Assignment Code: BPAC-111/ASST /TMA /July 2022-January 23

Course Code: BPAC-111

Assignment Name: Public Finance and Administration

Year: 2022-2023

Verification Status: Verified by Professor

Assignment A

Answer the following in about 500 words each. 2×20

1. Explain the meaning and objectives of monetary policy and discuss its instruments.

Ans) Money supply, interest rates, and credit accessibility are all aspects of monetary policy. It is the strategy outlined by the nation's central bank or any other capable monetary authority in an economy. The central bank controls the amount of money and credit in circulation through monetary policy. The country's economic growth is influenced by monetary policy, which also manages inflation by altering the money supply and interest rates. It directs money to the regions where it is most needed to achieve overall economic objectives.

The Objectives of Monetary Policy

1. Economic growth: Investment that boosts economic growth is made possible by regulating prices and income in the economy.

2. Price stability: The monetary policy controls the value of money in an effort to promote price stability. When there is a recession, interest rates on loans are lowered to help the economy. Loans may occasionally be granted with higher interest rates in an effort to reduce the money supply.

3. Exchange rate stability: Maintaining currency rate stability is crucial for building global trade trust.

4. Balance of Payments (BoP) Equilibrium: BoP is a record of every transaction that took place over a specific time period between entities in one nation and the rest of the world.

5. Financial stability: The monetary policy makes an effort to maintain economic financial stability and to lessen abrupt, dramatic oscillations in the financial market and in the economy.

Instruments of Monetary Policy

Bank Repo Rate: Repo rates, also known as repurchase rates, refer to the interest rate at which a nation's central bank lends money to commercial banks in times of financial need. Using the repo rate, inflation can be managed. When banks or other financial institutions are in need of a loan due to a financial emergency, they turn to the RBI, which lends them the money at the "repo rate" of interest.

Reverse Repo Rate: This is the rate at which the Reserve Bank of India borrows money from the big banks. Additionally, it reduces the surplus money supply in the banking system by doing this. The reverse repo rate is hence the interest rate at which the RBI borrows money from domestic commercial banks. By raising or lowering the rate, it serves as a tool for monetary policy.

Cash Reserve Ratio: All commercial banks are required to maintain a minimum amount of cash, known as currency chests, in proportion to their deposits with the RBI. The Cash Reserve Ratio refers to the required minimum amount of cash held with the RBI. As a greater CRR will leave a smaller amount with the commercial banks to be able to use it for loans and investments, this functions as another tool of monetary policy.

Statutory Liquidity Ratio: Before establishing the Statutory Liquidity Ratio in this context, it is important to grasp two words (SLR). As follows:

1. Demand Liabilities on net.

2. Time Obligations.

The SLR, which the RBI has the authority to raise by 40%, is the proportion of liquid assets to demand and time liabilities. It regulates the amount of money that commercial banks put into the economy.

Marginal Standing Facility (MSF): By drawing from the SLR at a penal rate of interest, the MSF is a provision that enables commercial banks to borrow additional overnight funds from the RBI. Because of this, banks are forced to react to sudden shocks to liquidity.

Lending Rate: These are the interest rates that the RBI set, based on which clients are lent money. The cost of the credit extended to the customer will increase as the lending rate rises. Customers may borrow more money from the bank if rates are lower.

2. Write a note in brief on important instruments of parliamentary control over executive in India.

Ans) The concept of Question Time originated in the United Kingdom in 1961 when the Parliament established Prime Minister's Question Time in order to hold that official accountable to the general public. The first hour of each Lok Sabha session is devoted to questions, and it is known as the Question Hour. Members of Parliament have the unrestricted right to ask questions. The question period focuses on the national and international policies of the administration.

A crucial tool for parliamentary budgetary control over the executive is the question period. The following list includes some of its main goals:.

1. Misuse of Funds: The opposition should interrogate the executive about any abnormalities in public spending at this point. On the other side, the government in power has the chance to clear up any misunderstandings and, if it is unable to do so, to make amends.

2. Checks and Controls: In India, the opposition parties are given an hour at the beginning of the Lok Sabha's proceedings to ask questions regarding how the government is run and how much money is being spent.

3. Hour of Trial: Members have the inherent right to ask questions, which has a special significance in the proceedings of the Parliament. All ministers are required to testify during this hour, which is transformed into a period of trial for the government. for the administration's actions, both intentional and unintentional.

4. Interactive Platform: It helps the government keep track of valid public concerns and find remedies.

5. Transparency: The televised Parliamentary proceedings raise the public's understanding of government processes and promote system openness.

Types of Questions in the Question Hour

Starred Questions: A question-mark icon means that a participant wants to ask a question.

