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Submitted to: Prepared By: Prof. Jatin Modi Vaishali Shah-101 Monal Sathavara-104 Jipal Sukhadiya-108 Sujal Thakkar-113 FISCAL POLICY

What is fiscal policy?:

What is fiscal policy? The fiscal policy can be used to overcome, recession and control inflation. It may be defined as the deliberate change in the government revenue and expenditure to influence the level of national output and price. policy decisions relating to entire financial structure of the government, including tax revenue, public expenditures, loans, transfers, debt management, budgetary deficit, and so on.

Objectives Of Fiscal Policy:

Objectives Of Fiscal Policy following are some of the important objectives of fiscal policy adopted by the Government of India: To mobilize adequate resources for financing various programmes and projects adopted for economic development; To raise the rate of savings and investment for increasing the rate of capital formation; To promote necessary development in the private sector through fiscal incentive;

Cont… :

Cont… To arrange an optimum utilization of resources; To control the inflationary pressures in economy in order to attain economic stability; To remove poverty and unemployment; To attain the growth of public sector for attaining the objective of socialistic pattern of society;


Cont… To reduce regional disparities; and To reduce the degree of inequality in the distribution of income and wealth. In order to attain all these aforesaid objectives, the Government of India has been formulating its fiscal policy by incorporating the revenue, expenditure, and public debt components in a comprehensive manner.

Pros And Cons Of Fiscal Policy:

Pros And Cons Of Fiscal Policy Pros : Highly acceptable for developing countries Emphasis on overall economic growth Takes care of revenue and expenditure Helps in planning Easy to target specific factor For the social welfare

cont… :

cont… Cons : Subject to time lags Corruption Inflation Growing inequality

Fiscal Policy Reforms :

Fiscal Policy Reforms Progression Taxes Agricultural Taxation Broad – Based Tax Net Checking Tax Evasion Checking Black Money Simplified Tax Structure Increasing Rellance On Direct Taxes Raising The Profitibility On Psus

Techniques of fiscal policy :

Techniques of fiscal policy Taxation policy Public expenditure policy Public debt policy Deficit financing policy

Fiscal policy statement 2011 – 12 :

Fiscal policy statement 2011 – 12 Fiscal policy overview Government strategy towards fiscal policy Tax policy Indirect tax Customs duty Service tax Excises duty Direct tax


INDIRECT TAX CUSTOMS DUTY Reducing The Peak Rate Of Customs Duty. Exports Duty Of Scarce Natural Raw-materials Has Been Increased. The Rate Of Export Duty On Two Basic Raw Materials Of Cement Industry Like Petcoke And Gypsum Is Reduced To 2.5% Cash Dispensers Fully Exempt From Basic Customs Duty


SERVICE TAX The Govt. has to charge services tax, simplification of law and procedure, improved tax administration. Standard rate of Services Tax retained at 10% Tax on Hospitals with 25 or more beds. ST on air travel both domestics and international are raised. ST on Hotel accommodation in excess of Rs.1000 per day.


EXCISES DUTY The excise duty levied on the important sectors are automobiles, paper, drugs, pharmaceuticals, food processing etc. The standard Rate of excise Duty maintained at 10% Lower Rate of ED enhanced from 4% to 5% Concessional Excise Duty of 10% to vehicles based on fuel cell technology. Excise Duty exemption for domestic suppliers producing capitals goods needed for expansion of existing power project.


Cont… Some Other Indirect Tax : CENVAT(Central Value Added Tax) VAT(Value Added Tax) Sales Tax


DIRECT TAX Over the last four years, widespread reforms into the Direct Tax are as following. Distortions the tax structure have been minimised by expanding the tax base and maintaining moderate tax rates. Enhancing the existing tax rate 10% to 15% in respect to short terms capital gains. Personal Income Tax(PIT) rate structure for individuals, Hindu Undivided Families(HUF) and so on, by enhancing the limit and revising the income slabs.


Cont… Exemption Limit for Male enhanced from Rs.1,60,000 to Rs.1,80,000 Exemption Limit for Senior Citizens enhanced from Rs.2,40,000 to Rs.2,50,000 Exemption Limit for 80 years or more Rs 5,00,000 Corporate surcharge of 7.5% on Domestic Companies proposed to be reduced to 5% Rate of minimum Alternative Tax increased from 18% to 18.5%

Fiscal Responsibility and Budget Management Act,2003(FRBM):

Fiscal Responsibility and Budget Management Act,2003(FRBM) This Act control Fiscal policy on the part of Govt. To take steps to element the revenue deficit and fiscal deficit and build up adequate revenue surplus. The estimated Fiscal deficit for the year 2.3% of GDP in 2010-2011. Fiscal consolidation targets at Centre and States have shown positive effect on macro economic mgt. of the economy. The Act care of following Statement… Medium-term Fiscal Policy Statement Fiscal Policy Strategy Statement Macro economic Frame Statement



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