Haryana PUBLIC FINANCE and Fiscal Policy
FISCAL POLICY
Fiscal Policy is prepared by Government and consists of various expenditures and revenues. Fiscal policy deals with the revenue and expenditure decisions of the government.
The government fiscal policy is used to stabilize the level of output and EMPLOYMENT through changes in its expenditure and taxes. The government attempts to increase output and income and seeks to stabilize the ups and downs in the economy.
In the process, fiscal policy creates a surplus (when total receipts exceed expenditure) or a deficit budget (when total expenditure exceeds receipts) rather than a balanced budget (when expenditure equals receipts).
Fiscal policy can achieve important public policy goals like Growth
- Equity
- Promotion of small scale industries
- Encouragement to agriculture
- Location of industries in rural areas
- Labour-intensive growth
- Export Promotion
- development of Sound social and physical Infrastructure-2/”>INFRASTRUCTURE
The two main instruments of fiscal policy are:
(a) Government Expenditure
(b) Government Receipts
Expenditure :- It s divided into :-
Receipts :-They are divided into
Capital receipts
TAX REVENUES
India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies.
Non Tax Revenues
Public Finance in Haryana
Revenue receipts and Revenue Expenditure
The revenue receipts are collected through State’s own tax and non-tax revenue, share in Central taxes and grant-in-aid from Centre. During 2016-17, the revenue receipts of the Govt. of Haryana is expected to be 62,955.53 crore against the estimated revenue expenditure of 75,235.88 crore, thereby showing a deficit amounting to 12,280.35 crore (BE). The revenue receipts of the State Government was 38,012.08 crore against the revenue expenditure of 41,887.10 crore with a deficit amounting to 3,875.02 crore in 2013-14. It was 40,798.66 crore against the revenue expenditure of 49,117.87 crore depicting a deficit amounting to 8,319.21 crore in 2014-15.
State’s Own Sources
There are two major components of State’s own sources i.e.
State’s own tax revenue and
State’s own non-tax revenue.
The State’s own sources are expected to rise from 30,541.66 crore in 2013-14 to 48,507.96 crore in 2016-17 (BE). The State’s own tax revenue expected to increase from 25,566.60 crore in 2013-14 to 40,199.51 crore in 2016-17 (BE) whereas the State’s own non-tax revenue are expected to increase from 4,975.06 crore to 8,308.45 crore during this period.
Taxes
Total tax comprises of
- i) State’s own tax revenue (OTR) and
- ii) State’s share in Central taxes
(SCT). State total tax is expected to increase from 28,909.84 crore (25,566.60 crore OTR + 3,343.24 crore SCT) in 2013-14 to 46,388.31 crore (40,199.51 crore OTR + 6,188.80 crore SCT) in 2016-17 (BE).
Tax Revenue
Tax revenue reveals that sales tax is the major source of tax revenue and it is estimated at 28,750 crore in 2016-17 (BE) as compared to 25,000 crore in 2015-16 (RE). Sales tax is estimated to increase by 15 percent in 2016-17 (BE) over 2015-16 (RE). The contribution in tax revenue from State excise is estimated at 5,251.58 crore in 2016-17 (BE) as compared to 4,567.59 crore in 2015-16 (RE) showing an increase of 14.97 percent in 2016-17 (BE) over 2015-16 (RE). The contribution in tax revenue from stamps and registration is estimated at 3,700 crore in 2016-17 (BE) as compared to 3,096.90 crore in 2015-16 (RE).
State’s Share in Central Taxes
State’s share in Central taxes consists of, grant for Plan schemes, grant under the award of Central Finance Commission and other non-plan grants. The share in Central taxes is estimated at 6,188.80 crore in 2016-17 (BE) against 5,496.22 crore in 2015-16 (RE). It shows that share in Central taxes is likely to increase by 12.60 percent in 2016-17 (BE) over 2015-16 (RE).
