Why is the knowledge of Fiscal Policy important to a Retail Banker and it’s impacts on sales pitch. Substantiate with an Investment option.

Faculty name - Vishwanathancenter – Hyderabad

Batch No – hyd01aa0213

Participant name Participant ID

S.KARTHIK GOUD E30031000148

T.PRAVEEN E30031000114

SANDEEP E30031000119

ANURAG E30031000113

INDEX1 Fiscal Policy

2 Objectives

3 Functions

4 Types of Fiscal Policies

5 Limitations

6 Factors affecting fiscal policy

7 Fiscal Deficit

8 Why it is important to a Retail Banker

9 Impacts on sales pitch & examples

10 Current trend on Fiscal policy

Introduction

Definition :Fiscal Policy refers to a policy under which government uses it’s expenditure and revenue programs to produce desirable effects on national income, production and employment

Fiscal can be explained as Financial ,so a policy in relation to finance and something similar to monetary policy

Now a Monetary policy is formed by RBI and the Fiscal policy is formed by central government

The main aim of the policy is to see the three facets of financial system are healthy i.e. public debt, public revenue, public expenditure

Objectives Economic growth Full Employment Reducing inequalities of income and

wealth Controlling inflation Price stability

Functions

•Allocation

•Distribution

•Stabilization

•Development

Types of Fiscal policy

Expansionary Fiscal Policy An increase in government expenditure

for goods and services A decrease in taxes Some combination of twoContractionary Fiscal Policy A decrease in government

expenditure for goods and services An increase in taxes

Expansionary fiscal policy

Contractionary fiscal policy

Difference between fiscal policy and monetary policy

Limitations

•Lack of adequate data•Time lag•Budget deficit•Small proportion of population in taxable

income groups

Factors affecting fiscal policy

Tax policies

Government subsidies

Government borrowings, lending's & investments

Fiscal Deficit The expenses that the government

incurs is always more than the income it makes, this difference or deficit is known as “ Fiscal Deficit”

It is expressed as a percentage of GDP

The financing of this deficit is known as “Deficit Financing”

Why it is important to a Retail Banker ?

It will help a retail banker in determining:-•Selection of Investment product.•Market behavior.•Product yield / Returns.•Risk diversification.

EXAMPLES ?

COMPANY NAME

LAST PRICE

CHANGE(%)

OPEN HIGH LOW VOLUME

FACE VALUE

National Highways Authority of India

999.50 0.26% 997.00 999.50 992.00 12081 1,000

Canara-rob equity-tax saver fund

Debt fund

0.25 0.39 17.74

HIGH YEILDING FD”S Interest Rates  

ICRA CRISIL FITCH CARE 1

YEAR2

YEAR3

YEAR

MAAA FAAA N/A N/A 8.90% 9.05% 9.15 %

Current trend on Fiscal Policy Deficit level in india is better than many

democratic countries Government plans to bring down Fiscal deficit to

3 % of GDP by 2016-17Present fiscal deficit 6.1 % of GDPFiscal deficit of 5.3 % in my view is doable –

FINANACE MINISTERFiscal deficit target of 5.3 % hard to achieve –

MOODYHigh fiscal deficit is a threat for sovereign rating