PUBLIC FINANCE AND FISCAL POLICY NOTES

Public Finance and Fiscal Policy



Pinaki Chakraborty

National Institute of Public Finance and Policy
New Delhi, India

, Structure of presentation

Š Role of State
Š Public Finance & Fiscal Policy
ƒ Issues related to Public Expenditure
ƒ Issues related to tax policy
ƒ Issues Related to Debt Management

Š Fiscal Policy in Macroeconomic Setting
Š Issues Related to Fiscal Space, revenue
mobilization, spending & sustainability

, Role of State

z Fiscal tasks of the state - in its three branches
(following Musgrave):
Allocation - provision of public goods and taking
care of externalities - positive and negative
Redistribution
Stabilization

, The Expansion of the Role of State


Š Three Major Factors
z Structural changes in the economy
z Democratization of society
z Concern for social justice
z Underlying Factors:
Š Structural changes - leading to urbanization and decline of self-sufficient
agricultural households - and family - cultural and welfare concerns of the
society also broaden in the process of civilization (Wagner's law).
Š Concerns raised by expansion of public sector - doubts about efficiency in the
use of resources - also emergence of deficits in government budgets led to
questions about sustainability of a large public sector - hence the cry for
“downsizing”.
Š How valid are these questions and moves? What are the implications?