Grant-in-Aid
Apart from the valuable amount from Central taxes, Finance Commission has made recommendations regarding grant-in-aid to the States for some specific purpose. The State is expected to receive about 8,258.77 crore as grant-in-aid in 2016-17 (BE) against 8,386.71 crore in 2015-16 (RE). It indicates that grant-in-aid is likely to decrease by 1.53 percent in 2016-17 (BE) over 2015-16 (RE).
CAPITAL RECEIPTS AND CAPITAL EXPENDITURE
Capital Receipts
The capital receipts consist of three parts namely; (i) recovery of loans (ii) miscellaneous capital receipts and (iii) Public Debt (Net). The public debt has a major contribution in the capital receipts. Capital receipts has increased from 9,907.43 crore in 2013-14 to 10,922.90 crore in 2014-15 and it is expected to be 25759.01 crore in 2016-17(BE).
Capital Expenditure
Capital expenditure consists of capital outlay and lending (disbursement of loans and advances) and it relates to the creation of assets. The capital expenditure of the State has increased from 4,710.21 crore in 2013-14 to 13,546.08 crore in 2016-17 (BE) .
The total developmental expenditure comprising of social Services like Education, medical and public Health, Water supply and sanitation, social security and welfare, labour and employment, etc and economic services like agriculture & allied activities, Irrigation & flood control, power, industries, transport, rural development, etc. The developmental expenditure is estimated at 65,841.76 crore in 2016-17(BE) as against 65,345.31 crore in 2015-16, showing an increase of 0.76 percent in 2016-17 (BE) over 2015-16 (RE).
The total non-developmental expenditure comprising of administrative services, organs of State, fiscal services, interest payments, pensions and miscellaneous general services etc. is estimated at 22,692.65 crore in 2016-17 (BE) as compared to 19,384.23 crore in 2015-16 (RE). The total non-developmental expenditure is estimated to increase by 17.07 percent in 2016-17 (BE) over 2015-16 (RE).
Financial Position
The net transactions on year’s account is estimated to show a deficit of 43.46 crore in 2016-17 (BE) as against the deficit of 61.09 crore in 2015-16 (RE). The revenue account is estimated to show a deficit of 12,280.35 crore in 2016-17 (BE). The net deposits of small Savings, provident fund etc. are estimated to show a surplus of 1,572 crore in 2016-17 (BE) as compared to 1,345 crore in 2015-16 (RE).
Goods and Service Tax (GST)
GST is one Indirect Tax for the whole nation, which will make India one unified Common Market. The GST intends to subsume most indirect taxes under a single Taxation regime.
GST, will replace multiple state and central taxes to create one national market and single tax in the country. This bill seeks to subsume all central indirect levies like excise duty, countervailing duty and service tax and also state taxes such as value added tax, entry tax and luxury tax, to create a single, pan-India market.
GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. This is expected to help broaden the tax base, increase tax compliance, and reduce economic distortions caused by inter-state variations in taxes.
Our Constitution empowers the Central Government to levy excise duty on manufacturing and service tax on the supply of services. Further, it empowers the State Governments to levy sales tax or value added tax (VAT) on the sale of goods. This exclusive division of fiscal powers has led to a multiplicity of indirect taxes in the country. In addition, central sales tax (CST) is levied on inter-State sale of goods by the Central Government, but collected and retained by the exporting States. Further, many States levy an entry tax on the entry of goods in local areas.
This multiplicity of taxes at the State and Central levels has resulted in a complex indirect tax structure in the country that is ridden with hidden costs for the trade and Industry.
In order to simplify and rationalize indirect tax structures, Government of India attempted various tax policy reforms at different points of time. A system of VAT on services at the central government level was introduced in 2002. The states collect taxes through state sales tax VAT, introduced in 2005, levied on intrastate trade and the CST on interstate trade. Despite all the various changes the overall taxation system continues to be complex and has various exemptions.
