The Fiscal Budget

A fiscal budget is a monetary budget that the government uses to exercise its control on the expenditure and tax rates within the economy. This is a tool used to influence the economy and monetary policies. Fiscal Budgets help in correcting situations with excess or diminished demand.

History

Before the Great Depression, all the governments used to follow the system of

“Laissez-faire”. It is where the market runs independently without any interference from the government. But as the Great Depression took place, the market crashed with low demand and high unemployment. This caused the government to find major solutions.

In 1936, British Economist John Keynes published a theory which called for an increase in government spending such that it will help in the economic rise of demand for commodities. This theory was proved to be right during the Second World War. Nations across the world started to spend heavily on their armed forces and the public. The Second World War got European countries out of the Great Depression.

Pros of Fiscal Budget

There are various advantages of this system across nations. Some of them are:-

• It keeps the business drifting even when individual household spending on consumer goods reduces.

• Spending on military projects and infrastructure for its improvement besides economic growth.

• It has helped in reducing unemployment and poverty in the country.

Cons of Fiscal Budget

Every system with pros has some cons accompanying it. This is also applicable to the Fiscal budget. Some of the cons are:-

• The policies take a long time to get implemented and influence the public.

• If government continuously keeps stimulating the economy then it can lead to negative effects like humongous debts which may lead to more investments in the private sector by the public.

Fiscal Budget of India- Analysis

The estimate of the government spending in the year 2022-23 was Rs 39,44,909 crore which is a 4.6% increase then the revised budget for 2021-22. Out of this total, the revenue expenditure is Rs 31,94,663 crore (0.9% increase) and capital expenditure is Rs 7,50,246 crore (24.5% increase). The increase in capital expenditure is due to loans and advances to the state government which has summed up to Rs 1,40,057 crore, a 157% increase since last year.

The Government receipts are estimated to be Rs 22,83,713 crore, an increase of 4.8% over the revised estimates. The central government has transferred up to Rs 16,11,781 crore to states and union territories for the financial year of 2022-23, which is an increase of 0.5% over the previous estimates. This transfer comprises of 1. Rs 8,16,649 crore out of the pool of central taxes and 2. Rs 7,95,132 crore in the form of grants and loans.

In 2022-23, the targeted revenue deficit is at 3.8% of GDP and the fiscal deficit is at 6.4% of GDP. So overall, the nominal GDP is estimated to grow at the rate of 11.1% in the year 2022-23. Receipts from the government have increased by 4.8% of revised estimates from 2021-22. For the ministry-wise allocations, the government has provided the 13 highest allocations in the ministries which account for 53%, especially towards the Ministry of Defence. While the expenditure towards the subsidies has extremely reduced by 27.1%, On the other hand, the government schemes like MGNREGS, and the PM-KISAN scheme, have been allocated a slightly higher expenditure since the last revised budget. Hence we can see that the fiscal deficit for 2022-23 is 6.4% of the country’s GDP.

So according to my personal opinion, I believe that it is good that the government has invested more in Capital Expenditure, because it is going to help in building better infrastructure, provided a better implementation of schemes and grow a much better economy. This will help in high investments by the private sector as well, So in short for every rupee that we spend we get rupees 2.5 in return.

But for every step ahead we are falling two steps back because, in a huge country like India, we have 2% of the population paying tax (but in countries like the USA there is 80% and in China, there are 15% paying tax) while 140.76 crores to feed. Hence we have to raise loans which increases are revenue expenditure and limits us to rapidly progressing our economy.

Conclusion

The fiscal policy of India aims to raise the quality of money to fund various government programmes and aims to eliminate inequality in wealth distribution by giving incentives to the private sector.