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Critical Evaluation of Fiscal Policy of India

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Critical Evaluation of Fiscal Policy of India
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Critical Evaluation of the Fiscal Policy of India

Subitted by:
Tanvir Singh
MBA 2nd Semester - B

Subitted by:
Tanvir Singh
MBA 2nd Semester - B

Subitted to:
Dr. Manoj Kumar Sharma
UBS, PU

Subitted to:
Dr. Manoj Kumar Sharma
UBS, PU

ACKNOWLEDGEMENT

I have put in my best efforts in the completion of this report. However, it would not have been possible without the kind support and help of many informative sources and individuals. I would like to extend my sincere thanks to all of them.

First of all, I am highly indebted to Dr. Manoj Kumar Sharma for his constant guidance and supervision as well as for providing necessary information regarding the project and also giving us the opportunity to increase our technical and managerial skills through this exhaustive and meaningful assignment.

I would also like to express our gratitude towards the individuals who helped navigate through the process of completing this project including the staff of our University Library.

14th April 2012 Tanvir Singh
Chandigarh. MBA 2nd Semester

Abstract

This report examines the trajectory of India’s fiscal policy with a focus on historical trends, fiscal discipline frameworks, fiscal responses to the global financial crisis and subsequent return to a fiscal consolidation path. The initial years of India’s planned development strategy were characterised by a conservative fiscal policy whereby deficits were kept under control. The tax system was geared to transfer resources from the private sector to fund the large public sector driven industrialization process and also cover social welfare schemes. However, growth was anaemic and the system was prone to inefficiencies. In the 1980s some attempts were made to reform particular sectors. But the public debt increased, as did the fiscal deficit. India’s balance of payments crisis of 1991 led to economic liberalisation. The reform of the tax system commenced. The fiscal


References: Dasgupta, Dipak and Supriyo De. 2011. "Fiscal Deficit," in New Oxford Companion to Economics in India. Kaushik Basu and Annemie Maertens eds. New Delhi: Oxford University Press. Empowered Committee of State Finance Ministers. 2009. "First Discussion Paper on Goods and Services Tax in India." Fischer, Stanley and William Easterly. 1990. "The Economics of the Government Budget Constraint." The World Bank Research Observer, 5:2 (July 1990), pp. 127-42. Herd, Richard and Willi Leibfritz. 2008. "Fiscal Policy in India: Past Reforms and Future Challenges." Organisation for Economic Co-operation and Development, Economics Department Working Paper No. 595. Kumar, Rajiv and Alamuru Soumya. 2010. "Fiscal Policy Issues for India after the Global Financial Crisis (2008-2010)." Asian Development Bank Institute, Working Paper No. 249. Ministry of Finance. 2011. "Fiscal Policy Strategy Statement (Budget 2011-12)." Planning Commission. 2011. "Approach to the Twelfth Five Year Plan." Rao, N. Govinda and R. Kavita Rao. 2006. "Trends and Issues in Tax Policy and Reform in India." India Policy Forum, NCAER, www.ncaer.org/downloads/Journals/ipf0506-paper2.pdf. Reserve Bank of India. 2011. "Database on the Indian Economy, http://dbie.rbi.org.in, date accessed 19th October 2011." Singh, Nirvikar and T. N. Srinivasan. 2004. "Fiscal Policy in India: Lessons and Priorities." Paper for the NIPFP-IMF conference on Fiscal Policy in India, New Delhi.
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