It is a "starred question" that needs to be answered in the House. In this situation

There may also be more inquiries made in that regard. The maximum number of questions

Each day, there are just 20 questions.

Unstarred Questions: If speaking back is not preferred and there A question with the ability to ask more questions is known as an unstarred question. The A concerned minister replies in writing in the house, and it is then published in the official report on House proceedings.

Short Notice Questions: Such a query refers to a pressing public concern. more significance and can be asked with less advance notice than typical queries.

Private Member Questions: A private member may receive a question. if the question's topic refers to a particular law, resolution, any matter pertaining to the house's operations for which that member is responsible.

Notice of Questions: The prescribed notification time is fifteen (15) days. Unless the Speaker instructs differently, a question must follow the format in the Lok Sabha Rules.

Allotment of Days for Questions: Days are set aside for question answering in accordance with the numbers assigned.

Mode of Asking Questions: When it is their turn to ask a question, each member must get up from their seat and read the question's number off the list. The person who is asking the inquiry is limited to asking two further questions. Each member who is concerned in the issue may submit one extra question, at the Speaker's discretion.

Half-an-Hour Discussion: Any member may put on the table a notice to raise a debate for a half-hour when a starred or unstarred question's answer requires clarification on a fact. The Speaker may permit such a discussion if the notification is admitted and receives precedence in the ballot. The conversation often lasts from 1730 to 1800, or the final 30 minutes of the day's events.

Assignment B

Answer the following questions in about 250 words each. 3×10

3. Discuss the principles of fiscal federalism.

Ans) The principles of fiscal federalism are listed below:

1. Span of Public Goods: The powers should be distributed such that the span of public goods, or the number of people who receive equal shares of the benefits of a public good, matches as closely as feasible the geographic limits of the jurisdictions.

2. Principle of Subsidiary: The delegation of authority must be founded on the subsidiary concept, which entails giving as much resources as possible to the governments closest to the people.

3. Innovation: The distribution of authority must encourage experimentation and creativity among smaller governments. Costs associated with risk reduction would emerge as a result of the larger governments directing and safeguarding them.

4. Independence and Responsibility: Every government needs its own private financial resources. Financial freedom and accountability are necessary for fiscal federalism. To have their own resources to support equal economic and social growth, both the union and state governments must have taxing autonomy.

5. Integration and Coordination: Due to the existence of numerous levels of government, the concepts of integration and coordination are fundamental to the formulation and implementation of fiscal federalism. If they each work independently, resources are wasted and attempts are duplicated.

6. Equity: According to the equity principle, all of the nation's tax-paying residents should bear the same share of the cost of taxation. All members of society must bear the same amount of tax burden. The rates of taxation must also be the same across all states, to the extent possible.

7. Accountability: To achieve transparency, all levels of government must be answerable to the public. The amount of money spent by the governments within a particular fiscal year must be disclosed to the Parliament.

4. Explain the concept of gender budget and examine the gender budgeting initiatives in India.

Ans) The International Monetary Fund has defined a gender budget as a method of planning a budget that uses fiscal management and policy to advance gender equality and development. Any level of government's fiscal authority can evaluate the needs of both men and women, determine the main objectives or results, plan, allocate, and disperse funds, and track and evaluate progress. A gender responsive budget aims to work for everyone by guaranteeing resource distribution that is gender-equitable and giving everyone the same chances.

At the international level, governments have enacted gender budgets. In 1984, Australia became the first nation to introduce a prototype women's budget initiative in Parliament. One of the world's most institutionalised programmes is still the Philippines model. Similar initiatives have been made in a number of nations.

There are two sections to the gender budget. Part A contains programmes with a 100% allocation, including widow pension programmes, girls hostel programmes, and others. Plans in Part B, such as the programme for midday meals, the mission to improve rural livelihoods, the bio-gas programme, etc., each receive 30% of the budget. The nutrition, anganwadi, and women's employment programmes in this budget were prioritised.

In order to give a blueprint for institutionalising gender budgeting at the state level, the Ministry of Women and Child Development released instructions to States in 2013. The gender budget has increased sixfold in the 16 years since gender budgeting was adopted, from 24,241 crore to 1,43462 crore in 2020–21. Since the budget's establishment, part B allocations have made up two-thirds of the entire gender budget. Benefit-incidence analysis must be carefully considered in gender budgeting. The advantages that have resulted from the real expenditures must be the main focus.

5. Describe the classification of government accounts.

Ans) The classification of government accounts are as follows:

Consolidated Fund of India

All taxes, including Income Tax, Central Excise, Customs, and other receipts (i.e., non-tax revenues), are credited into the Consolidated Fund, which was established pursuant to Article 266 (1) of the Indian Constitution. All loans collected from foreign countries and international organisations as well as those raised by the government via the issuance of treasury bills are credited into this fund. All government expenses are paid for out of this fund, and no money may be taken out of the fund without the consent of the Parliament.

