Deficit Financing Theory and Practice in Bangladesh
Full description
Full description
Descripción completa
Full description
Find information about nri India, Business in India, NRI Loans, NRI Banking, Indian overseas citizen, indian overseas, indian overseas citizen, indian overseas citizenship, ministry of overs…Full description
Women empowerment is not a new concept and its need was sensed much earlier, even before independence. Not only in India but all over the world women have faced atrocities and thus since the beginning of its history they have been challenging gender
Women Entrepreneurs may be defined as the women or a group of women who initiate, organize and operate a business enterprise. Government of India has defined women entrepreneurs as an enterprise owned and controlled by a women having a minimum financ
e commerce in india
its about labour law project ..Full description
Full description
important Judgements in india
An Introduction to understand Vernacular ArchitectureFull description
DEFICIT BUDGETA deficit is the a%ount b# &hich a su% fa""s short of so%e reference a%ount' (hen govern %ent e)penditure e)ceeds govern%ent receipts in the budget is said to be a deficit budget' !n econo%ics* a deficit is an e)cess of e)penditures over revenue in a given ti%e period' (hen a govern%ent spends %ore than it co""ects b# &a# of revenue* it incurs a budget deficit' +here are various %easures that capture govern%ent deficit and the# have their o&n i%p"ications for the econo%#' REVENUE DEFICIT,evenue deficit refers to the e)cess of govern%ent-s revenue e)penditure over revenue receipts' Revenue deficit = Revenue expenditue- Revenue eceipt!
+his is a situation in &hich net a%ount received fa""s short of the projected net a%ount to be received' +his occurs &hen the actua" a%ount of revenue received and the actua" a%ount of e)penditures do not correspond &ith predicted revenue and e)penditure figures' +his is the opposite of a revenue surp"us* &hich occurs &hen the actua" a%ount e)ceeds the projected a%ount' FISCA" DEFICITA fisca" deficit is the difference bet&een the govern%ent-s tota" e)penditure and its tota" receipts' G#!! Fi!c$% deficit = T#t$% expenditue & T#t$% eceipt!
.isca" deficit is a %easure of tota" borro&ings re/uired b# the govern%ent' Greater fisca" deficit i%p"ies greater borro&ings b# the govern%ent' +his creates a "arge burden of interest pa#%ents in the future that "eads to increase in revenue e)penditure* causing an increase in revenue deficit' +hus a vicious circ"e sets in
PRI'AR( DFICIT0ri%ar# deficit is the pure deficit &hich is derived after deduc ting the interest pa#%ents co%ponent fro% the tota" deficit of an# budget' Pi)$* deficit = Fi!c$% deficit & intee!t p$*)ent
0ri%ar# deficit signifies borro&ing re/uire%ents of the govern%ent' A "o& or ero pri%ar# deficit %eans that &hi"e govern%ent-s interest re/uire%ent on ear"ier "oans have co%pe""ed the govern%ent to borro& but it is a&are of the need to tighten its be"t'
DEFICIT FINANCING-
!t is defined as Govern%ent funding of spending b# borro&ing' 0"anned e)penditure b# a govern%ent to put %ore %one# into the econo%# than it taes out b# ta)ation* &ith the e)pectation that increased business activit# &i"" bring enough additiona" revenue to cover the shortfa""' !t is a"so ca""ed deficit spending' +he difference bet&een revenue and e)penditure is usua""# %ade up b# borro&ing or %inting ne& funds' +he inf"uence of govern%ent deficits upon a nationa" econo%# %a# be ver# great' udget deficits %a# occur for nu%erous reasons the ter% usua""# refers to a conscious atte%pt to sti%u"ate the econo%# b# "o&ering ta) rates or increasing govern%ent e)penditures' Deficit financing* %a# a"so resu"t fro% govern%ent inefficienc#* ref"ecting &idespread ta) evasion or &astefu" spending rather than the operation of a p"anned counterc#c"ica" po"ic#' (here capita" %arets are undeve"oped* deficit financing %a# p"ace the govern%ent in debt to foreign creditors' !n addition* in %an# "essdeve"oped countries* budg et surp"uses %a# be desirab"e in the%se"ves as a &a# of encouraging private saving' Deficit financing in !ndia %eans the e)penditure &hich in e)cess of current revenue and pub"ic borro&ing' +he govern%ent %a# cover the deficit in the fo""o&ing &a#s • • •
# running do&n its accu%u"ated cash reserve fro% ,!' !ssue of ne& currenc# b# govern%ent itse"f' orro&ing fro% reserve ban of !ndia and ,! gives the "oans b# printing %ore currenc # notes'
+he concept of deficit spending in econo%ics is not "i%ited to govern%ent use' usinesses of a"" sies %a# choose to spend %ore %one# up front in hopes of generating funds to pa# off the invest%ent at a "ater date' Deficit financing is an approach to %one# %anage%ent that invo"ves spending %ore %one# than is co""ected during the sa%e period' One of the %ore co%%on e)a%p"es of govern%ent deficit financing has to do &ith sti%u"ating the econo%# of a nation in order to bring an end to a period of recession' # estab"ishing a specific p"an of action that invo"ves using borro&ed resources to %ae purchases* the govern%ent can increase the de%and for output fro% various sectors of the business co%%unit#' ouseho"d budgets a"so engage in this for% of %one# %anage%ent* a"though the ro"e of deficit financing on an individua" "eve" taes a s"ight"# different for% than &ith businesses and govern%ents' +he idea of deficit financing in econo%ic deve"op%ent is not ne&' cono%ists fro% ohn 9a#nard :e#nes up to the present da# have recognied this strateg#* its benefits* and its possib"e "iabi"ities if not app"ied proper"#' (hi"e not auto%atica""# the best option to correct an undesirab"e financia" situation* its responsib"e use can u"ti%ate"# i%prove the /ua"it# of "ife and the financia" status of ever#one concerned'
