Indian Financial System

Friends, inwards our terminal postal service nosotros induce got discussed nearly Indian Financial System. Today nosotros shall hash out nearly Indian Fiscal System. It refers to the management of revenue in addition to upper-case missive of the alphabet expenditure finances of the state.

Fiscal Policy 

It refers to the role of taxation, populace expenditure in addition to the management of the populace debt inwards fellowship to make surely specified objectives. These uses tin shipping away deport upon the next macroeconomic variables inwards an economy.

  • Aggregate need in addition to the degree of economical activity.
  • The distribution of income
  • The patter of resources allotment inside the authorities sector in addition to relative to the soul sector. 

Sources of Revenue

Main sources of revenue are customs duties, excise duties, service tax, taxes on property, corporate, income taxes.

Sources of Expenditure

  • Plan expenditure : It includes agriculture, rural development, irrigation in addition to alluvion control, energy, industry, minerals, carry in addition to communications etc.
  • Non-Plan Expenditure : It consists of involvement payments, defense, subsidies, in addition to full general services.

Public Debt

  • Internal Debt : It comprises loans raised from the opened upwards marketplace treasury bills issued to the RBI, Commercial Banks etc.
  • External Debt : It consists of loans taken from World Bank ,IMF, ADB in addition to Individual Countries. 


In a budget statement, iv types of deficits are mentioned. Those are,
  1. Revenue
  2. Capital
  3. Fiscal
  4. Primary

Revenue Deficit

There are diverse ways to correspond in addition to translate a Government’s deficit. The simplest is the revenue deficit which is only the departure betwixt revenue receipts in addition to revenue expenditures.
  • Revenue Deficit = Revenue Expenditure – Revenue Receipts

Capital Deficit

An imbalance inwards a nation’s residual of payments upper-case missive of the alphabet account, inwards which payments made past times the dry reason for purchasing unusual assets operate past times payments received past times the dry reason for selling domestic assets. In other words, investment past times the domestic economic scheme inwards unusual assets is less than unusual investment inwards domestic assets. This is to a greater extent than frequently than non not a desirable province of affairs for a domestic economy.
  • Capital Deficit = Capital Receipts – Disbursement on Capital Account

Fiscal Deficit

This is the center of revenue in addition to upper-case missive of the alphabet expenditure less all revenue in addition to upper-case missive of the alphabet receipts other than loan taken. This gives a to a greater extent than holistic persuasion of the Government’s funding province of affairs since it gives the departure betwixt all receipts in addition to expenditures other than loans taken to encounter such expenditures.
  • Fiscal Deficit = Difference betwixt dry reason expenditure in addition to earnings
  • Fiscal Deficit = Revenue receipts (Net Tax Revenue + Non Tax Revenue) + Capital Receipts (only recoveries of loans in addition to other receipts) – Total expenditure (Plan in addition to non-plan)

Primary Deficit

Amount past times which a Government’s full expenditure exceeds its full revenue, excluding involvement payments on its debt.
  • Primary deficit = Fiscal Deficit – Interest Payments

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