Академический Документы
Профессиональный Документы
Культура Документы
ABHISHEK 309
AKANSHA 310
AKSHAY 312
DIVYA 322
DIVYANSHU 323
ISHITA 325
WHAT IS FISCAL DEFICIT?
The difference between total revenue and total expenditure of the government, it tells us
how much the government exceeds the set budget
Generally takes place due to revenue deficit or due to a spur in capital expenditure i.e. to
create long term assets such as infrastructure
Financed through debt from either the central bank or from other capital markets by issuing
debt instruments such as treasury bills and bonds
Net Fiscal
Deficit
Fiscal Deficit
Gross Fiscal
Deficit
IMPACT OF FISCAL DEFICIT
It leads to excessive government borrowing from the market which in-turn leads to
increase in market interest rate. Higher market interest rate leads to reduction in
private investments which further reduces the available resources for the private
sector investments.
The extent to which a large fiscal deficit is financed by borrowing from the Central
Bank which issues new currency (which is called reserve money) for the government.
This causes greater expansion in money supply through the process of money
multiplier and generates inflationary situation in the economy. Thus, to check the rate
of inflation, fiscal deficit has to be reduced through both raising revenue of the
government and reducing government expenditure.
PUBLIC DEBT AND HOW IT RELATES TO FISCAL
DEFICIT?
The public debt is defined as
how much a country owes to
lenders outside. These will
include individuals,
businesses, and foreign
governments
Bad Debt
decisions
Safe way for foreigners to
invest in a country by buying
bonds Higher debt leads to
higher return rates for
investors
Much more attractive than
investing in the stock market
Effects foreign
investment in the long
Used judiciously, public debt run
improves the standard of
living in a country
Economy worsened
Growing inflation,
unemployment and
Early 1990s poverty
Gulf war affected Indias
foreign reserve
Fell to $240mn
1991 reformed
Relaxation in FDI
Highly talented
technical work-
IT Boom post force
1991 R&D centers shifted
to India
Driving Forces behind Economic Growth
1. Increased Foreign Direct Investment
2. Expertise in Information Technology
3. Increased domestic consumption because of growing middle class population
Increased
FDI India became $1.823tn economy in 2011
because of liberalization and privatisation
Expertise in IT
Increased
consumption
Increased
consumption
Increased
Steps need to be taken for rural upliftment
FDI
and promote manufacturing sector
CURRENT SCENARIO- Fiscal Deficit
The personal income tax could raise more revenue and better contribute to
vertical and horizontal equity
GST
1. Will take some time to be fully implemented
2. Lack of clarity on rules and regulations
3. Increased compliance and shortage of skilled labour
4. IT systems need to be abreast with the change
Gold
1. Educating the population for investments other than gold
2. Encourage Gold ETF
3. Impose quantitative restriction on gold imports
Improve PSU
1. Problems of low capacity utilization
2. Better Management
3. Foreign investments
4. Disinvest ?