!n !ndia* deficit financing is used for raising resources for • • • •
econo%ic deve"op%ent rede%ption of pub"ic debt adjusting the ba"ance of pa#%ents reducing the foreign debt
OB+ECTIVES OF DEFICIT FINANCING-
1
T# fin$nce ,$ Deficit financing has genera""# being used as a %ethod of financing &ar e)penditure' During the &ar ti%e through nor%a" %ethods of raising resources' !t beco%es difficu"t to %obi"ie ade/uate resources' +herefore govern%ent has to adopt deficit financing' 2 Re)ed* f# depe!!i#n !n deve"oped countries deficit financing is used as an instru%ent of econo%ic po"ic# for re%oving the conditions of depression' 0rof' :e#nes has a"so advocated for deficit financing as a re%ed# for depression and une%p"o#%ent' 3 Ec#n#)ic deve%#p)ent +he %ain objective of deficit financing in an under deve"oped countr# "ie !ndia is to pro%ote econo%ic deve"op%ent' +he use of deficit financing in fact beco%es essentia" for financing the deve"op%ent p"an especia""# in underdeve"oped countries' 4 '#i%i$ti#n #f Re!#uce! deficit financing is a"so used for the %obi"iation of surp"us* idea" and unuti"ied resources in the countr#' 5 F# /$ntin/ !u!idie! !n a countr# "ie !ndia govern%ent grants subsidies to the producers to encourage the% to produce a particu"ar t#pe of co%%odit#* granting subsidies is a ver# cost"# affair &hich &e cannot %eet &ith the regu"ar inco%e this deficit financing beco%es %ust for it' 6 Ince$!e in $//e/$te de)$nd Deficit financing "oads to increase in aggregate de%and through increased pub"ic e)penditure' +his increase the inco %e and purchasing po&er of the peop"e as a conse/uence there is an increase avai"abi"it# of goods and services and the production and e%p"o#%ent "eve" a"so increase' 7 F# p$*)ent #f intee!t ;oan &hich are taen b# the govt' are supposed to be repaid &ith their interest for that govern%ent needs %one# deficit financing is an i%portant too" to get the inco%e for the repa#%ent of "oan a"ong &ith the interest' 8 +o overco%e "o& ta) receipts' +o overco%e the "osses of pub"ic sector enterprises' 1< +o i%p"e%ent antipovert# progra%s'
DEFICIT FINANCING SOURCES-
ADVERSE EFFECTS OF DEFICIT FINANCING Deficit financing is not free fro% its defects' !t has its adverse effect on econo%#' !%portant evi" effects of deficit financing are given be"o& 1
"e$d! t# inf%$ti#n Deficit financing %a# "ead to inf"ation' Due to deficit financing* %one# supp"# increases = the purchasing po&er of the peop"e a"so increase &hich increases the aggregate de%and and the prices a"so increase'
2
Adve!e effect #n !$vin/ Deficit financing "eads to inf"ation and inf"ation affects the habit of vo"untar# saving adverse"#' !nfect it is not possib"e for the peop"e to %aintain the previous rate of saving in the state of rising prices'
3
Adve!e effect #n Inve!t)ent deficit financing effects invest%ent adverse"# &hen there is inf"ation in the econo%# trade unions %ae de%and for higher &ages for that the# go for stries and "oc outs &hich decreases the efficienc# of "abour and creates uncertaint# in the business &hich a decreases the "eve" of invest%ent of the countr#'
4
Ine0u$%it* in case of deficit financing inco%e distribution beco%es une/ua"' During deficit financing def"ationar# pressure can be seen on the econo%# &hich %aes the rich richer and the poor* poorer' +he fi) &age earners are bad"# affected and their standard of "iving deteriorates thus the gap bet&een rich = poor increases'
5
P#%e) #f $%$nce #f p$*)ent Deficit financing "eads to inf"ation' A high price "eve" as co%pared to other countries &i"" %ae the e)ports %ore e)pensive and thus the# start dec"ining' On the other hand rise in do%estic inco%e and price %a# encourage peop"e to i%port %ore co%%odities fro% abroad' +his &i"" create a deficit in ba"ance o f pa#%ent and the ba"ance of pa#%ent &i"" beco%e unfavorab"e'
6
Ince$!e in t1e c#!t #f p#ducti#n (hen deficit financing "eads to the rise in the price "eve" the cost of deve"op%ent projects a"so rises this %eans a "arger dose of deficit financing is re/uired on the port of govern%ent for co%p"etion of these projects'
7
C1$n/e in t1e p$tten #f inve!t)ent Deficit financing "eads to inf"ation' During inf"ation prices rise and reach to a ver# high "eve" in that case peop"e instead of indu"ging into productive activities the# start doing specu"ative activities'
GRAP2S &
IS DEFICIT FINANCING INF"ATIONAR(3
Deficit financing %a# not necessari"# be inf"ationar#' +here are certain conditions under &hich deficit financing %a# not "ead to inf"ation' (ith increase in %one# supp"# due to deficit financing prices do rise but rise in price &i"" on"# be te%porar# for about a period' As f"o& of goods and services increase prices &i"" began to fa""' Deficit financing is an i%portant device for financing deve"op%ent p"ans for underdeve"oped countries and acce"erate their rate of econo%ic deve"op%ent' ut if deficit financing is not ept &ithin "i%its it %a# give rise to prices* distorted invest%ent and une/ua" and unjust distribution of inco%e' +herefore it is essentia" that deficit financing is ept &ithin "i%its and its i%pact on prices and costs are softened through various contro"s'