Indian economy-Overview

India's diverse economy encompasses traditional village farming, modern agriculture, a wide range of modern industries and a multitude of services. India's GDP during 2012-13 is estimated at 5%. But it is expected to increase between 6.1 percent to 6.7 % in 2013-14. Inflation expected to fall between 6.2 % and 6.6 % during 2013-14. The country's exports were worth $25587 million by October in 2012-13 FDI inflows into India declined from $31.5 billion in 2011 to $27.3 billion in 2012 In 2012, FIIs bought equities worth USD 24.4 billion in 2012. The trade deficit for April - January, 2012-13 was estimated at US $ 167168.12 million, which was higher than the deficit of US $ 154890.14 million during April -January, 2011-12.

Fiscal Policy effect on Indian Economy

Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nations economy. Macroeconomic goals of Fiscal policy: I. Economic Growth II. Employment III. Stabilization IV. Economic Equality V. Price stability Instruments of Fiscal Policies: Taxation Public Expenditure Public Debt

Evaluation of Fiscal Policy

Early 1980s: Net of depreciation consistently negative. Late 1980s: Large deficit averaging about 8% of GDP Post liberalization: Fiscal deficit decreased. 2001: Fiscal deficit increased to 10% of GDP. 2003: FRBM was adopted. FRBM improved the transparency in budgetary policy. As a result fiscal deficit decreased to 3.7% of GDP. In 2007-2008 fiscal deficit was 2.7 % Shot up to 5.7 % in 20012-2013. Crowding out : the government borrows such large amounts of capital to finance government projects, its activities can increase interest rates. Higher interest rates discourage individuals and businesses from borrowing money, which reduces their spending and investment activities.