Presentation Arun

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Monetary & Fiscal

Policy

IT Industry



What is Policy?

Principle to rule or to guide decisions andachieve rational outcomes

Either a procedure or a protocol

By the Board of or senior governance body

Assists subjective as well as objective decisionmaking

Considered as a "Statement of Intent" or a"Commitment".



Difference b/w Policy & Law

POLICY LAW

Policy merely guides actionstoward those that are most likelyto achieve a desired outcome.

Law can compel or prohibitbehaviours (e.g. a law requiringthe payment of taxes on income)



Monetary Policy

Monetary policy is the process by whichthe monetary authority of a country controlsthe supply of money, often targeting a rateof interest for the purpose of promoting economic growth and stability.



Fiscal Policy

Fiscal Policy is defined as the govt.Programme of taxation, expenditure, & otherfinancial operation to achieve national goals.

The two main instruments of fiscal policy aregovernment expenditure and taxation.



MONETARY DIFFER FROM FISCAL

POLICY Monetary Policy Fiscal Policy

Aims to maintain price stability,full employment and economic

growthRegulates the supply of moneyand the cost and availability of credit in the economy.Lending and borrowing rates of interest for commercial banks.It can increase or decrease thesupply of currency as well asinterest rate, carry out open marketoperations, control credit and varythe reserve requirements.

Fiscal policy is a broader tool withthe government.

Can be used to overcomerecession and control inflation.Fiscal policy aims at changingaggregate demand by suitablechanges in government spendingand taxes.The annual Union Budgetshowcases the government's FiscalPolicy.



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 domesticinflation

High global crude prices, domestic fuel subsidies will impactinflation

This year's monsoon may impact yields of grains, pulses, oilseedsand cotton

Inadequate supplies may keep prices of eggs, meat, fish, milk andpulses high



Key Facts

IT POLICY focuses on application of technology-enabled approaches to overcomemonumental developmental challenges ineducation, 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 TechnologyAgreement (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 boxis 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 inthe Indian job market

India has a huge pool of English-speaking ITprofessionals.



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 insoftware and electronics

Electronic hardware technology parks(EHTPs), softwaretechnology parks(STPs), free trade zones and 100

percent trade oriented units(TOUs).

Simplification and liberalization of export and importpolicy.



OPPORTUNITIES

IT industry US $ 14 billion, growing at 50% p.a.

Exports US $ 10 billion

Job creation: a million direct and 2-3 millionindirect

High quality standards

250 fortune of 500 companies- clients of Indian

firms

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