fiscalpolicy-140328225047-phpapp01.pptx
Transcript of fiscalpolicy-140328225047-phpapp01.pptx
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 1/36
Fiscal Policy….with respect to investment
Presented by:
RAJESH KUMAR
MBA(Finance), ACS, AIII
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 2/36
“The policy of the o!e"n#ent "ea"$in the le!el ofo!e"n#ent %pen$in an$ t"an%fe"% an$ the ta&
%t"'ct'"e
*R
“Fiscal policy i% the '%e of o!e"n#ent "e!en'e
collection (ta&ation) an$ e&pen$it'"e (%pen$in) to
infl'ence the econo#y
Meaning:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 3/36
1)Neutral iscal policy : It i% '%'ally 'n$e"ta+en hen anecono#y i% in e-'ili."i'# /o!e"n#ent %pen$in i% f'lly
f'n$e$ .y ta& "e!en'e an$ o!e"all the .'$et o'tco#e ha% a
ne't"al effect on the le!el of econo#ic acti!ity
!) "#pansionary iscal policy: It in!ol!e% o!e"n#ent%pen$in e&cee$in ta& "e!en'e, an$ i% '%'ally
'n$e"ta+en $'"in "ece%%ion%
$)%ontractionary iscal policy: It occ'"% hen
o!e"n#ent %pen$in i% loe" than ta& "e!en'e, an$ i%'%'ally 'n$e"ta+en to pay $on o!e"n#ent $e.t
(So'"ce0 1i+ipe$ia)
&tages or 'ypes:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 4/36
Econo#ic %ta.ili2ation Econo#ic "oth (*P growth $.+,- in !/1!01$)
E#ploy#ent ene"ation (nemployment $., in !/11 est.)
Re$'ction in ine-'alitie% of inco#e an$ ealth
Inc"ea%e in capital fo"#ation 3"ice %ta.ility an$ cont"ol of inflation (2.3 4 5pril !/1$)
Effecti!e #o.ili2ation of "e%o'"ce%
Balance$ "eional $e!elop#ent
Inc"ea%e in national inco#e 4e!elop#ent of inf"a%t"'ct'"e
Fo"ein e&chane ea"nin%(Foreign reserves 6!+7.!+ billion in
8ct.!/1!)
8b9ectives:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 5/36
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 6/36
Note:0 *ata on F*; have been revised since 5pril !/11 to e#pand the coverage.
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 7/36
“B'$et "efe"% a financial %tate#ent hich %ho%
anticipate$ "e!en'e an$ anticipate$ e&pen$it'"e in an
acco'ntin yea"
o"
“State#ent of e%ti#ate$ "eceipt% an$ e&pen$it'"e% of
the o!e"n#ent in "e%pect of e!e"y financial yea" hich
"'n% f"o# 5 Ap"il to 65 Ma"ch
<udget:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 8/36
(a) =evenue <udget: The Re!en'e B'$et %ho% the
c'""ent "eceipt% of the o!e"n#ent an$ the e&pen$it'"e
that can .e #et f"o# the%e "eceipt%
(.) %apital <udget: The Capital B'$et i% an acco'nt of
the a%%et% a% ell a% lia.ilitie% of the cent"al
o!e"n#ent, hich ta+e% into con%i$e"ation chane% in
capital It con%i%t% of capital "eceipt% an$ capital
e&pen$it'"e of the o!e"n#ent
'ypes o budget:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 9/36
8>"=NM"N' <*"'
=">"N" <*"' %5P;'5? <*"'
=">"N"="%";P'&
=">"N""@P"N*;'="
%5P;'5?="%";P'&
%5P;'5?"@P"N*;'="
'5@
=">"N"
N8N0'5@
=">"N"
P?5N
=">"N"
"@P"N*;'="
N8N0P?5N
"@P"N*;'="
P?5N %5P;'5?
"@P"N*;'="
N8N0P?5N
%5P;'5?
