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INSTRUMENTSOF FISCA

!OIC"

!U#ICRE$ENUE

!U#ICE%!EN&ITURE

INSTRUMENTS OF FISCAL POLICY


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GOVT OWNRECEIPT

REVENUERECEIPTS

TA.REVENUE

DIRECT INDIRECT

NON-TA.REVENUE

CO//ERCIAL

E01 Lo#s2fo$ei0# i(s

etc1

AD/INISTRATIVEE01 Fees fo$0$#ti#0 o$iss%#ce of+e$'its #(

!ice#ce

CAPITALRECEIPTS

PU3LICSECTOR

DISINVEST/E

NT PROCEEDSE01 Cs* f$o' se!!

of fi4e( sset

RECOVERYOF LOANS

GRANTS

PUBLIC REVENUE


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/jo$ co'+o#e#ts of Ce#t$! Gove$#'e#tRecei+ts

Tot! $ecei+ts5 Reve#%e Recei+ts 6 C+it! Recei+ts

78 Reve#%e $ecei+ts,

I8T4 Reve#%e

A' &irect Ta(

i' !ersonal Income Ta(

ii' Cor)oration Ta(

#' Indirect Ta(

i' e(cise d*t+

ii' c*stoms d*ties

II8 No#-T4 Reve#%e

A' Interest Recei)ts


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98 C+it! $ecei+ts,

A' Mar,et borrowings -net'

#' Small sa.ings

C' !ro.ident f*nds

&' S)ecial de)osits

E' Reco.er+ of loans

F' &isin.estment recei)ts

/' E(ternal loans -net'

According to R#I0

Total Recei)t of Central /o.ernment in 1234536is7

Re.en*e recei)t 75 Rs32894:43 #illion

Ca)ital Recei)t75 Rs 92;


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CATEGORIES

REVENUEACCOUNT

E.PENDITURE

CAPITALACCOUNT

E.PENDITURE

TRANSFERE.PENDITURE

NONTRANSFER

E.PENDITURE

PLANE.PENDITURE

NON-PLANE.PENDITUR

E

FUNCTIONALCLASSIFICATION

ECONO/ICCLASSIFICATION

PRODUCTIVEE.PENDITURE

UNPRODUCTIVE

E.PENDITURE

PUBLIC EXPENDITURE


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/jo$ co'+o#e#ts of Ce#t$! Gove$#'e#tE4+e#(it%$e

Tot! e4+e#(it%$e5

Reve#%e e4+e#(it%$e6 C+it! E4+e#(it%$e #( o*e$

78 Reve#%e E4+e#(it%$e

A' &efence e()endit*re

#' Interest )a+ments

C' S*bsidies

98 C+it! e4+e#(it%$e

A' oans and ad.ances

#' Ca)ital o*tla+

i' &efence e()endit*re

According to R#I0

Total E()endit*re of Central /o.ernment in 1234536 is7

Re.en*e E()endit*re 75 Rs36493:9< #illion

Ca)ital E()endit*re75 Rs 11


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Thus,

/ross recei)ts incl*des re.en*e recei)ts and

disin.estments> Rs 33313:68 #illion

/ross e()endit*re incl*des re.en*e e()endit*re0ca)ital o*tla+ and loans and ad.ances net ofreco.eries > Rs 39869:66 #illion

Therefore0

Fisc! (eficit e4+e#(it%$e @ $eve#%e8 i# 97B-7 isRs ;91


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fiscal policy in a developing country 2014

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