fiscal policy jinal

8/9/2019 Fiscal Policy Jinal

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Introduction

Fiscal Policy is the main part ofEconomicPolicy and Fiscal Policy's first word Fiscal is

taken from French word Fisc it means treasureof Govt. So we can define fiscal policy as the

revenue and expenditure policy of Govt. of India.It is prime duty of Government to make fiscalpolicy . By making this policy , Govt. collects

money from his different resources and utilize it

in different expenditure . Thus fiscal policy isrelated to development policy . All welfareprojects are completed under this policy


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OBJECTIVES

1. To achieve desirable price level

2. To Achieve desirable consumption level

3. To Achieve desirable employment level

4. To achieve desirable income distribution:

5. Increase in capital formation

6. Degree of inflation


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INSTRUMENTS

Budget

Government expenditure

Taxation- direct and indirect Public debt

Deficit financing

Government borrowing


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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 ofthe period to which it applies.


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COMPONENTS OF BUDGET

Revenue receipts

Capital receipts

Revenue expenditure Capital expenditure


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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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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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Deficit financing


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GOVERNMENT BORROWING


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Fiscal Policy Can Be Divided In Two Types.


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Fiscal Measures to control

inflation (a) Reduction in Unnecessary

Expenditure

(b) Increase in Taxes (c) Increase in Savings

(d) Surplus Budgets

(e) Public Debt

(c) Increase in Savings


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Criticisms of Fiscal Policy

Disincentives of Tax Cuts

Side Effects on Public Spending

Poor Information

Time Lags

Budget Deficit

OtherComponenets of AD

Depends on Multiplier

Crowding Out


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Fiscal measures to control

deflation


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fiscal policy jinal

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