MONETRY AND FISCAL POLICY, UNION BUDGET, STATE BUDGET AND FINANCE COMMISION. CONTENT. MONETRY POLICY.
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- Affect total quantity of credit and affect economy generally
- Affect certain select sectors
"Fiscal policy is the part of the government policy which is concerned with the raising revenue through taxation and other means to decide on the level and pattern of expenditure“
It operates through budget – which is estimate of government revenue and expenditure for financial year.
Fiscal Policy is the main part of Economic Policy and Fiscal Policy's first word Fiscal is taken from French word Fisc it means treasure of Govt. So we can define fiscal policy as the revenue and expenditure policy of Govt. of India .It is prime duty of Government to make fiscal policy . By making this policy , Govt. collects money from his different resources and utilize it in different expenditure . Thus fiscal policy is related to development policy . All welfare projects are completed under this policy
→ If Govt. will increase taxes , more burden will be on the public and it will reduce production and purchasing power of public .→ If Govt. will decrease taxes , then public's purchasing power will increase and it will increase the inflation.
So , govt. expenditure is technique of fiscal policy by using this , govt. use his fund first on very necessary sector and other will be done after this .
The three possible stances of fiscal policy are neutral, expansionary and contractionary. The simplest definitions of these stances are as follows:
THUS A BUDGET HAS TWO MAIN COMPONENTS :[A] RECEIPTS ,[B] EXPENDITURE.
A. REVENUE RECEIPTS [1+2 ]
B. CAPITAL RECEIPTS [3+5]
1. Direct taxes- Corporate tax, Div. Distribution Tax, Personal Income Tax, Fringe Benefit taxes, Banking Cash Transaction Tax
2. Indirect taxes- Central Sales Tax, Customs, Service Tax, excise duty.