Fiscal Policy and Budget

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Information about Fiscal Policy and Budget
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Published on January 4, 2009

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Fiscal Policy and Budget : Fiscal Policy and Budget Presented By: Group 4 (Roll. No 46-60) Fiscal Policy-Meaning : Fiscal Policy-Meaning The word fisc means ‘state treasury’ and fiscal policy refers to policy concerning the use of ‘state treasury’ or the govt. finances to achieve the macroeconomic goals. “any decision to change the level, composition or timing of govt. expenditure or to vary the burden ,the structure or frequency of the tax payment is fiscal policy.” - G.K. Shaw Objectives of Fiscal Policy : Objectives of Fiscal Policy It has 2 major objectives: GENERAL obj-. aimed at achieving macroeconomic goals SPECIFIC obj-. relating to any typical problems of an economy Fiscal Policy And Macroeconomic Goals : Fiscal Policy And Macroeconomic Goals Economic Growth: By creating conditions for increase in savings & investment. Employment: By encouraging the use of labour-absorbing technology Stabilization: fight with depressionary trends and booming (overheating) indications in the economy Economic Equality: By reducing the income and wealth gaps between the rich and poor. Price stability: employed to contain inflationary and deflationary tendencies in the economy. Instruments of Fiscal Policy : Instruments of Fiscal Policy Budgetary surplus and deficit Government expenditure Taxation- direct and indirect Public debt Deficit financing Budgetary surplus and deficit : Budgetary surplus and deficit “A budget is a detailed plan of operations for some specific future period” Keeping budget balanced (R=E) or deficit (R<E) or surplus (R>E) as a matter of policy is itself a fiscal instrument. An accumulated deficit over several years (or centuries) is referred to as the government debt A deficit is a flow. And a debt is a stock. Debt is essentially an accumulated flow of deficits Government Expenditure : Government Expenditure It includes : Government spending on the purchase of goods & services. Payment of wages and salaries of government servants Public investment Transfer payments Taxation : Taxation Meaning : Non quid pro quo transfer of private income to public coffers by means of taxes. Classified into 1. Direct taxes- Corporate tax, Div. Distribution Tax, Personal Income Tax, Fringe Benefit taxes, Banking Cash Transaction Tax 2. Indirect taxes- Central Sales Tax, Customs, Service Tax, excise duty. Public debt : Public debt Internal borrowings Borrowings from the public by means of treasury bills and govt. bonds Borrowings from the central bank (monetized deficit financing) External borrowings foreign investments international organizations like World Bank & IMF market borrowings BUDGET : BUDGET “A budget is a detailed plan of operations for some specific future period” It is an estimate prepared in advance of the period to which it applies. COMPONENTS OF BUDGET : COMPONENTS OF BUDGET Revenue receipts Capital receipts Revenue expenditure Capital expenditure BUDGET FINANCIALS 2007-08 : BUDGET FINANCIALS 2007-08 Where The Rupee Comes From : Where The Rupee Comes From Where Does The Rupee Goes To : Where Does The Rupee Goes To Fiscal Responsibility And Budget Management (FRBM) Bill : Fiscal Responsibility And Budget Management (FRBM) Bill Introduced in Lok Sabha in December 2000. Objectives include: Long-term macroeconomic stability Inter-generational equity in fiscal management. It aimed at: Reducing revenue deficit Reducing gross fiscal deficit Reducing the Public debt No Borrowing from the RBI Sticking to FRBM Targets : Sticking to FRBM Targets *From Budget proposals ** SBI share transfer excluded Thank You : Thank You “We need faster growth because, at our level of incomes, there can be no doubt that we must expand the production base of the economy if we want to provide broad-based improvement in the material conditions of living of our population, .......... But growth alone is not enough if it does not produce a flow of benefits that is sufficiently wide-spread. We, therefore, need a growth process that is much more inclusive, .......... and which also ensures access to essential services such as health and education for all sections of the community”. -Dr. Manmohan Singh, Prime Minister GROUP MEMBERS : GROUP MEMBERS A-46 NEERAJ MENDIRATTA A-47 NEETU KUMARI A-48 NEHA GUPTA A-49 NIDHI SINGH A-50 PALLAVI DUTTA A-51 PANKAJ BANSAL A-52 PEARL RAMAN A-53 PRIYESH AGARWAL A-54 PULKIT GOSAIN A-55 PUNEET GERA A-56 RAGINI KAKKAR A-57 RAVI GUPTA A-58 RICHA KAPUR A-59 SAGAR NARULA A-60 SANTOSH

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