Monetary & Fiscal Policy IT Industry

What is Policy?
Principle to rule or to guide decisions and

achieve rational outcomes Either a procedure or a protocol By the Board of or senior governance body Assists subjective as well as objective decision making Considered as a "Statement of Intent" or a "Commitment".

Difference b/w Policy & Law

POLICY LAW

Policy merely guides actions Law can compel or prohibit toward those that are most likely behaviours (e.g. a law requiring to achieve a desired outcome. the payment of taxes on income)

Monetary Policy
Monetary policy is the process by which

the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.

Fiscal Policy
Fiscal Policy is defined as the govt.

Programme of taxation, expenditure, & other financial operation to achieve national goals. The two main instruments of fiscal policy are government expenditure and taxation.

MONETARY DIFFER FROM FISCAL POLICY

Monetary Policy Aims to maintain price stability, full employment and economic growth Regulates the supply of money and the cost and availability of credit in the economy. Lending and borrowing rates of interest for commercial banks. It can increase or decrease the supply of currency as well as interest rate, carry out open market operations, control credit and vary the reserve requirements. Fiscal Policy Fiscal policy is a broader tool with the government. Can be used to overcome recession and control inflation. Fiscal policy aims at changing aggregate demand by suitable changes in government spending and taxes. The annual Union Budget showcases the government's Fiscal Policy.

OBJECTIVES OF MONETARY POLICY

Maximum feasible output. High rate of growth. Growth in employment & income Price stability. Stability of Forex & national currency Inflation Control Greater equality in the distribution of income

and wealth.

HIGHLIGHTS OF CURRENT MONETARY POLICY

Cash reserve ratio retained at 6 percent Statutory liquidity ration retained at 24 percent Bank rate untouched at 6 percent Inflation expected to remain elevated for few more months High global commodity prices may also exert pressure on domestic

inflation
High global crude prices, domestic fuel subsidies will impact

inflation
This year's monsoon may impact yields of grains, pulses, oilseeds

and cotton
Inadequate supplies may keep prices of eggs, meat, fish, milk and

pulses high

Key Facts
IT POLICY focuses on application of

technology-enabled approaches to overcome monumental developmental challenges in education, health, skill development, financial inclusion, employment generation, governance etc. to greatly enhance efficiency across the board in the economy. Peak rate of customs duty is 10%

Key Facts
The customs duty on 217 Information Technology Agreement (ITA-1) items* is zero%. EXAMPLE;Telecommunication equipment; Electronic components including semiconductors; Semiconductor manufacturing equipment; Software and Scientific instruments.
VAT on IT items is @4% and non-IT electronic items are @12.5%. CST is 2%. Customs duty on specified capital goods used for manufacture of electronic goods is 0%.

 Custom duty on LCD panels and set top box

is 5%. Mean rate of excise duty( CENVAT) is 8%.

India's IT Industry
India is home of IT professionals. Skilled Indian workforce cost is reasonably

low Process outsourcing and knowledge process outsourcing have expanded significantly in the Indian job market India has a huge pool of English-speaking IT professionals.

India's IT Industry
A separate ministry Oct 15, 1999. Information technology Act 2000

INVESTMENT POLICY Automatic route for foreign equity up to 100 percent in software and electronics Electronic hardware technology parks(EHTPs), software technology parks(STPs), free trade zones and 100 percent trade oriented units(TOUs). Simplification and liberalization of export and import policy.

OPPORTUNITIES
IT industry US $ 14 billion, growing at 50% p.a. Exports US $ 10 billion Job creation: a million direct and 2-3 million indirect High quality standards 250 fortune of 500 companies- clients of Indian firms