Components of Fiscal Policy
The components of the policy are categorized as.
- Government receipts
- Government expenditures
- Public account of India
Government Receipts
Government receipts are any funds received by the government in the form of interest, taxes, investment gains, and other payments for rendered services. It is the overall sum of money that the various sources of government send forth. However, their income enables them to invest in other industries. Capital receipts and Revenue receipts are the two categories into which the government’s receipts are divided. Capital receipts are government payments that increase liabilities or decrease assets. Revenue receipts are sums received by the government that neither decrease assets nor increase liabilities.
1. Capital receipts: A government receives money for operating expenses in a variety of ways, which are referred to as capital receipts. The ways might be forced to liquidate its assets or take on debt to the government. However, capital inflows are also referred to as incoming cash flows.
As the governing bodies pay back the money and interest, all loans and borrowings are regarded as debt receipts.
2. Revenue receipts: Revenue receipts are those that neither increase assets nor decrease obligations. It is separated into tax and non-tax forms, respectively. Direct and indirect taxes make up the two different categories of tax revenue. Cess, interest, dividends on government investments, and other receipts are included in the non-tax revenues.
Government Expenditures
Revenue expenditure and capital expenditure are the two divisions of government spending.
1. Revenue expenditures: Revenue expenditures are one-year, short-term spending. It includes the costs necessary to cover the government’s operating expenses. It also covers routine maintenance and repairs, which are necessary to keep assets functional without extending their useful lives.
2. Capital expenditures: Investments made by governing bodies to grow their operations and bring in more money are referred to as capital expenditures. These include investing in long-term assets with a shelf life of at least a year.
Frequently, such costs can be covered by purchasing fixed assets like machinery. Examples include company acquisitions, manufacturing equipment, furniture, etc.
India’s open account
In the Public Account of India, flows for transactions in which the government acts as a banker are included. According to Article 266 of the Indian Constitution, it was established. Small savings, provident funds, and other examples of public accounts are available in India. The government requests a return of this money to their owners on a periodic basis; they are not its property. Therefore, the Parliament is not required to approve any expenditures made from the public account.
What is Fiscal Policy?
Learn about Fiscal Policy, including its Meaning of Fiscal Policy, Instruments of Fiscal Policy, Tools of Fiscal Policy, and real-world Examples of Fiscal Policy, to understand its role in economic management.
Fiscal policy, which refers to the use of government spending and taxation to impact the economy, is an important component of economic management. Governments need it to handle economic issues and accomplish macroeconomic goals including lowering unemployment, fostering growth, and containing inflation. In this article, we’ll explore what fiscal policy is, why it’s important, and give instances of when it’s been utilised well. This article will provide you with a thorough introduction to fiscal policy, whether you’re an economist, a policymaker, or just curious about how the economy functions.
Table of Content
- What is a Fiscal Policy?
- Tools of Fiscal Policy
- Examples of Fiscal Policy
- Changing Tax Rates
- How does Fiscal Policy Work?
- Instruments of Fiscal Policy
- Objectives of Fiscal Policy
- Taxation in Fiscal Policy
- Why is Fiscal Policy Necessary?
- Types of Fiscal Policy
- Economic Influence of Fiscal Policy
- Components of Fiscal Policy
- Altering Government Spending
- Fiscal Policy and Business Effects
- How Does Fiscal Policy Affect People?
- Government Spending and Fiscal Policy
- Government Transfers
- Who Handles Fiscal Policy?
- Fiscal Policy for Strong Economy
- Act on Financial Responsibility and Budget Management (FRBM)
- Sustainable Economic Growth through Fiscal Policy