Public Finance

Public Finance pertains to that section of the Finance Ministry that concerns itself with the objective of allocating resources, while staying within the constraints of the budget. Public Finance in India also comes under the purview of a branch of economics which determines and assesses the policies of the Indian government stipulated in the annual finance budget. Public finance identifies that types and consequences of tax measures and expenditure on citizens, institutions, and the entire economy. Public finance is also concerned with improving and upgrading economic procedures that support governmental policies. Indian public finance is usually praised and welcomed by the business community since the budget tends to be market friendly. However, in recent years, the government's infrastructural reforms have been criticized. According to financial analysts, the government spends the majority of its revenue on current expenditure and loses focus on public finance/investment. For example, in 2001-02, as per CIA estimates, the Indian government accumulated revenues of about $48 billion and incurred expenditures of around $78 billion. On the whole, the government experienced a deficit of about $30 billion and external debt amounted to $100.6 billion. Public policy is inextricably linked with public finance. Public policy refers to the decisions and measures undertaken by the government, in congruence with citizens and legal bodies. Public policy and public finance are related since it's with the help of public policy that issues pertaining to public finance are sorted out. Policies under Public Finance: Fiscal policy: This refers to the overall policy framework of the government after factors such as government earning, government spending, and government borrowings have been taken into consideration. Monetary policy: This refers to India's central government policy regarding the amount of money, exchange and interest rates prevailing in the economy. Monetary policy plays a significant role in controlling aggregate demand and inflation. By means of these policies, the government aims at: Bringing about equity in distribution of wealth and income across the various strata of society, so that the gap between and rich and the poor is gradually bridged. Promoting and sustaining economic growth by increasing rate of savings and investment and enhancing the rate of public expenditure. Undertaking the optimum allocation of resources with the help of financial instruments such as taxes and subsidies. Stabilizing the economy by avoiding drastic fluctuations between economic boom and recession.

Economic Survey Highlights 2010-11
Robust growth and steady fiscal consolidates have been the hallmark of the Indian economy in the year 2010-11 so far. The growth rate has been 8.6 percent in 2010-11 and is expected to be around 9 percent in the next fiscal year. The growth has been broad based with a rebound in the Agriculture sector which is expected to grow around 5.4 per cent.

1 per cent in 2010-11.5 percent higher than what would be if the country was not on the growth curve.1 billion tonnes from 218. The Survey reports that the industrial output growth rate was 8.3 per cent (provisional) in April-December. civil aviation sectors performed well while the power generation.87 per cent. The survey has pointed out that the inflation is expected to be 1.7 percent while the investment rate is up to 36. Six core industries registered a growth of 5. The Survey has observed that a rise in savings and investments and pick up in private consumption has resulted in 9. With a relatively good monsoon the agriculture-sector is expected to grow at 5. During April-November 2010 telecom. Recognizing the fact that inflation continues to be high even though it has come down markedly from where it was at the start of the fiscal year. higher commodity prices and volatility in global commodity markets have been a cause of concern underscoring the need of fiscal consolidation and stronger reserves.7 per cent growth of GDP at market prices (constant) in 2010-11. . 2010 as against 4.4 per cent during 2010-11. The rising food inflation and the critical role of agriculture underline the need for a larger investment in agriculture enroute to the second green revolution.Manufacturing and Services sector have registered impressive gains.7 per cent during the same period in 2009-10. The telecommunications sector has done exceedingly well as the tele density has increased from 20. In order to check food inflation. Savings and investment are looking up while exports are rising. However unmet gaps still remains large and accelerated investments will be needed in the next Plan period for addressing delays. Economic Survey 2010-11 has highlighted the increasing role of infrastructure services which have been deepening rapidly with rising investments. the Government should improve the delivery mechanisms by strengthening the institutions and addressing corruption. The foodgrain production went up to 232.6 per cent while the manufacturing sector registered a growth rate of 9. Savings rate has gone up to 33. cement and fertilizer production. Food inflation.1 billion tonnes in 2009-10.95 per cent in 2010 in urban areas. The Survey points out that the agriculture sector growth in the first four years of the 11th Plan (2007-12) is estimated at 2. it has suggested. the Survey underlined the need to monitor emerging trends in inflation on a sequential monthly basis. crude oil production. railway freight traffic and cargo handling at major ports have grown at comparatively lower rates.74 per cent in 2004 to 143. cost overruns and regulatory and pricing impediments.5 percent of GDP in 200910.

installing stronger safeguards and measures to accelerate financial inclusion. The specific schemes for Scheduled Castes.18 per cent in 2010. It has called for efficient taxation of goods and services by a new GST. The Economic Survey 2010-11 has expressed satisfaction at the progress of fiscal consolidation and the role of monetary policy on tackling inflation.3 bn in end December 2010. in terms of coverage as well as the spending and monitoring have found specific mention in the report. Sarva Shiksha Abhiyan . expansion of Mahatma Gandhi NREGA.1 percent in the previous year. The inclusive growth agenda of the Government is reflected in the 59 per cent rise in Net Bank Credit .3 percent of GDP in the previous year. A call for reforms in the university and higher education and correcting the demand supply mismatch in the job market has been made in the report. OBCs and the regions such as North-East.2bn from US $ 279.8% of GDP in 2010-11 as against 6. Tribes.5 per cent while the imports during the same period registered a growth rate of 19 per cent. The Survey points out that Gross Fiscal Deficit is 4. Balance of payment situation has improved due to surge in capital flows and rise in foreign exchange reserves which have been accompanied by rupee appreciation. the Survey has called for the policies to promote further opportunities in new areas in global demand such as accounting. The Survey points out that the exports in April-December 2010 went up by 29.4 bn in end April 2010 to US $ 297. The Revenue deficit in the current financial year has been 3.5 percent of GDP as against 5. Lauding the role of services sector as the potential growth engine. tourism. The Economic Survey 2010-11 has lauded the Government's efforts in addressing social and financial inclusion. legal. It says the gap in resources for higher education may be met on the basis of public private partnership without diluting the regulatory oversight of the Government. financial and other services beyond the IT and business process sectors.While in the rural areas it has gone up from 1.57 per cent in 2004 to 30. The expenditure on Social sector programs has been stepped up by 5 percent point of GDP over the past five years. education.01 bn in the same period. The survey has advised that a better convergence of the schemes to address the issues of unemployment and poverty alleviation could avoid duplication and leakages. raising revenues. National Rural Health Mission. ensuring availability of funds and expansion of credit growth. The trade gap narrowed down to US $ 82. During current fiscal foreign exchange reserves increased by US $ 18. .

The Economic Survey has suggested that in the long run the potential engines of growth for the country could be from skill development and innovative activity and therefore. . such as volatility in commodity prices like crude oil exacerbated by political turmoil in the Middle-East. Regarding the outlook for the Indian economy.The Survey has also made specific mention of Government's active engagement on issues related to climate change with expanded financing of programs and better policies. efforts should be made to promote them. the Survey says that despite the risks of global events. The Economic Survey sums up by stating that the real GDP growth is expected to reach the 9 per cent mark in 2011-12 and the next two decades may well see the economy growing faster than it has done any time in the past. the Indian economy seems poised to scale greater heights in terms of macro economic indicators.

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