Fiscal Policy and Budget

Presented By: Group 4 (Roll. No 4660)

1.The wordfisc 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 thetax payment is fiscal policy. -G.K. Shaw G.K.
2.

Objectives of Fiscal Policy

It has 2 major objectives:
ii. GENERAL obj-. aimed at achieving macroeconomic goals iii. SPECIFIC obj-. relating to any typical problems of an economy
3.

Fiscal Policy And

Macroeconomic Goals
Economic Growth: By creating conditions for increase in savings & investment. Employment: By encouraging the use of labourabsorbing 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.
4.

Instruments of Fiscal Policy

Budgetary surplus and deficit Government expenditure Taxation- direct and indirect Public debt Deficit financing
5.

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
6.

Government Expenditure
It includes : Government spending on the purchase of goods & services. Payment of wages and salaries of government servants Public investment Transfer payments
7.

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
gs from the public by means of treasury bills and govt. bonds Borrowings from the central bank (monetized deficit financing)
8.

Public debt

Internal borrowings External borrowings 5. foreign investments 6. international organizations like World Bank & IMF 7. market borrowings
9.

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
10.

COMPONENTS OF BUDGET
Revenue receipts Capital receipts Revenue expenditure Capital expenditure
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BUDGET FINANCIALS 2007-08

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Where The Rupee Comes From

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Fiscal Responsibility And Budget Management (FRBM) Bill

Introduced in Lok Sabha in December 2000. Objectives include: It aimed at:
6. Reducing revenue deficit 7. Reducing gross fiscal deficit 8. Reducing the Public debt 9. No Borrowing from the RBI
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Sticking to FRBM Targets

58.6 64.4 65.1 % Debt/ GDP 14.0** 14.1 14.2 % Expenditure/ GDP 12.0 11.4 10.3 % Gross Tax/ GDP

3.3 3.7 4.1 % Fiscal deficit/ GDP 1.5 2 2.6 % Revenue deficit/ GD

Thank You
Weneedfast ergrowthbec ause,atourl evelofincom es,therecan be

nodoubtthat wemustexpan dtheproduct ionbaseofth eeconomyif wewanttopro videbroad-b asedimprove mentinthema terial conditionso flivingofou rpopulation ,.......... Butgrowthal oneisnoteno ughifitdoes notproducea flowofbenef its thatissuffi cientlywide -spread.We, therefore,n eedagrowthp rocess thatismuchm oreinclusiv e,......... .andwhichal soensuresac cessto essentialse rvicessucha shealthande ducationfor allsections ofthe

community. -Dr.Manmoha nSingh, PrimeMinist e

Thank You
Weneedfast ergrowthbec ause,atourl evelofincom es,therecan be nodoubtthat wemustexpan dtheproduct ionbaseofth eeconomyif wewanttopro videbroad-b asedimprove mentinthema terial conditionso flivingofou rpopulation ,.......... Butgrowthal oneisnoteno ughifitdoes notproducea flowofbenef its thatissuffi cientlywide -spread.We,

therefore,n eedagrowthp rocess thatismuchm oreinclusiv e,......... .andwhichal soensuresac cessto essentialse rvicessucha shealthande ducationfor allsections ofthe community. -Dr.Manmoha nSingh, PrimeMi