Fiscal Policy

Presented by :Swapnil Supriya M.B.A 4th semester

Fiscal Policy-Meaning • The fiscal policy is concerned with the raising of government revenue and incurring of government expenditure. . the fiscal policy is concerned with government expenditure and government revenue. To generate revenue and to incur expenditure. So. the government frames a policy called budgetary policy or fiscal policy.

finances to achieve the macroeconomic goals.” . “any decision to change the level. Shaw .K. expenditure or to vary the burden .• • The word fisc means ‘state treasury’ and fiscal policy refers to policy concerning the use of ‘state treasury’ or the govt. composition or timing of govt.the structure or frequency of the tax payment is fiscal policy.G.

aimed at achieving macroeconomic goals ii. GENERAL obj-. SPECIFIC obj-. relating to any typical problems of an economy .Objectives of Fiscal Policy • It has 2 major objectives: i.

Fiscal Policy And Macroeconomic Goals • Economic Growth: By creating conditions for increase in savings & investment. . • Price stability: employed to contain inflationary and deflationary tendencies in the economy. • Employment: By encouraging the use of labour-absorbing technology • Stabilization: fight with depressionary trends and booming (overheating) indications in the economy • Economic Equality: By reducing the income and wealth gaps between the rich and poor.

Instruments of Fiscal Policy • • • • • Budgetary surplus and deficit Government expenditure Taxation.direct and indirect Public debt Deficit financing .

Budgetary surplus and deficit • “A budget is a detailed plan of operations for some specific future period” • Keeping budget balanced (R=E) or deficit (R<E) or surplus (R>E) as a matter of policy is itself a fiscal instrument. • An accumulated deficit over several years (or centuries) is referred to as the government debt • A deficit is a flow. Debt is essentially an accumulated flow of deficits . And a debt is a stock.

Government Expenditure  It includes : • Government spending on the purchase of goods & services. • Payment of wages and salaries of government servants • Public investment • Transfer payments .

excise duty. Direct taxes.Central Sales Tax.Corporate tax. . Personal Income Tax. Distribution Tax. Service Tax. Banking Cash Transaction Tax 2. • Classified into 1.Taxation • Meaning : Non quid pro quo transfer of private income to public coffers by means of taxes. Fringe Benefit taxes. Div. Customs. Indirect taxes.

market borrowings . international organizations like World Bank & IMF 3.Public debt • 1. 2. foreign investments 2. Internal borrowings Borrowings from the public by means of treasury bills and govt. bonds Borrowings from the central bank (monetized deficit financing) • External borrowings 1.

.BUDGET • “A budget is a detailed plan of operations for some specific future period” • It is an estimate prepared in advance of the period to which it applies.

COMPONENTS OF BUDGET • • • • Revenue receipts Capital receipts Revenue expenditure Capital expenditure .

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