"@P"N*;'="
*;="%'
'5@
;N*;="%'
'5@
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 10/36
Capital Receipts: The #ain ite#% of capital "eceipt% a"e loan%"ai%e$ .y the o!e"n#ent f"o# the p'.lic hich a"e calle$
#a"+et .o""oin%, .o""oin .y the o!e"n#ent f"o# the
Re%e"!e Ban+ an$ co##e"cial .an+% an$ othe" financial
in%tit'tion% th"o'h the %ale of t"ea%'"y .ill%, loan% "ecei!e$
f"o# fo"ein o!e"n#ent% an$ inte"national o"ani2ation%, an$
"eco!e"ie% of loan% "ante$ .y the cent"al o!e"n#ent
(=s -A/,A+-3 %rore or the year !/1$012)
Capital Expenditure: Thi% incl'$e% e&pen$it'"e on the
ac-'i%ition of lan$, .'il$in, #achine"y, e-'ip#ent,in!e%t#ent in %ha"e%, an$ loan% an$ a$!ance% .y the cent"al
o!e"n#ent to %tate an$ 'nion te""ito"y o!e"n#ent%, 3SU%
an$ othe" pa"tie%
(=s1-A-7A!+3 %rore or the year !/1$012)
%apital <udget(5ccount):
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 11/36
Capital expenditure is also categorized as plan and non –planin the budget documents:
a) Plan capital e#penditure: 3lan capital e&pen$it'"e,
li+e it% "e!en'e co'nte"pa"t, "elate% to cent"al plan
an$ cent"al a%%i%tance fo" %tate an$ 'nion te""ito"y
plan% (=s 7A77A$!! %rore or the year !/1$012)
.) Non0plan capital e#penditure: 7on8plan capital
e&pen$it'"e co!e"% !a"io'% ene"al, %ocial an$econo#ic %e"!ice% p"o!i$e$ .y the o!e"n#ent(=s 11A/+A+37 %rore or the year !/1$012)
%apital "#penditure:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 12/36
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 13/36
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 14/36
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 15/36
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 16/36
Revenue Receipts: Re!en'e "eceipt% a"e $i!i$e$ intota& an$ non8ta& "e!en'e% Ta& "e!en'e% con%i%t of the
p"ocee$% of ta&e% an$ othe" $'tie% le!ie$ .y the
cent"al o!e"n#ent (=s 1/A7-A$$1 %rore or the year !/1$012)
Revenue Expenditure: B"oa$ly %pea+in, "e!en'e
e&pen$it'"e con%i%t% of all tho%e e&pen$it'"e% of the
o!e"n#ent hich $o not "e%'lt in c"eation of
phy%ical o" financial a%%et% (=s 1A3!A!7! %rore or the year !/1$012)
=evenue <udget(5ccount):
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 17/36
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 18/36
a) *irect ta#: 4i"ect ta&e% 9 hich fall $i"ectly onin$i!i$'al% (pe"%onal inco#e ta&) an$ fi"#%
(co"po"ation ta&) *the" $i"ect ta&e% li+e ealth ta&,
ift ta& an$ e%tate $'ty (=s 7A-2A$$3 %rore
or the year !/1$012)b) ;ndirect ta#0 In$i"ect ta&e% li+e e&ci%e ta&e% ($'tie%
le!ie$ on oo$% p"o$'ce$ ithin the co'nt"y), c'%to#%
$'tie% (ta&e% i#po%e$ on oo$% i#po"te$ into an$
e&po"te$ o't of In$ia) an$ %e"!ice ta&
(=s 7A/2A2!$ %rore or the year !/1$012)
'a# =evenue:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 19/36
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 20/36
Plan revenue e#penditure: 3lan "e!en'e e&pen$it'"e"elate% to cent"al 3lan% (the Fi!e8:ea" 3lan%) an$
cent"al a%%i%tance fo" State an$ Union Te""ito"y 3lan%
(=s 2A2$A!-/ %rore or the year !/1$012)
Non0 plan revenue e#penditure: 7on8plan
