Post on 10-Apr-2018
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iscal Deficit rends and Components
By Darshita Shah
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content
Brief about Fiscal Deficit
Objectives of Fiscal Policy
Components of Fiscal Deficit
Trends
At global level
Measures
conclusion
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q The term ‘fisc’ means treasury thus fiscal policy means policy related to treasury.qqq Fiscal policy comprises of public revenue , public expenditure and public debt.q
qqqq It has important place in modern times particularly after the great economic
depression of thirties.q
qqqqq The Fiscal deficit is the difference between the government’s total expenditure
and its total receipts.
Brief about Fiscal Deficit
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omponents of fiscal deficit
ü Revenue Receipts• Tax revenue
• Non Tax revenue
üü Capital Receipts• Recovery of loan• Other receipts
ü
ü Total Expenditure•
• Plan and non plan expenditure
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Trends
In 15years of period from 1975-90 fiscal deficitgoes rose from 4.7% to 7.9% of GDP
Non plan revenue expenditure on defense,interest payments, food and fertilizer subsidiesrose sharply in 1980s
Reforms were taken up from the year 1991 torestore the fiscal deficit.
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Trends
. %As such the fiscal deficit reduced to 4 1 in-1996 97
- . %Rose again in 2000 01 and stood at 5 6 Fiscal responsibility and budget
( )management FRBM bill was introduced in 2000
and FRBM act was passed in 2003
As a result deficit has been reduced & standat 3.6% in 2006-07
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-960 1990
Corporate taxation initiated
Oil shocks in 1973 and 1979
Exemption on agricultural income in 1974
Subsidy rose sharply during 1980s
MODVAT in 1986
BOP crisis
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( %)evenue Receipts in
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( %)xpenditure in
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-Fiscal deficit 1960 1990
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1990 to 2009
qReformsqLPGqKargil war
q The undue debt burden is cripplingqNCMP policy (2004-05)qFarmer’s loan waiverqSixth pay commissionqHigh inflation
qGlobal crisis
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Revenue & Expenditure
: -Source economic survey 2006 07
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- : .After 1987 1991 the trends decreases due to tax reforms , .Indirect taxes coming down direct taxes starts increasing - , ; , ,In 2007 08 lowering in Excise duties growth in Automobiles Drug
.Pharmaceuticals sectors etc
.Abolition of numerous exemptions and concessions - : .1971 77 Oil seeds and black pepper import increases , .Depend on Exchange rate domestic production level - , , , .In 2008 2009 Basic exemption limit raise to 1 50 000
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Fiscal deficit till 2009
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r Revenue Receipts
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Capital Receipts
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Total Expenditure
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t global level
Bangladesh is being lauded for controlling wasteful subsidies - -Nepal has a revenue to GDP ratio far higher than India and has
.been running fiscal and current account surpluses
, ,Pakistan despite all its struggles has been recently upgraded& ’by the global ratings firm Standard Poor s for its efforts.at fiscal consolidation
( . %)Pakistan 4 4
( %)Sri Lanka 8•
( . %)China 3 4 ( . %)Indonesia 0 8
•
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The Largest Fiscal Deficit among World’s Major Economies
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Measures
Reducing Public Expenditure
Increasing Revenue from Taxation
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conclusion
The fall in inflation after 1998 implied the loss.of an important source of revenue
Reducing government spending as a proportion of
.GDP in India is probably not an alternative ’India s fiscal situation requires immediate
.attention
The most respected rating agency in the world’recently revised India s status from STABLE to. -NEGATIVE The reason because of our fiscal.deficit
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Fiscal journey
Thank you
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Bibliography
India macroeconomics and political economy by Joshi and Little
Indian economy part 1st and 2nd
RBI handbook http://indiabudget.nic.in/previouses.htm
Macroeconomics –theory and policy by Dr. H. L.Ahuja
Economic survey 2008-09
’
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tax
- : . %In 1 9 5 0 5 1 le ss to ta l ta x co lle ctio n m e re 6 3 1 ;La u n ch in g o f fiv e Ye a r p la n in 1 9 5 0 in cre a se in
& ,im p o rts m a n u fa ctu rin g e xcise d u ty
.in te rm e d ia ry g o o d s :After 1951 expansion in administrative and
.welfare activities of the Government
- :After 1987 1991 the trends decreases due to tax.reforms
,Indirect taxes coming down direct taxes starts
.increasing
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…ont
- ; ,In 1957 58 for Administrative reasons there was. , . , .reduction from Rs 4 200 to Rs 3 000
- ,In 2008 2009 Basic exemption limit raise to
, , .1 50 000
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ustom duty tax
- - :1950 51 to 1970 71 Protective trade policy and.dwindling of foreign reserves reduced
.Abolition of numerous exemptions and concessions - :1971 77 Oil seeds and black pepper import
.increases ,Depend on Exchange rate domestic production
.level
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- : .1976 77 Fertilizer retention price introduce - : &1979 81 Oil price doubled increase custom
.revenue - :1990 91 Progressive decrease in import duty and
.increase in export duty - :1993 94 Reduction in tariff and corporate tax
.reduce custom duty
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tax
- :1990 91 Tax Reforms .Income tax in gross tax revenues increases
%.Corporation tax increases to 30 - - - : . %2005 06 2007 08 9 2 Service Tax was also
.included
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tax
- : = . %1950 51 Excise duty modest 16 8 of Central.tax collection
- : ;1970 71 breakdown numerous exemptions and
.concessions Substantial legal and administrative complexity
.with increase in litigation
.Burden of duties falls on all section of society - , ;In 2007 08 lowering in Excise duties growth in
, , .Automobiles Drug Pharmaceuticals sectors etc
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exp
- : - . % . %.1990 91 Ratio to GDP decline 28 8 to 25 1 - : - . %.1997 98 Trend follow upward movement 29 5
: & -Reason National sub national levels of.Government expenditure correction .Cut in Capital Expenditure
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ubsidy exp
- : . % .1991 92 Decrease in Subsidy to 1 11 of GDP : &Reason Reform Rationalization of
,Fertilizer subsidy decontrol of Phosphate& .NPK
&Drastic variation in the price of Wheat
.Paddy - :2001 02 Release of food grain at concessional
.rates .The prices of Wheat and Rice get reduced : .2002 Subsidization in the oil sector
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