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Introduction
Fiscal Policy is the main part ofEconomicPolicy and Fiscal Policy's first word Fiscal is
taken from French word Fisc it means treasureof Govt. So we can define fiscal policy as the
revenue and expenditure policy of Govt. of India.It is prime duty of Government to make fiscalpolicy . By making this policy , Govt. collects
money from his different resources and utilize it
in different expenditure . Thus fiscal policy isrelated to development policy . All welfareprojects are completed under this policy
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OBJECTIVES
1. To achieve desirable price level
2. To Achieve desirable consumption level
3. To Achieve desirable employment level
4. To achieve desirable income distribution:
5. Increase in capital formation
6. Degree of inflation
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INSTRUMENTS
Budget
Government expenditure
Taxation- direct and indirect Public debt
Deficit financing
Government borrowing
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BUDGET
A budget is a detailed plan of operations
for some specific future period
It is an estimate prepared in advance ofthe period to which it applies.
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COMPONENTS OF BUDGET
Revenue receipts
Capital receipts
Revenue expenditure Capital expenditure
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Government Expenditure
It includes :
Government spending on the purchase of
goods & services. Payment of wages and salaries of
government servants
Public investment
Transfer payments
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Public debt
Internal borrowings1. Borrowings from the public by means of treasury bills
and govt. bonds
2. Borrowings from the central bank (monetized deficitfinancing)
External borrowings
1. foreign investments
2. international organizations like World Bank &IMF
3.market borrowings
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Deficit financing
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GOVERNMENT BORROWING
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Fiscal Policy Can Be Divided In Two Types.
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Fiscal Measures to control
inflation (a) Reduction in Unnecessary
Expenditure
(b) Increase in Taxes (c) Increase in Savings
(d) Surplus Budgets
(e) Public Debt
(c) Increase in Savings
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Criticisms of Fiscal Policy
Disincentives of Tax Cuts
Side Effects on Public Spending
Poor Information
Time Lags
Budget Deficit
OtherComponenets of AD
Depends on Multiplier
Crowding Out
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Fiscal measures to control
deflation
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