This led to the idea of One nation One Tax and introduction of GST in Indian financial system. This is simply very similar to VAT which is at present applicable in most of the states and can be termed as National level VAT on Goods and Services with only one difference that in this system not only goods but also services are involved and the rate of tax on goods and services are generally the same.,
Public Finance
Public finance is the study of the government’s revenue and expenditure. It is concerned with how the government raises Money and how it spends it. Public finance is a branch of economics that deals with the financial activities of the government.
Public revenue is the money that the government receives from taxes, fees, and other sources. Tax revenue is the most important source of public revenue. It is collected from individuals and businesses. Non-tax revenue includes fees, fines, and profits from government enterprises.
Public expenditure is the money that the government spends on goods and services. It includes spending on education, health, defense, and infrastructure. Public expenditure is also used to transfer income to the poor and to provide subsidies to businesses.
Fiscal Policy
Fiscal policy is the use of government spending and taxation to influence the economy. It is one of the two main tools of macroeconomic policy, along with Monetary Policy. Fiscal policy is used to achieve a variety of objectives, such as economic growth, full employment, and price stability.
The government can use fiscal policy to stimulate the economy by increasing spending or cutting taxes. This will increase Aggregate Demand and lead to economic growth. The government can also use fiscal policy to restrain the economy by decreasing spending or raising taxes. This will decrease aggregate demand and lead to economic growth.
A fiscal deficit is the difference between the government’s revenue and expenditure. If the government’s expenditure is greater than its revenue, then the government has a fiscal deficit. The fiscal deficit is a measure of the government’s borrowing.
The fiscal deficit can be financed by borrowing from the public, from the central bank, or from foreign governments. Borrowing from the public increases the government’s debt. Borrowing from the central bank increases the Money Supply. Borrowing from foreign governments can lead to a Balance of Payments deficit.
The primary deficit is the fiscal deficit excluding interest payments. The primary deficit is a measure of the government’s borrowing needs that are not due to interest payments.
The primary deficit is important because it indicates the government’s ability to finance its spending without increasing its debt. If the primary deficit is too high, then the government will need to increase its debt to finance its spending. This can lead to a debt crisis.
Debt-GDP Ratio
The debt-GDP ratio is the ratio of the government’s debt to the country’s gross domestic product (GDP). The debt-GDP ratio is a measure of the government’s financial health.
A high debt-GDP ratio can be a problem because it means that the government is borrowing a lot of money. This can lead to a debt crisis. A high debt-GDP ratio can also make it difficult for the government to borrow money in the future.
Fiscal Responsibility and Budget Management Act
The Fiscal Responsibility and Budget Management Act (FRBM Act) is a law that was passed by the Indian Parliament in 2003. The FRBM Act aims to improve the fiscal management of the Indian government.
The FRBM Act sets targets for the fiscal deficit and the debt-GDP ratio. The FRBM Act also requires the government to publish a medium-term fiscal policy statement.
Fiscal consolidation is the process of reducing the government’s fiscal deficit. Fiscal consolidation can be achieved by increasing taxes, decreasing spending, or both.
Fiscal consolidation is often necessary to reduce the government’s debt. A high debt-GDP ratio can be a problem because it means that the government is borrowing a lot of money. This can lead to a debt crisis. A high debt-GDP ratio can also make it difficult for the government to borrow money in the future.
Fiscal consolidation can be a difficult process. It can lead to higher taxes and lower spending, which can be unpopular with voters. However, fiscal consolidation is often necessary to ensure the long-term health of the economy.
What is public finance?
Public finance is the study of how governments raise and spend money. It includes the study of government budgets, taxes, and debt.
What is fiscal policy?
Fiscal policy is the use of government spending and taxation to influence the economy. It is one of the two main tools of macroeconomic policy, along with monetary policy.
What are the goals of public finance?
The goals of public finance are to provide public goods and services, to redistribute income, and to stabilize the economy.
What are the sources of government revenue?
The main sources of government revenue are taxes, fees, and fines.
What are the Types of Taxes?
There are many different types of taxes, but the most common are income taxes, sales taxes, and property taxes.
