FISCAL POLICY,Objectives of Fiscal Policy,Components of Fiscal Policy,Understanding Budget Process,Budget Estimate,Revised Estimate,Actual Expenditure,Financial Year vs Assessment Year

FISCAL POLICY:

Fiscal is derived from the Latin noun fiscus, meaning "basket" or "treasury." In historical Rome, term fiscus was used for the treasury managed through the emperor, wherein the revenues collected from the provinces were stored in baskets ie fiscus.

Fiscal Policy deals with the revenue and expenditure policy of the Govt. 

Objectives of Fiscal Policy:

• The overall objective of Fiscal policy is to increase the capital formation and thereafter economic growth along-with maintaining price stability.
• The government mobilizes resources for public expenditure and development through Fiscal policy. 
• Government also generates employment by speeding infrastructure development.
• The mobilized funds are allocated for development of social and physical infrastructure in the country. 
• The taxes collected from rich people are spent for the welfare  of the poor in an order  to reduce inequalities of income using resource allocation.
• Government uses fiscal measures such as taxation and public expenditure to stabilize the prices and control inflation.
• Government through various policy announcements tries to promote exports to earn foreign exchange. This helps in maintaining favourable balance of trade and balance of payments.

Components of Fiscal Policy:

The key components of Fiscal Policy are as follows:

●       Taxation Policy

●       Expenditure Policy

●       Investment & Disinvestment policy

●       Debt / surplus management.

UNDERSTANDING BUDGET PROCESS:

According to Article 112 of the Indian Constitution, the Union Budget of a year is referred to as the Annual Financial Statement (AFS). It is to be noted that there is no such word "budget " mentioned in the Indian Constitution.

Deciphering the Budget 2024 presented on Feb 2024:

Budget Estimate (BE) 2024-25:

The presented budget has estimates for the next fiscal year, that is, 2024-25 and this estimate is referred to as Budget estimate (BE).BE represents the "intention to spend" of the government and are not legally binding on the government.

Revised Estimate (RE) 2023-24: 

The BE can be changed if the funds are insufficient or exceed the needs of the ministry or scheme. The changed amount of the budget is called the Revised Estimate (RE). The RE numbers presented are for the current year. Therefore, this budget will have the RE of 2023-24.

Actual Expenditure (AE) 2022-23:

As the name suggests, it is the final amount actually spent by the ministry/department/scheme and it is derived after auditing is done. In the given case ,the actual expenditures in the budget documents will be from 2022-23. 

Financial Year vs Assessment Year :

For income tax purposes, the financial year (FY) is the year in which you earn income. The assessment year (AY) is the year following the financial year in which you must evaluate the previous year’s income and pay taxes on it. So, for financial year FY  2024-25, AY will be 2025-26.