fiscal policy final prentation
TRANSCRIPT
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Fiscal Policy and Budget
Presented By :-
Ajay Banka
Amey Vikram
Binny Kumar
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Fiscal Policy-Meaning
The word fisc means state treasury and fiscalpolicy refers to policy concerning the use ofstate treasury or the govt. finances to achievethe macroeconomic goals.
Any decision to change the level, compositionor timing ofgovt. expenditure or to vary the
burden ,the structure or frequency of the tax
payment is fiscal policy.- G.K. ShawG.K. Shaw
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Objectives of Fiscal Policy
Economic Growth.
Promotion of Employment.
Economic Stability
Economic Justice or Equity.
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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.
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Use of Fiscal Policy
Adjustment of income tax allowances rather than ratesof income tax
Extending or amending range of goods covered by
VAT Changing the rules under which tax has to be paid married persons allowances, inheritance taxes, stampduties, etc.
Abolishment of certain tax allowances MIRAS
(Mortgage Income Relief At Source) Accusations of stealth taxes much of it is atinkering with the tax system to achieve certain aims
mostly non-economic (governments these days, forexample, rarely increase taxes to dampen down theeconomy)
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Economic effects of fiscal policy
Governments use fiscal policy to influence
the level of aggregate demand in the
economy, in an effort to achieve economicobjectives of price stability, full
employment, and economic growth.
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Instruments of Fiscal Policy
Government expenditure
Taxation- direct and indirect
Public debt
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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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Taxation
Meaning : Non quid pro quo transfer of private
income to public coffers by means of taxes.
Classified into1. Direct taxes- Corporate tax, Div. Distribution Tax,
Personal Income Tax, Fringe Benefit taxes, Banking
Cash Transaction Tax
2. Indirect taxes- Central Sales Tax, Customs, ServiceTax, excise duty.
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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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Fiscal policy framework
The Government's fiscal policy framework is based on the five key principles set
out in the Code for fiscal stability - transparency, stability, responsibility, fairness
and efficiency.
The Code requires the Government to state both its objectives and the rules
through which fiscal policy will be operated. The Government's fiscal policy
objectives are:
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Cont.
over the medium term, to ensure soundpublic finances and that spending and
taxation impact fairly within and betweengenerations.
over the short term, to support monetarypolicy and, in particular, to allow theautomatic stabilisers to help smooth the
path of the economy.
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Fiscal Policy In Inflation
Control Over Public Expenditure.
Increase In Taxes.
Increase In public Borrowing.
Delay In The Payment of old Debts
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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 of the
period to which it applies.
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Where The Rupee Comes From
service & other taxes
7%
excise
17%
customs
12%
income tax
13%
corporation tax
21%
borrowings
19%
non-debt capital reciepts
1%
non-tax revenue
10%
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Where Does The Rupee Goes To
state's share of
taxes & duties
18%
non plan assistanceto states
5%
planned state
assistance
7%
central plan
20%
interest
20%
defence
12%
subsidies
7%
other non plan exp.
11%
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