Fiscal Policy Is Relevant In India

National Economic Planning Fiscal Policies are Relevant in India

Presented By: Ankit Abda Giriraj Sagar Mahesh Nakhwani Sagar Modak Sarita Nahata

Agenda • Introduction • Structure • Strategies • Statistical Data • Recommendations

Indian Institute of Planning and Management, Ahmedabad.

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Origin

Indian Institute of Planning and Management, Ahmedabad.

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History

Indian Institute of Planning and Management, Ahmedabad.

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LPG Model • Liberalization • Privatization • Globalization

Indian Institute of Planning and Management, Ahmedabad.

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Objectives • • • • • •

Achieve Desirable Price Levels Achieve Desirable Consumption Level Achieve Desirable Employment Level Achieve Desirable Income Distribution Increase in Capital Formation Degree of Inflation

Indian Institute of Planning and Management, Ahmedabad.

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REVENUE

DEFICIT

FISCAL FACTORS

EXPENDITURE

OUTPUT AND EMPLOYMENT

Indian Institute of Planning and Management, Ahmedabad.

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Statistical Data

Indian Institute of Planning and Management, Ahmedabad.

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Indian Institute of Planning and Management, Ahmedabad.

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Indian Institute of Planning and Management, Ahmedabad.

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Major Achievements • 12th Largest Economy in the World as per GDP in US Dollars • 3rd Largest Economy in the World as per GDP in US Dollars (Purchasing Power Parity) • 2nd Fast Growing Major Economy @ 9.2 % • Trillion Dollar Economy

Indian Institute of Planning and Management, Ahmedabad.

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Pros & 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 sector For the Social Welfare

• Cons: – Subject to Time Lags – Corruption

Indian Institute of Planning and Management, Ahmedabad.

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Pros & Cons of Monetary Policy • Pros: – Regulates Money Supply – Controls Interest Rate

• Cons: – – – – –

Basically meant for Capitalistic or Developed Country Banking Infrastructure is Pathetic Restricted to Money Matters Takes care of only monetary measures Uncertainties is very High

Indian Institute of Planning and Management, Ahmedabad.

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Challenges • Systemic

Reform is Complex and Difficult, even when

done Piecemeal.

• Diversity and Regional Inequality create Political Hurdles and Exacerbate Internal Political Tensions

• Need to Build New Political Coalitions for Governmental Reforms.

Indian Institute of Planning and Management, Ahmedabad.

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Challenges • Several other Simultaneous Developments Heighten the Challenges:

• Major Local Government Reform. • Liberalization and move away Intervention,

including

from

Re-evaluation

of

Govt. Govt.

Economic Planning.

• Red Tape

& Corruption.

Indian Institute of Planning and Management, Ahmedabad.

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Recommendations TAX REFORMS • Coordinated Tax Reform Required: • Jurisdictions: States and Center have to work together • Taxes: Could have Piggy Backing of States on Income Tax, with Distinction between Agricultural and Non-Agricultural income removed

• New Measures on Services Tax are Retrograde: • Shift Tax Power to Center.

Indian Institute of Planning and Management, Ahmedabad.

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Recommendations • • • • • • • • • •

Reduce the corruption Level Reducing the Past Borrowings Mitigate the Interest payment on Debt. Keeping regular check on Policy Implementation Balancing the Current A/c & Capital A/c Deficit. Generating the Foreign Exchange Reserve. Improvement in Infrastructure Disinvestment in PSUs Investment in Priority Sectors first. Reducing the red tapism from Government Sectors

Indian Institute of Planning and Management, Ahmedabad.

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THANK YOU Indian Institute of Planning and Management, Ahmedabad.

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