What are the benefits of public finance?
Public finance provides many benefits, including:
- Public goods and services, such as roads, schools, and hospitals
- Redistribution of income, which helps to reduce POVERTY and inequality
- Economic stability, which helps to create jobs and grow the economy
What are the costs of public finance?
The main costs of public finance are taxes, which can be a burden on businesses and individuals.
What are the challenges of public finance?
The main challenges of public finance are:
- Balancing the budget, which can be difficult to do during times of economic Recession
- Providing adequate funding for public goods and services
- Redistributing income in a fair and equitable way
- Stabilizing the economy
What is the future of public finance?
The future of public finance is uncertain. The aging Population and the increasing cost of healthcare are putting a strain on government budgets. In addition, the rise of Artificial Intelligence and other new technologies is likely to change the way that government services are delivered.
What are some common misconceptions about public finance?
Some common misconceptions about public finance include:
- The belief that government spending is always wasteful
- The belief that taxes are always bad
- The belief that the government should not provide any public goods or services
What are some Resources for Learning more about public finance?
There are many resources available for learning more about public finance, including:
- Textbooks on public finance
- Online courses on public finance
- Government websites on public finance
- Journals and magazines on public finance
The main source of revenue for the Haryana government is:
(A) Income tax
(B) Sales tax
(C) Excise duty
(D) Corporate taxThe main expenditure of the Haryana government is on:
(A) Education
(B) Health
(C) Infrastructure
(D) Social securityThe fiscal deficit of Haryana is:
(A) The difference between the revenue and expenditure of the government
(B) The amount of money that the government borrows
(C) The amount of money that the government spends on interest payments
(D) The amount of money that the government spends on subsidiesThe public debt of Haryana is:
(A) The total amount of money that the government owes
(B) The amount of money that the government borrows from domestic sources
(C) The amount of money that the government borrows from foreign sources
(D) The amount of money that the government spends on interest paymentsThe fiscal policy of Haryana is:
(A) The government’s plan for raising and spending money
(B) The government’s plan for managing the public debt
(C) The government’s plan for managing the economy
(D) The government’s plan for managing the budgetThe Haryana government has a Revenue Deficit of â¹10,000 crore. This means that:
(A) The government has collected â¹10,000 crore in revenue but spent â¹20,000 crore
(B) The government has collected â¹10,000 crore in revenue but spent â¹15,000 crore
(C) The government has collected â¹10,000 crore in revenue but spent â¹12,000 crore
(D) The government has collected â¹10,000 crore in revenue but spent â¹10,000 croreThe Haryana government has an expenditure deficit of â¹10,000 crore. This means that:
(A) The government has collected â¹10,000 crore in revenue but spent â¹20,000 crore
(B) The government has collected â¹10,000 crore in revenue but spent â¹15,000 crore
(C) The government has collected â¹10,000 crore in revenue but spent â¹12,000 crore
(D) The government has collected â¹10,000 crore in revenue but spent â¹10,000 croreThe Haryana government has a fiscal deficit of â¹10,000 crore. This means that:
(A) The government has collected â¹10,000 crore in revenue but spent â¹20,000 crore
(B) The government has collected â¹10,000 crore in revenue but spent â¹15,000 crore
(C) The government has collected â¹10,000 crore in revenue but spent â¹12,000 crore
(D) The government has borrowed â¹10,000 croreThe Haryana government has a public debt of â¹100,000 crore. This means that:
(A) The government owes â¹100,000 crore to domestic sources
(B) The government owes â¹100,000 crore to foreign sources
(C) The government has borrowed â¹100,000 crore
(D) The government has spent â¹100,000 crore on interest paymentsThe Haryana government’s fiscal policy is expansionary. This means that:
(A) The government is trying to stimulate the economy by increasing spending and borrowing
(B) The government is trying to reduce the deficit by cutting spending and raising taxes
(C) The government is trying to maintain a balanced budget
(D) The government is trying to reduce the public debt