A PRESENTATION ON The Topic Fiscal Policy

Submitted By:- Mohsin Akhter M.B.A. Sem. 1st Bhadarwah Campus University Of Jammu

Submitted To:- Mr. Vinay Sharma

Fiscal Policy
In simple words, fiscal policy is that part of government policy which is concerned with raising revenue through taxation, deciding on the level of public expenditure and public debt. The term fiscal has been derived from the Greek word Fisc, meaning a basket to symbolize the public purse. Fisc, thus, refers to the Treasury. Fiscal policy, therefore, means a policy related to the treasury of the government.

Broader Concept:Broadly speaking, fiscal policy is a part of general economic policy of the government which is primarily concerned with the budget receipts and expenditures of the government. In short, fiscal policy refers to the Budgetary Policy. Thus, the term fiscal policy embraces the tax and expenditure policies of the government. Fiscal policy operates through the control of government expenditures and tax receipts.

Definition:According to Arthur Smithies, fiscal policy is a policy under which the government uses its expenditure and revenue programs to produce desired effects and to avoid undesirable effects on the national income, production and employment. According to Paul Samuelson, Fiscal Policy means public expenditure and tax policy.

The Budget:Fiscal policy operates through the budget. Infact, fiscal policy is also known as budgetary policy. The term budget is derived from the French word Bougette which means a leather bag or a wallet used to carry financial papers. Thus, the word budget has come to mean papers containing financial matters. The budget simply means estimate of revenue and expenditure. Budget is the master financial plan of the government. (Blue-print)

The Union Budget:Budget approval is a big exercise because without it(i) No tax can be levied, (ii) No expenditure can be incurred, and (iii) Govt. can spend only on approved items. The budget or union budget is divided into two parts, viz., (a) Revenue budget and (b) Capital budget.

Objectives of Fiscal Policy In a Developing Country Like India:(1) Fiscal policy and Capital Formation. (2) Fiscal policy and Mobilization of Resources. (3) Problem of Unemployment. (4) Fiscal policy and Economic Stability. (5) Fiscal policy and Redistribution of National Income. (6) Fiscal policy and Price Stability.

Evaluation/Achievements of Fiscal Policy:The effectiveness of our fiscal policy can be assessed from three angles: a) Fiscal policy and savings and capital formation, b) Fiscal policy and economic inequalities, c) Fiscal policy and inflation control. With reference to the first item, it may be safely concluded that fiscal policy has failed to produce enough savings for public investment. Financial crunch has become a standard excuse to avoid or postpone project implementation.

With regard to the impact of public revenue and public expenditure on minimizing income inequalities, less said the better. Over the years, the chasm between the rich and the poor has widened. The tax system has, obviously, failed to rob with this effect. Finally, fiscal policy has been successful in controlling inflation. The rate of inflation during the last couple of years has been lowering around five percent- a good sing indeed.

Agenda For Future:Fiscal policy were indeed as a part of economic reforms initiated since 1991. The fiscal reforms must be an ongoing process. In the years to come, our approach to fiscal policy must be1) Completion of the tax reform agenda. 2) Curb wasteful expenditure. 3) Minimize budgetary allocation to public sector undertakings. 4) Adopt a new approach to administer prices. 5) Reduce and redirect subsidies.

The End