fiscal and monitory policies in india

8/8/2019 Fiscal and Monitory Policies in India

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FISCAL AND MONITORYPOLICIES IN INDIA


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Fiscal Policy


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Fiscal Policy

What is Fiscal Policy? Fiscal policy is the policy related to revenue,

expenditure and debt of the government for achieving

a set of objectives. It is decided by the Government ofIndia.

What are the major Objectives? Balance public revenue, expenditure and debt

Full employment Price stability

Reduction in economic inequality

Economic Development


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Main instruments of Fiscal Policy


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Fiscal Policy overview 2009-10

Budget 2008-09 presented in the backdrop ofimpressive growth

Fiscal deficit 2009-10 estimated at 2.5 per cent of

GDP (which was quiet good) After presentation of budget Indian economy

was hit by global crisis

Fiscal policy shifted from fuelling growth to

containing inflation, which had reached 12.9 percent in August,2008. Stimulus package of Rs .1,50,320 crore was

provided


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Overview continued

Customs: Sharp reduction was effected in the import duty rates of various

food items

Import duties on crude petroleum was reduced to nil and onpetrol and diesel to 2.5% (earlier 7.5%)

Excise: Reduction of 4 %points in the ad valorem rates of excise duty on

non-petroleum items.

Service tax: Service Tax continued at 10%.

Tax base widened


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Government borrowing, lending and

investments

The gross borrowings: Rs 2,40,167 crore

The net borrowings : Rs 1,68,710

Government set up a National InvestmentFund


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Evaluation of the above Fiscal

measures All this lead to an increase in the fiscal deficit to

10.3% of GDP

Government was able to control the inflation at 7.8%

The growth rate was maintained well above 6% inmost trying times, when the world s majoreconomies were showing a negative growth


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Monitory Policy


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Monitory Policy

What is Monitory Policy?

The part of the economic policy which regulates

the level of money in the economy in order toachieve certain objectives. In India the RBIcontrols the monitory policy. It is announced twicein a year through which RBI controls the flow ofmoney in the Economy


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Main objectives of Monitory policy

To achieve price stability by controlling

inflation and deflation

To promote and encourage economic growthof the economy

To ensure the economic stability at full

employment or potential level of output

Ensure stability in the foreign exchange rate


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Main instruments of Monitory Policy

Tools

Openmarket

operations

CashReserve

ratio

StatutoryLiquidity

ratio

Otherqualitativemeasures

Bank ratepolicy


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Monitory policy overview 2009-10

GDP growth at 7.9% for Q2 2009, which was predicted tobe 6.3%

WPI currently at 4.78% & Food Inflation touched 19%because of easy monetary policies & decreasing agricultural

production Bank Rate has been retained unchanged at 6.0 %

Repo Rate has been retained unchanged at 4.75%

Reverse Repo Rate has been retained unchanged at 3.25 %

C

RR at 5% and SLR to 25% This was a very easy money policy, however sometightening has been seen in the January 2010 policy


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Evaluation of the above Monitory

measures

Economy came back on track with growth

rate moving above 7.5%

Indian economy remained recession proofthroughout the turbulent times of the world

The economic activities are on a roll

The inflation however has been climbinghigher and higher, but with the currentgrowth rate of the economy, it can now be

controlled


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Thank You

Rishi Jain

MICA

fiscal and monitory policies in india

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