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Fiscal Policy - Short Trick

Public finance, budget history, the stages in Parliament, deficit formulas and FRBM — one sentence each

2 trick sentences3 pairs6 parts
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How to read
  • Guru Ram Each coloured word = one name in the list, shown below in the same colour
  • Panda Two colours in one word = two names
  • ➜ Order the numbered order matters · ⇄ Any order no order
1

Public Finance and the Budget’s Structure

The five parts of public finance, the idea of a deficit budget, revenue against capital budget, and non-tax receipts.

Trick 1

The five parts of public finance

⇄ Any order

Rekha explained fishing to Dev and Adil.

  1. Public revenue
  2. Public expenditure
  3. Fiscal policyonly one part of public finance — expressed every year through the budget
  4. Public debt
  5. Financial administrationpreparing, passing and auditing the budget — the part students forget

The two big goals of fiscal policy — better growth and social justice.

Pairs

The deficit budget — whose idea

1 sentences

Deficit spending is the key in a slump.

Deficit budget=J. M. Keynes (1930s) — raise government spending in a slowdown to build demand · India runs a deficit budget on purpose

More receipts than spending is a surplus budget, more spending is a deficit budget, equal is a balanced budget.

Pairs

Revenue budget against capital budget

2 sentences

Rent is paid every month.

Revenue budget=Recurring — no effect on assets or liabilities · salaries, pensions, interest payments · tax, fees

A castle is built once.

Capital budget=Occasional — assets or liabilities change · roads, railways, ports · loans, disinvestment

Defence is split across both — a soldier’s pay is revenue expenditure, new weapons are capital expenditure.

Trick 2

Non-tax receipts — five kinds

⇄ Any order

Esha finally felt proud of her special cake.

  1. Escheatproperty with no legal heir goes to the state
  2. Finesthe aim is making people follow rules, not earning
  3. Fees and licencespassport fee, driving licence fee
  4. Profit of public enterprisesrailways, oil companies
  5. Special assessmenta charge on land that gained value from government development work

Another split — earned receipts (rent, royalty, PSU profit) and unearned receipts (grants, gifts).

2

Budget History and Records

Who presented which “first” budget, and who holds the big budget records.

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3

Papers, Parliament and Budget Forms

The budget papers, the six stages in Parliament, the six departments of the Finance Ministry and the special forms of budget.

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4

Deficits — Definitions and Formulas

What is subtracted from what, and the old budget deficit.

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5

Debt and Deficit Financing

The three ways to cover a deficit and the RBI’s short-term loan.

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6

Consolidation, the Laffer Curve and FRBM

The three pillars of fiscal consolidation, the Laffer curve, the FRBM targets and the escape clause.

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Read the full chapter for the complete notes — a trick helps you remember the list; understanding comes from the notes.