indian economy - fiscal policy

7/28/2019 Indian Economy - Fiscal Policy

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Fiscal Policy

In economics, fiscal policy is the use of

government expenditure and revenue

collection (taxation) to influence the economy

Monetary policy is the process by which the

monetary authority of a country controls the

supply of money .


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Methods of funding

Taxation

Seigniorage

Borrowing money from the population or fromabroad

Sale of fixed assets (e.g., land).


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Stances of fiscal policy

The three possible stances of fiscal policy are

Neutral,

Expansionary and Contractionary.


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Fiscal Straitjacket


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Main Objectives of Fiscal

Policy In India

Development by effective Mobilisation of

Resources

Taxation : Public Savings :

Private Savings :


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Price Stability and Control of Inflation -

Reducing fiscal deficits, introducing taxsavings schemes,

Reduction in inequalities of Income and

Wealth Direct and Indirect Taxes Employment Generation - Investment in

infrastructure

Capital Formation


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India's fiscal worries: Nochange in 20 years


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The finance minister today grapples with the

same fiscal worries of two decades ago

In 1991-92, Manmohan Singh reduced the

fiscal deficit to 5.8 per cent of gross domestic

product, from a much higher level of 8.4 per

cent in the previous year.


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Twenty years later, little has changed, though

Pranab Mukherjee would consider it a

success if he reduced the fiscal deficit for2010-11 to the targeted 5.5 per cent of gross

domestic product.


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The government's fiscal deficit fell to 2.7 per

cent of GDP in 2007-08, before ballooning to

6 per cent in the following year and to 6.8 percent in 2009-10.


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Direct tax revenue mobilisation was 2.33 per

cent of GDP in 1991-92 and it is now over six

per cent. Indirect tax revenue 8 % to 5 %


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The threat of a rising fiscal deficit, and more

importantly of the revenue deficit, continues

to be a big challenge.


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What is the FRBM Act?

Rules impose limits on fiscal and revenue

deficit.

Each year, the government is required to

reduce the revenue deficit by 0.5% of the

GDP.

In reality, the fiscal deficit doubled to 6% of

GDP during 2008-09


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And how grave is the problem of fiscaldeficit?

Over the years, public debt has continued to

mount and so have interest payments. Rs1,32,103 crore. The interest payment during

the year was Rs 1,24,555 crore. 2007

More than 94% of borrowed funds are being

used to pay interest for past loans -debt trap

.


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How fiscal discipline can be

brought in our country ?

50% of budget is spent on the poor(

subsidies included ), still their numbers are

increasing

why


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Conclusion

Twenty years have gone by, but it seems the

finance minister of today is grappling with the

same sort of fiscal worries

as formidable and challenging as those that

confronted Manmohan Singh as finance

minister then.


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Although western media portray modernimages of India as poverty-stricken andunderdeveloped through politicalcorruption, India was once the richestempire on earth


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INDIAS ECONOMIC GROWTH

HOW WILL INDIA BECOME AECONOMIC SUPERPOWER =

GOOD GOVERNANCE + EFFECTIVE

ADMINISTRATION


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With about 1,414,000 soldiers in

active service and about 1,800,000

reserve troops, the Indian Army is

the world's second largest active

standing army and the largest in

terms of army populace.


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1962

After the Kargil war in1999, the defenceforces were spending

less than theallocation.


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These measures have also helped India in

emerging as a resurgent, vibrant anddynamic nation, leading global growth

India is the second fastest growing

economy in the world after China India was able to withstand the

repercussion of the global economiccrisis

Indias participation is required in allglobal negotiations ranging from globaltrade to climate related deals


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Likely overshooting of fiscaldeficit Though fiscal deficit is

budgeted at 4.6% for FY 2012,however, developments in recentmonths like deceleration in

growth, high crude oil prices, highsubsidy and rising interest ratesare casting doubts


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THANK YOU

indian economy - fiscal policy

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