Is the Fiscal Policy of India Sustainable - Dissertation Example

Download file to see previous pages The staggered recovery in the economy has apparently terminated the growth dynamics of major industrialized economies and developed nations. The declining growth rates of household and the shyness of the business market has been adversely affecting the world trade and the employment scenario simultaneously. The huge funding requirements of the banks and the sovereigns can be also regarded as one of the major problems of these nations. On the other hand, the emerging and developing markets on the global platform are at the same time growing at an accelerated rate. Similarly one of the world’s developing nations i.e., the Indian economy has grown rapidly since the beginning of the 1990s despite a large and growing fiscal deficit and rising public levels relative to output.

Despite the economic upheaval in the time span of 2007-09 and the downsizing of the global events particularly the random fluctuations in the movement of the prices of crude oil, the economy of India has faced remarkable growth and has worked on further growth and development in their economic conditions with consolidated enhancement in the key macroeconomic indicators. The Indian economy with a strong economic base and resilience encountered a solid growth rate of around 8.4 percent during the phase of 2010-2011 with the emergence of one of the fastest developing countries.

The agriculture sector has followed strong performance inculcated with a strong pace of growth in the industrial and services sector. The Growth rate in Gross Domestic Product around a percentage of 8.4 can be highly attributed to the magnificent growth rate in major sectors like growth in transport, storage and communication (14.7%), financing, insurance, real estate & business services (10.4%), trade, hotels & restaurants (9.0%), and construction (8.0%). The growth rate of the primary sector i.e. agriculture, forestry & fishing has shown a high growth of 7.0 percent during 2010-11 in comparison to around 1.0 percent during the year 2009-10. The growth of the secondary sector is 7.2 percent and that of the service sector is 9.3 percent during 2010-11. In this case, the fiscal policies adapted and implemented by the government are stupendously crucial as it is one of the most significant parameters in the determination of growth rates and development. Thus the basics of fiscal policy and its relevance with respect to the Indian economy will be explained in the subsequent section.

The crux of fiscal policies generally refers to the combination of several practices of the government with respect to revenues, expenditures, and debt management. The fiscal planning mechanism is generally done within the context of the Public Services Program (PSP), Operating Budget and the Capital Improvements Program (CIP)/Capital Budget reflects and helps shape fiscal policy. The process of the budget not only reflects the fiscal policies currently in action but is itself a major propelling vehicle for the determination and the implementation of such policies. Fiscal policies are not general sets of rules or norms which are taken as a yardstick of measurement but they are basically variable sets of rules which changes with the change in the economic environment of an economy. ...Download file to see next pages Read More