e&pen$it'"e, the #o"e i#po"tant co#ponent of "e!en'e
e&pen$it'"e, co!e"% a !a%t "ane of ene"al, econo#ic
an$ %ocial %e"!ice% of the o!e"n#ent The #ain ite#%
of non8plan e&pen$it'"e a"e inte"e%t pay#ent%, $efence
%e"!ice%, %'.%i$ie%, %ala"ie% an$ pen%ion% (=s +A+!A+/,
%rore or the year !/1$012)
=evenue "#penditure:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 21/36
<udget deicit: 1hen a o!e"n#ent %pen$% #o"e than
it collect% .y ay of "e!en'e, it inc'"% a .'$et $eficit
Revenue Deficit : The "e!en'e $eficit "efe"% to the
e&ce%% of o!e"n#ent;% "e!en'e e&pen$it'"e o!e"
"e!en'e "eceipt% (=s $A3+A,$, %rore or the
year !/1$012)
Re!en'e $eficit < Re!en'e e&pen$it'"e 9
Re!en'e "eceipt%
Measures o overnment *eicit:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 22/36
Fiscal Deficit : Fi%cal $eficit i% the $iffe"ence .eteen
the o!e"n#ent;% total e&pen$it'"e an$ it% total "eceipt%
e&cl'$in .o""oin
/"o%% fi%cal $eficit < Total e&pen$it'"e 9 (Re!en'e
"eceipt% = 7on8$e.t c"eatin capital "eceipt%)
7on8$e.t c"eatin capital "eceipt% a"e tho%e "eceipt%
hich a"e not .o""oin% an$, the"efo"e, $o not i!e"i%e to $e.t Examples are recovery of loans and
the proceeds from the sale of PSUs. he fiscal
deficit !ill have to be financed through
borro!ing. hus" it indicates the total borro!ingre#uirements of the government from all sources
(=s 7A2!A2++ %rore or the year !/1$012)
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 23/36
/"o%% fi%cal $eficit < 7et .o""oin at ho#e =
Bo""oin f"o# RBI = Bo""oin f"o# a."oa$
7et .o""oin at ho#e incl'$e% that $i"ectly .o""oe$f"o# the p'.lic th"o'h $e.t in%t"'#ent% (fo" e&a#ple,
the !a"io'% %#all %a!in% %che#e%) an$ in$i"ectly f"o#
co##e"cial .an+% th"o'h Stat'to"y >i-'i$ity Ratio
(S>R)
? Fi%cal $eficit i% @ of /43 (D56), The
Econo#ic Ti#e%
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 24/36
Primary deicit: To o.tain an e%ti#ate of .o""oin
on acco'nt of c'""ent e&pen$it'"e% e&cee$in "e!en'e%,
e nee$ to calc'late hat ha% .een calle$ the p"i#a"y$eficit It i% %i#ply the fi%cal $eficit #in'% the inte"e%t
pay#ent%
(=s 1A31A,12 %rore or the year !/1$012)
/"o%% p"i#a"y $eficit < /"o%% fi%cal $eficit 9 netinte"e%t lia.ilitie%
$et interest liabilities consist of interest payments
minus interest receipts by the government on net
domestic lending.
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 25/36
Re!en'e
$eficit
Fi%cal
#a"+%#an%hip
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 26/36
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 27/36
B'$eta"y $eficit% #'%t .e finance$ .y eithe" ta&ation,
.o""oin o" p"intin #oney /o!e"n#ent% ha!e #o%tly "elie$ on .o""oin, i!in
"i%e to hat i% calle$ o!e"n#ent $e.t
The concept% of $eficit% an$ $e.t a"e clo%ely "elate$
4eficit% can .e tho'ht of a% a flo! hich a$$ to the
stoc% of $e.t
If the o!e"n#ent contin'e% to .o""o yea" afte" yea", it
lea$% to the acc'#'lation of $e.t an$ the o!e"n#ent ha%
to pay #o"e an$ #o"e .y ay of inte"e%t
The%e inte"e%t pay#ent% the#%el!e% cont"i.'te to the $e.t
(Public debt -3.7+ o *P in !/1! est.)
