me indian fiscal policy group 7
TRANSCRIPT
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TEAM MEMBERSTEAM MEMBERS
CHETAN BASOTIACHETAN BASOTIA
SHIVAKRITI KAPOORSHIVAKRITI KAPOOR
PRASHATI KHAREPRASHATI KHARE
GAURAV GAJWANIGAURAV GAJWANI
KRISHNA AGARWALKRISHNA AGARWAL
RASHITA KHANNARASHITA KHANNA
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Fiscal policy is the means by which a
government adjusts its levels of spending
in order to monitor and influence anation's economy. It is the sister strategy
to monetary policy with which a central
bankinfluences a nation's money supply.
These two policies are used in variouscombinations in an effort to direct a
country's economic goals...
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Economic Growth: By creating conditions for increasein savings & investment.
Employment: By encouraging the use of labour-
absorbing technology
Stabilization: Fight with depressionary trends andbooming (overheating) indications in the economy
Economic Equality: By reducing the income andwealth gaps between the rich and poor.
Price Stability: Employed to contain inflationary and
deflationary tendencies in the economy.
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Expansionary FiscalExpansionary FiscalPolicyPolicy
Contractionary FiscalContractionary Fiscal
PolicyPolicy
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The goal of expansionary fiscal policy is to reduce
unemployment. Therefore the tools would be an
increase in government spending and/or a decrease
in taxes.
Contractionary Fiscal PolicyContractionary Fiscal Policy
The goal of Contractionary fiscal policy is to
reduce inflation.Therfore tools would be to
decrease government spending and/or to
increase taxes.
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yy Budgetary surplus and deficitBudgetary surplus and deficit
yy Government expenditureGovernment expenditure
yy TaxationTaxation-- direct and indirectdirect and indirect
yy Public debtPublic debt
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y A budget is a detailed plan of operations forsome specific future period
y Keeping budget balanced (R=E) or deficit(RE) as a matter of policy isitself a fiscal instrument.
y An accumulated deficit over several years (orcenturies) is referred to as the government debt.
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Budget DeficitBudget Deficit
Government incurs moreGovernment incurs moreexpenditure on goods and servicesexpenditure on goods and servicesthan its receipts from taxes andthan its receipts from taxes and
nonnon--tax revenue.tax revenue.
Budget SurplusBudget Surplus
Government incurs lessGovernment incurs lessexpenditure on goods and servicesexpenditure on goods and servicesthan its receipts from taxes andthan its receipts from taxes andnonnon--tax revenue.tax revenue.
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The principle relating to governmentexpenditure includes:
Greater reliance on domestic borrowingsover external debt .
Preference for market borrowings overinstruments carrying administeredinterest rates.
Development of a deep and wide marketfor government securities to improveliquidity.
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Taxation is an important instrument ofresource mobilization to raise savings tonational income ratio and also cuts downconsumption and thereby controls inflation.
Taxes can be imposed :
Directly through highly progressive taxes on
income and profits. Indirectly through excise duties and sales tax
on luxury goods.
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DirectDirect
TaxTax
CorporateCorporate
Income tax,Income tax,Capital gainCapital gaintax.tax.
IndirectIndirect
TaxTax
Customs,Customs,
Service Tax,Service Tax,Excise dutyExcise duty.
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y Internal borrowings
1. Borrowings from the public by means of
govt. bonds,etc.
2. Borrowings from the central bank
y External borrowings
1. Foreign investments2. International organizations like World Bank
& IMF
3. Market borrowings
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Emphasis on Overall economic
Growth.
HighlyAcceptable for DevelopingCountries.
Takes care of Revenue and
Expenditure
For the Social Welfare
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y High degree of fiscal deficit leads to excess
market borrowing by the government which
leads to inflationary situation.
y To check the rate of inflation fiscal deficit
has to be reduced through raising revenue of
government and by reducing governmentexpenditure.
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We would ensure economic growth momentum butWe would ensure economic growth momentum but
at the same time fiscal prudence will be kept inat the same time fiscal prudence will be kept inmindmind
Dr.Manmohan Singh(P.M.) / May 28, 2009Dr.Manmohan Singh(P.M.) / May 28, 2009