Explain Fiscal policy in detail

    Fiscal policy is that part of Govt. policy which is concerned with raising revenue through taxation and other means and dividing on the level and pattern of expenditure.

    The fiscal policy operates through the Budget. The Budget is an estimate of Govt. expenditure and revenue for the ensuring financial year, presented to Parliament by the Finance sinister. In times of financial crisis, interim Budget may be introduced later in the year to increase taxation, expenditures etc.

The Union Budget:
Constitutional Provision:

    No tax can be levied or collected except by authority of law.

    No expenditure can be incurred from public funds except in the manner provided in the constiution and

    The executive authorities must spend public money only in the manner sanctioned by the Parliament in case of Union and by the State legislative or the case of state.

Procedure: 

    An estimate of all anticipated revenue and expenditure of This is known as Annual Financial statement and covers Central Govts the Union Govt. for the ensuing financial year is laid before the Parliament transactions of all kinds in which statement is prepared. All receipts of Union Govt. are kept in 2 separate headings. Consolidated Fund of India and Public Account of India. All received loans raised and money received. repayment of loans by Union Govt. from consolidated fund. All other receipts go into public account. 

General Discussion: 

    Presentation of Annual Financial Statement is followed by general discussion or Budget in both Houses of Parliament. The estimates of expenditure from consolidated Fund of India are then placed before Lok Sabha. A separate demand is made for each ministry. The tax proposals budget are embodied in another bill which is passed as Finance Act of the year.

   The receipts and expenditure of Central and State govts are audited by Controller and Auditor General who is independent of executive and his 'reports on accounts are given to President, Governor to lay before Parliament.

Structure of Budget: 

    Budget is divided into receipts and expenditure vertically. Horizontally divided into revenue account and capital account and receipts, thus broken into Revenue receipts and capital receipts. Expenditure into Revenue and capital expenditure. Revenue expenditure includes current expenditure of Govt. on administration and Capital Expenditure includes capital transactions of Govt.

    Revenue receipts include revenue from taxes while capital receipts include market loans, income from repayments.

State Budgets: 

    Like Union Govt. State govts. have their own budgets. Estimates are presented to legislatures.