Page 250 - DECO201_MACRO_ECONOMICS_ENGLISH

Unit 14: Macro Economic Policies: Fiscal Policy

Price Notes

For the development of the economy Govt. has to launch public sector. As private sector don't take
interest or it is unable in some highly capital intensive and having a high gestation period projects
like infrastructure projects, heavy industry etc. Some time for the rapid development also Govt.
have to invest in many sector simultaneously that in consumer industry like clothes etc to meet the
huge gap between demand and supply and in heavy industry to make available the resources for
the economy. Govt. charges the price for the goods its manufactures or the services it provides.
Income from public enterprises now constitutes a substantial source of revenue.
Fee

It is a payment against the services, though it is never more than the cost of the services.
Sometime it covers only part of the services.

Example:As nominal fees in govt. hospitals, educational fees, etc.
Fees like license fee are much higher than the services rendered. Sometime there is no positive
return in terms of services and fees is charged just to grant permission in terms of license, etc.
Difference between price and fees is that in fees it is public interest which is prominent that's
why part of the cost is charged in most cases on the other hand in price is payment for the service
of business charter. Here usually full cost is covered.

Rates

Rates are levied by local bodies, i.e., municipalities and district boards, for local purchases. They
are generally imposed on the local immovable properties.

Fines

Fines are imposed as deterrent to breaking the law.

Escheat

When a person dies heirless or without a successor or leaves no will behind, his property or
assets will go the State. The claim of the state to deceased's assets is called escheat.

Grants and Gifts

Grants are given by a government at a higher level to that at the lower level, e.g. from the
central govt. to the state govt. or to the local district boards, municipalities, etc.

Example: Gifts are sometime received from private bodies and foreign Govt. for relief
in natural calamities like earthquake, floods, droughts, cyclones, for building a hospital, schools,
etc.

14.3.5 Expenditure of the Central Government

All public expenditure is classified into:
(a) Unplanned Expenditure: Unplanned expenditure of the central govt. is divided into revenue
expenditure and capital expenditure. Under revenue expenditure we include: interest

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