Fiscal policy - times pro

Fiscal policy - times pro

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  Presented by- Batch 23;PGDBM+ Group 5  Gunjan Roy chaudhuri  Supravat Pramanik  Saurav das  Pratip Paul Fiscal policy & twoinvestment options when government spendingincreases
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   About fiscalpolicy  Tools of fiscal policy  Expenditure & revenue after Union Budget 2016-17  Kinds of fiscal policy  Limitations & affecting factors  Various deficit components  Investment options  Bond  Treasury bill  Conclusion  References  Acknowledgement Overview
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   The wordfisc means ‘ state treasury ’ & fiscal policy refers to policy concerning the use of ‘state treasury’ or the govt. finances to achieve the macroeconomic goals.  Concerned with the raising of government revenue and incurring of government expenditure.  AD = C+ I + G + X – M  Development by effective Mobilisation of Resources.  Reduction in inequalities of Income and Wealth  Price Stability and Control of Inflation  Employment Generation  Capital Formation  Development of Infrastructure About fiscal policy
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  Tools of fiscalpolicy
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  Expenditure & revenueafter Union Budget 2016-17
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  Kinds of fiscalpolicy  Expansionary Fiscal Policy  Involves increasing AD.  Govt will increase spending (G) & cut Taxes.  Lower taxes will increase consumers spending because they have more disposable income(C).  This will worsen the govt. budget deficit.  Risk of High Inflation due to huge demand & increase in money supply.  Contractionary Fiscal Policy  Involves decreasing AD.  Govt will cut spending (G) & increase Taxes.  High taxes will decrease consumers spending because they have less disposable income(C).  This will help in improving the govt budget deficit.  Not Easy to achieve this.
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  Limitations  Lack ofadequate data  Time lag  Budget deficit  Small proportion of population in taxable income groups Factors affecting fiscal policy  Tax policies  Government subsidies  Government borrowings, lending's & investments Limitations & affecting factors
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   Revenue deficit= revenue expenditure – revenue income.  Budgetary deficit = total expenditure – total income.  Fiscal deficit = budgetary deficit + borrowing.  Primary deficit = fiscal deficit – interest payment.  Current account deficit = balance of trade + net factor income + net cash transfers.  Reasons :  Increase in Subsidies.  Unproductive expenditure by the government.  Huge Borrowings.  Defense Expenditure.  Poor Performance of Public Sector.  Payment of Interest.  Tax Evasion. Various deficit components
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  Investment options (when governmentspending increases)  When governments increase their spending, crowding out can occur.  Government spending reduces available funds and increases the cost of capital.  Crowding out effect - The government competes with private borrowers for funds, and could drive up interest rates; the government may “crowd out” private borrowing, and this offsets the government expansion.  Involves selling government bonds or bills.  Bonds are long term securities that pay a fixed rate of return over a long period until maturity, and are bought by financial institutions looking for a safe return.  Treasury bills are issued into the money markets to help raise short term cash.
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   Fixed incomesecurities.  A debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.  Used by companies, municipalities, states and governments to raise money.  Owners of bonds are debtholders, creditor of the issuer.  Not taxed.  Inversely proportionate to interest rates.  Selling price< face value, that is discount bond.  Selling price> face value, that is premium bond. Bond
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   Represent short-termborrowings of the Government.  A treasury bill is nothing but a promissory note issued by the Government under discount for a specified period stated therein.  Issued only by the RBI on behalf of the Government. Treasury bills are issued for meeting temporary Government deficits.  91 DAYS TB ,184 DAYS TB ,364 DAYS TB (On basis of periodicity).  Importance:  Safety.  Ideal short term investment.  Ideal fund management.  Non-inflationary monetary tool. Treasury bill
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   The objectivesof fiscal policy such as economic development, price stability, social justice, etc. can be achieved only if the tools of policy are effectively used.  Though there are gaps in India's fiscal policy, there is also an urgent need for making India's fiscal policy a rationalised and growth oriented one.  The success of fiscal policy depends upon taking timely measures and their effective administration during implementation.  Fiscal deficit has been pegged at Rs 5.33 lakh crore, or 3.5 per cent of GDP, in 2016-17 (As per data released by the Controller General of Accounts).  Previous RBI Governor Raghuram G. Rajan said after government's 2016/17 budget had been "fiscally prudent", and the establishment of a monetary policy committee to set interest rates would help the central bank fight inflation. Conclusion
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   The EconomicsTimes Finpro.  General Awareness book for banking by Mahendra’s publication.  Government of India: Ministry of Finance- http://finmin.nic.in/  Employment news - http://employmentnews.gov.in/writereaddata/11032016356271UNION%20BUDGET%2 02016-17.png  The Economics Times : http://economictimes.indiatimes.com/news/economy/finance/rbi-governor-raghuram- rajan-says-governments-budget-fiscally-prudent/articleshow/51373176.cms  Mercatus center - https://www.mercatus.org/publication/does-government-spending- affect-economic-growth  India :http://www.india.com/topic/fiscal-deficit/ References
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   The teamis indebted to the Times-pro for providing the infrastructural facilities.  Sincere thanks are due to our sir, Mr. Suvashis Halder , for providing guidance.  Lastly, the co-operation received from the classmates, our loving parents whose moral supports helped us to complete the work & specially all team- members whose equal contribution gave a shape is also acknowledged. Acknowledgement