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The policy of the government pertaining to public revenue, public expenditure, public debt known as Fiscal Policy. Fiscus (in Latin) refers to a purse and fisc (in English) is a royal or state treasury. Thus, fiscal policy is that under which the government uses its revenue and expenditure programs to produce desirable effects on national income, production and economy. It is thus used as a balancing device in the economy. Two major elements of fiscal policy are taxation and public expenditure.
Fiscal policy refers to the overall effect of the budget outcome on economic activity.
The idea of using fiscal policy to combat recessions was introduced by John Maynard Keynes in the 1930s Two main instruments of fiscal policy Revenue Budget Expenditure Budget
A neutral stance of fiscal policy implies a balanced budget where G = T (Government spending = Tax revenue). An expansionary stance of fiscal policy involves a net increase in government spending (G > T). A contractionary stance of fiscal policy (G < T)
METHODS OF FUNDING
Governments spend money on a wide variety of things, from the military to services like education and healthcare, as well as transfer payments.
This expenditure can be funded in a number of different ways: Taxation Seignorage, the benefit from printing money Consumption of fiscal reserves. Sale of assets (e.g., land).
REVENUE RECEIPT
Revenue receipt are those which neither decreases the asset nor increases the liability of the government Classification of revenue receipts:
Direct Tax
Indirect Tax
TAX REVENUE
Revenue Receipts (Tax Revenue)
10 9 8 8.5 7.1 7.5 9.3
8.8
Revenue Receipts
website: http//indiabudget.nic.in
DEV26-03-2012
Direct tax: when incidence and impact of tax falls on the same person.
Direct Taxes
4.5 4.1 3.5 2.6 1.8 2.8 2.2 1.6 1.8 2.3 PersonaL Income Taxes Corporation Tax 4.2
personal/corporation taxes
2006-07 years
2007-08
2008-09
website: http//indiabudget.nic.in
Indirect tax: when incidence and impact of tax can fall on different person. E.g. sale tax, import duty & excise duty
Indirect Taxes
Custom/Excise/Service taxes
3.5 3 2.5 2 1.5 1 0.5 0 Customs Excise Service Taxes 2004-05 1.8 3.1 0.5 2005-06 1.8 3.1 0.6 2006-07 2.1 2.8 0.9 Years 2007-08 2.2 2.6 1.1 2008-09 2.0 2.0 1.2 Customs Excise Service Taxes
website: http//indiabudget.nic.in
Number of services
75 84 99
Tax rate (% )
10 10 12
Revenue (Crores)
14200 23055 37598
2007-08
106
12
12
51301
65000
DT/IT
4 3 2 1 0 Direct Tax Indirect Tax 2004-05 4.2 5.4 2005-06 4.6 5.6 2006-07 5.3 5.8 Years 2007-08 6.3 5.9 2008-09 6.5 5.3
website: http//indiabudget.nic.in
GAGANJEET PHOGAAT 26-03-2012
2006-07 Year
2007-08
2008-09
website: http//indiabudget.nic.in
Revenue expenditure: which neither increases the asset nor decreases the liability of the government.
Revenue Expenditure
16 14 12.2 12.2 12.5 12.6 15.1
RE as % of GDP
website: http//indiabudget.nic.in
website: http//indiabudget.nic.in
Components of RE
Revenue deficit: its the difference between revenue expenditure and revenue receipt of the Government
Revenue Defecit
5 4.5
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2004-05 2005-06 2006-07 Years 2007-08 2008-09 2.5 2.6 1.9 1.1 Series1
website: http//indiabudget.nic.in
GAGAN ANAND 26-03-2012
Capital receipt: Are those which either decreases the asset or increases the liability of the Government.
Capital Receipts
8.0
Capital Receipts
Recovery of Loans 6.0 4.0 2.0 0.0 Recovery of Loans Other Receipts (PSU Diisinvestment) Borrowings and other Liabilities 2004-05 2005-06 2006-07 2007-08 2008-09 2.0 0.1 0.3 0 0.1 0 0.1 0.8 0.2 0 Other Receipts (PSU Diisinvestment) Borrowings and other Liabilities
4.0
4.1
3.5 Years
2.7
6.1
website: http//indiabudget.nic.in
Capital Expenditure: Are those which either increases the asset or decreases the liability of the Government
Capital Expenditure
capital Expenditure (as % of GDP)
4 3.5 3 2.5 2 1.5 1 0.5 0 2004-05 2005-06 2006-07 Years 2007-08 2008-09 1.9 1.7 1.8 Series1 2.5 3.6
website: http//indiabudget.nic.in
RE/CE
website: http//indiabudget.nic.in
Planned expenditure : These are the expenses that form a part of the governments five year plan. For ex- salaries and pension
Plan Expenditure
6
Series1
2007-08
2008-09
website: http//indiabudget.nic.in
DEEPIKA 26-03-2012
Non plan expenditure: These are the expenses that dont form a part of the governments five year plan and include defense expenses, subsidies, grants to the states
Non Plan Expenditure
12
11.6 11.5 11 10.5 10 9.5 9 2004-05 2005-06 2006-07 Years 2007-08 10.2 10.0 10.7
11.6
Series1
2008-09
website: http//indiabudget.nic.in
Fiscal Deficit: when a Government total expenditure exceed the revenue that it generated (excluding money from borrowing)
Fiscal Defecit
7.0
6.0 5.0 4.0 Series1 3.0 2.0 1.0 0.0 2004-05 2005-06 2006-07 Years 2007-08 2008-09
website: http//indiabudget.nic.in
Fiscal deficit for the FY 2011 is estimated at 5.5% 18.9% growth rate registered by manufacturing industry in 2009 Indian Economy is expected to register a 10% GDP growth in the coming years A 7.2% economic growth is estimated to be registered in the current fiscal The future years are expected to witness gradual segmentation of incentives Direct Tax Code and General Sales Tax to be launched in April 2011 A supreme level Fiscal Stability and Development Council to be established by the central government Issue of additional banking licenses by the Reserve Bank of India to private players and non-banking financial organizations 6 months extension of the refund term for farmer loans up to June 30th 2011 Undertaking of the introductory development activities for Delhi-Mumbai industrial corridor Rs 25000 crores increase by the government via Disinvestment route Setting up of Technology advisory group under the governance of Nandan Nilekani Allocation of Rs 1900 crore for UID authority Allocation of Rs 147,000 crore for defence