FISCAL POLICY IN INDIAN ECONOMY
An analysis of different instruments of fiscal policy for 2010 -11 in Indian Economy
Submitted By: Pranav Grover (138), Rajesh Kumar Gond (165), Rajesh Ranjan (166), Raju Mahato (167), Ranjana Rashmi Roy (168), Rashmi Yadav (169) PGDM, Section-D Batch of: 2011-2013
Under Guidance of Faculty Instructor: Dr. Tapan Kumar Nayak Faculty PGDM IMS, Ghaziabad.
(BUSINESS ENVIRONMENT AND POLICIES -1 REPORT IN PARTIAL FULFILLMENT OF THE AWARD OF POST GRADUATE DIPLOMA IN MANAGEMENT (2011-13))
Institute of Management Studies Lal Quan, Ghaziabad, Uttar Pradesh -201009
DECLARATION
We, Raju Mahato, Pranav Grover, Rajesh Ranjan, Rajesh Kumar Gond, Rashmi Yadav, Ranjana Rashmi Roy, students of PostGraduate Diploma in Management at Institute of Management Studies (2011 13) batch, Ghaziabad, hereby declare that this submission is our own work & to the best of our knowledge & belief, it neither contains the material previously published nor the material which to a substantial extent has been accepted for the award of any other degree or diploma of the university or other institute of higher learning except where due acknowledge has been made in the text.
Name
Raju Mahato ( BM-00167) Pranav Grover (BM-00138) Rajesh Ranjan (BM-00166) Rajesh Kumar Gond (BM-00165) Rashmi Yadav (BM-00169) Ranjana Rashmi Roy (BM-00168) Date:
Signature
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CERTIFICATE
This is to certify that Raju Mahato, Pranav Grover, Rajesh Ranjan, Rajesh Kumar Gond, Rashmi Yadav, Ranjana Rashmi Roy, students of PGDM (Full Time) 2011- 2013 batch, I.M.S. Ghaziabad, have done this Project under my supervision and guidance. During this project they were found to be very sincere and attentive to small details whatsoever were told to them. I wish them good luck and success for their future.
Date:
Dr. Tapan Kumar Nayak (Chairperson PGP -cell)
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ACKNOWLEDGMENT
The ideal way to commence documenting this project would be to extend our profound gratitude to everyone who encouraged us and guided throughout this project. Words have never seemed as inadequate as now, when we are endeavoring to express our heart full gratitude at the culmination of the project, to all those made it possible. The contributing factors for the completion of any project are cooperation, co-ordination and combined efforts of knowledge, inspiration and energy. At the onset we would like to extend our sincere gratitude to Dr. Tapan Kumar Nayak faculty of Institute of Management Studies, Ghaziabad for launching us in this foray.
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ABSTRACT
The present study broadly attempts to analyze the role of Fiscal Responsibility and Budget Management Act in restoring fiscal balance in India. It analyses the need for fiscal rules and constraints in India. The study aims at finding out the major factor behind rising fiscal imbalance in India and to examine whether there is an electoral motive towards high fiscal deficit to GDP ratio or not. It also analyzes the effectiveness of various measures undertaken at the central and state level to inculcate fiscal discipline in the fiscal management. The study also makes an attempt to do a critical in depth reviews of the Fiscal Responsibility and Budget Management Act and make an attempt at examining effectiveness and suitability of FRBM Act through a quantitative analysis. It also makes an attempt to suggest improvements in the fiscal monitoring mechanism in India. We employ Ordinary Least Square (OLS) method to examine the impact of Fiscal Responsibility and Budget Management Act on fiscal deficit in India using the data for the period 1980-81 to 2008-09. The regression results indicates that FRBM Act does not have a significant effect on the Gross Fiscal Deficit (GFD) to GDP ratio where as GDP (at factor cost) growth rate has a significant negative effect on the GFD to GDP ratio.
TABLE OF CONTENTS
Sr. No.
1 .
Contents
Introduction
a. b. c. d. e. f. Meaning of fiscal policy Objectives Stances of fiscal policy Role of fiscal policy Drawbacks of fiscal policy Reforms of fiscal policy
Page No.
1-8
2.
Instruments of fiscal policy
Budget Tax Policy Government Borrowings, Lending and Investment Initiative in Public Expenditure Management Deficit Financing
9 - 23
3.
Policy Evaluation Discretionary fiscal policy
a. Fiscal Policy to Cure Recession b. Fiscal Policy to Control Inflation
27 30
4. 5. 6. 7. 8. 9.
Non - Discretionary fiscal policy Effectiveness of Fiscal Policy Limitation Conclusion Reference Bibliography
30 35 36 37 38 39 40
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