Chapter 8 PUBLIC FINANCE IN INDIA
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Public finance in India refers to the management of government revenue, expenditure, and debt to achieve various economic and social objectives. It plays a crucial role in shaping the country's economic development and ensuring equitable distribution of resources. Here's an overview:
Revenue Sources: The Indian government generates revenue from various sources, including:
- Tax Revenue: This includes direct taxes (income tax, corporate tax) and indirect taxes (GST, customs duty, excise duty).
- Non-Tax Revenue: This comprises revenue from sources other than taxes, such as dividends from public sector enterprises, interest receipts, fees, and fines.
Expenditure Allocation: Government expenditure in India is categorized into:
- Revenue Expenditure: This includes day-to-day expenses on salaries, subsidies, interest payments, pensions, etc.
- Capital Expenditure: This is for long-term investments in infrastructure, education, healthcare, and other development projects.
Budgetary Process: The Indian government presents an annual budget, which outlines its revenue and expenditure plans for the fiscal year. The budget is presented in Parliament and consists of:
- Revenue Budget: Estimates revenue receipts and expenditure for the year.
- Capital Budget: Outlines the government's capital receipts and capital expenditure.
Fiscal Policy: The government uses fiscal policy to influence the economy by adjusting tax rates, government spending, and borrowing. It aims to achieve macroeconomic objectives like economic growth, price stability, and employment generation.
Subsidy Policy: India provides subsidies to various sectors such as agriculture, food, fuel, and fertilizer to support vulnerable sections of society and promote economic activities. However, there have been discussions on rationalizing subsidies to improve fiscal health and target them more effectively.
Debt Management: The Indian government borrows from domestic and external sources to finance its budget deficits. Effective debt management is crucial to ensure sustainability and avoid excessive debt burden.
Public Sector Enterprises (PSEs): India has a significant presence of PSEs in various sectors like banking, energy, telecommunications, and transportation. Public finance also involves managing these enterprises, including their investments, performance, and subsidies.
Financial Inclusion: Public finance initiatives in India also focus on promoting financial inclusion, ensuring access to banking and financial services for all sections of society, particularly in rural and underserved areas.
State Finances: Besides the central government, state governments in India also manage their public finances. Each state presents its budget annually, outlining revenue and expenditure plans for various sectors and development projects.
Overall, public finance in India is crucial for promoting economic growth, reducing inequalities, and ensuring the efficient allocation of resources to meet the diverse needs of its population. It involves a complex interplay of fiscal policies, budgetary decisions, and management of public resources at both the central and state levels.