Trends in fiscal policy of india
Some of the major instruments of fiscal policy are as follows: Budget, Taxation, Public Expenditure, public revenue, Public Debt, and Fiscal Deficit in the economy.
Reforms in Direct Taxation: It is important to note that over the last two decades, there has been a significant reform in the tax system so that it can make larger contribution to resource mobilisation for economic growth and at the same time serves the objective of achieving equity as well.
This is quite contrary to broadening the tax base. Sustainability with of this kind of high fiscal as well as revenue deficit is very difficult and the overall economy will have adverse impact of the same.
The government invests a significant proportion of its tax revenue in the implementation of Poverty Alleviation Programmes to improve the conditions of poor people in society.
Major problems of fiscal policy in india
Some of the major instruments of fiscal policy are as follows: Budget, Taxation, Public Expenditure, public revenue, Public Debt, and Fiscal Deficit in the economy. In service tax was expected to yield Rs. Besides, to raise revenue from corporate taxation, fringe benefit tax FBT was levied payable by corporate employee. Disinvestments Government can also get revenue by disinvesting from public sector companies. If government wants to bring down the fiscal deficit instantly then they can choose this option. This is done with the help of public expenditure. As far as the growth rate is more than deficit rate Debt to GDP ratio will not increase but if deficit overtake growth rate then one can see rise in the Debt to GDP ratio. It is quite surprising to note that Kelkar Task Force on implementation of Fiscal Responsibility and Budgetary Management Act FRBMA proposed a shift to a three rate structure on customs duties consisting of 5 per cent, 8 per cent and 10 per cent. The Way Out Reduction in the revenue expenditures Large amount of total expenditure is spent on revenue expenditures. To ensure that benefits of expenditure on subsidies are not usurped by those not intended be the beneficiaries of these subsidies. It was realised that moderate rates of these taxes would yield more revenue by increasing tax compliance. This is an instant solution to improve the revenue collection and bring down the fiscal deficit. The introduction of service tax in ushered in a major change in indirect taxes in the BE form of wider base and facilitated the process of rationalization of excise duties resulting in lower tax burden on productive sectors. From year government is incurring huge revenue deficits which average 4. Economy Fiscal Policy of India: Meaning, Objectives and Impacts on the Economy Fiscal policy deals with the taxation and expenditure decisions of the government.
In our view this is going too far in trade liberalisation. Higher debt increases interest expenditure which is revenue expenditure and does not add any productive capacity for the future growth.
VAT tax will replace different rates of sales tax levied by the state governments. Development by effective Mobilisation of Resources: The principal objective of fiscal policy is to ensure rapid economic growth and development.
A improved infrastructure is the key to further speed up the economic growth of the country. Thus, as will be seen from Table The government has spent average 85 percent of total expenditure on revue expenses between year and It is only in and under well-designed contra-cyclical policy that Government increased its expenditure and borrowed heavily for this purpose to fight slowdown of the Indian economy and to keep the growth momentum.
But this solution is short term in nature since this is not a regular revenue source for the government.
based on 99 review