*ebt:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 28/36
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 29/36
Perspectives on the 5ppropriate 5mount o
overnment *ebt:
The"e a"e to inte"lin+e$ a%pect% of the i%%'e *nei% hethe" o!e"n#ent $e.t i% a .'"$en an$ to,
the i%%'e of financin the $e.t
The .'"$en of $e.t #'%t .e $i%c'%%e$ +eepin in#in$ that hat i% t"'e of one %#all t"a$e";% $e.t
#ay not .e t"'e fo" the o!e"n#ent;% $e.t, an$ one
#'%t $eal ith the Ghole; $iffe"ently f"o# the
Gpa"t; Unli+e any one t"a$e", the o!e"n#ent can "ai%e
"e%o'"ce% th"o'h ta&ation an$ p"intin #oney
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 30/36
By .o""oin, the o!e"n#ent t"an%fe"% the .'"$en of
"e$'ce$ con%'#ption on f't'"e ene"ation%
Thi% i% .eca'%e it .o""o% .y i%%'in .on$% to the people li!in at p"e%ent .'t #ay $eci$e to pay off the
.on$% %o#e tenty yea"% late" .y "ai%in ta&e%
The%e #ay .e le!ie$ on the yo'n pop'lation that ha!e
'%t ente"e$ the o"+ fo"ce, ho%e $i%po%a.le inco#eill o $on an$ hence con%'#ption
Th'%, national %a!in%, it a% a"'e$, o'l$ fall Al%o,
o!e"n#ent .o""oin f"o# the people "e$'ce% the
%a!in% a!aila.le to the p"i!ate %ecto"
To the e&tent that thi% "e$'ce% capital fo"#ation an$
"oth, $e.t act% a% a G.'"$en; on f't'"e ene"ation%
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 31/36
Note : *ata or !/1!01$ is as per 5dvance "stimates released by %&8.
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 32/36
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 33/36
http:indiabudget.nic.in
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 34/36
In$ia;% fi%cal %it'ation "e-'i"e% i##e$iate attention, hih "oth
an$ lo inte"e%t "ate ill not ta+e ca"e of the p"o.le# in the lon"'n
In, fact "oth "ate in "ecent yea"% ha!e .een %inificantly loe",
at p"e%ent In$ia% econo#ic "oth "ate i% 6 in the la%t
-'a"te" of D56
In$ia;% e&te"nal po%ition i% "elati!ely %t"on, in te"#% of t"a$e flo,
"e%e"!e%, fo"ein e&chane%, .'t 'p to %o#e e&tent #oneta"y an$
e&chane "ate policie% a"e .ia%e$ to co#pen%ate the fi%cal $eficit
Coo"$ination of fi%cal policy ith #oneta"y an$ e&chane "ate
policy o'l$ .e .ette" than lettin late" to a$'%t fi%cal loo%ene%% A na""o foc'% on $eficit o" $e.t can lea$ to nelect the lon "'n
"oth
%onclusion:
8/9/2019 fiscalpolicy-140328225047-phpapp01.pptx
http://slidepdf.com/reader/full/fiscalpolicy-140328225047-phpapp01pptx 35/36
/o!t ha% to thin+ a.o't "e!en'e enhancin ta& "efo"#%
.eca'%e the"e ha% a#ple %cope of i#p"o!in in$i"ect ta&
%t"'ct'"e Ta& "efo"# i% an e%%ential %tep toa"$% inc"ea%in
o!t "e!en'e a% ell a% "e$'ce #ic"oecono#ic $i%to"tion Fi%cal a$'%t#ent i% oin to #ao" aen$a fo" the o!t
they ha!e to plan it intelliently "athe" than %eein a% a
c"i%i%
/o!t ha% to "econ%t"'ct thei" e&pen$it'"e Hence e can %ay that fi%cal #ea%'"e% "e$'ce the inten%ity
of .'%ine%% fl'ct'ation% (Inflation Rece%%ion) .'t only
the%e alone a"e not %'fficient to co""ect fl'ct'ation%
%inificantly , the"efo"e the "ole of $i%c"etiona"y fi%cal policy an$ e&plicit chane% in ta& "ate% an$ /o!t
E&pen$it'"e a"e "e-'i"e$ to c'"e "ece%%ion an$ c'".
inflation