Contingency Fund of India

In accordance with Article 267(I) of the Constitution, "Parliament may by law establish a Contingency Fund in the nature of an imprest to be known as the Contingency Fund of India into which shall be paid from time to time such sums as may be determined by such law, and the said Fund shall be placed at the disposal of the President to enable advances to be made by him out of such Fund for the purposes of meeting unforeseen expenditure pending authorization of such expenditure by P."

Part III: Public Account

Article 266(2) of the Constitution establishes the Public Account. It deals with the monies that the government receives, such as deposits under the national savings programme and state provident funds. The payments sent into the public account are not typical government payments. Therefore, payments from the public account do not require parliamentary authorization. The government does not own these monies. They must be returned to their proper owners. When it comes to public account transactions, the government serves as a banker. Deposits, reserve funds, remittances, and other receipts and expenditures that are not a part of the "Consolidated Fund" are included in the Public Account and are not voted on by the legislature because they do not come from the Consolidated Fund.

Assignment C

Answer the following questions in about 100 words each. 5×6

6. What are the features of government budget?

Ans) Most government budgets contain a few key features, such as:

1. Annuality: The majority of budgets are annual financial plans that necessitate voting on a regular basis. One budget is being created while the other is being implemented, but this process is ongoing.

2. Rule of Lapse: Due to the fact that the budget is annual, it follows that any remaining funds at the conclusion of the fiscal year expire and cannot be used by the government. Sanctions and a new request are required.

3. Predetermined Objectives: Without clearly laid out and defined goals to pursue, a budget cannot be created.

4. Flexibility: Many times, projects run into financial difficulties because of delays, cost overruns, rising raw material prices, etc. Since the budgets are an annual feature, provisions have been made to allocate additional monies if needed to carry out the projects and meet the established goals.

5. Accuracy: A budget is a precise annual financial statement based on the accuracy of projections and outlays made in the previous year. The budget should be as exact and detailed as feasible. As a result, a budget establishes the objectives and goals in advance, allowing for the accurate preparation of estimates that are ultimately approved by the legislative bodies.

7. Discuss the role of Ministry of Finance.

Ans) The Ministry of Finance is essential to the entire process, from budget creation through implementation. The Ministry of Finance is responsible for carrying out the tasks involved in creating budgetary estimates, combining estimates of income and expenses, and presenting the results in the form of annual financial statements.

It must do the following duties:

1. Recommending monetary and fiscal policies.

2. Raising financial resources in order to reach spending goals.

3. Assessing if the requests of numerous ministries and departments are desirable.

4. Compiling and reviewing budget projections

5. Drafting of finance and appropriation bills in accordance with constitutional guidelines.

6. Review of ongoing fees, discontinued programmes, and new initiatives.

7. Creating a budget's economic classification.

8. Examining each and every expenditure department request.

9. Keeping the discipline in your finances.

10. Ensuring adherence to financial regulations.

11. Implementing efficient budgetary spending control.

12. A significant part of the enormous responsibility of budgeting cycle from planning to execution is played by the ministry of finance with its different ministries and divisions. The prudent use of public resources and maintaining a proper balance between revenues and expenditures are its key concerns.

8. Examine the role and functions of Central Board of Direct Taxes.

Ans) A statutory body operating under the Central Board of Revenue Act of 1963 is the Central Board of Direct Taxes (CBDT).

Role and Functions of CBDT

Under the different laws relating to direct taxes, the CBDT is responsible for formulating policies addressing the Board's and the Union Government's statutory obligations.

The following list includes CBDT's duties and position:

1) It establishes general guidelines for:

a) organisation of the income-tax department's setup and structure.

b) methods and procedures used in the Board's work.

c) Measures for getting rid of assessments, collecting taxes, and stopping and catching tax avoidance and evasion.

d) Recruitment, training, and any other issues pertaining to the working environment and future employment opportunities for the income-tax department's staff.

2) Setting goals and establishing priorities for handling assessments, collecting taxes, and other relevant issues

3) Policy governing the awarding of prizes and certificates of appreciation.

4) Any other item that the Chairman or a Board Member may refer for the Board's collective consideration with the Chairman's permission.

9. Analyse the role of audit.

Ans) The following points can be used to study role and effectiveness:

1. Builds Accountability Structure: The auditing system creates a framework for accountability. Internal or administrative accountability as well as public accountability are included. The exercise of accountability is impacted by the effectiveness of internal controls, information management, performance reviews, financial monitoring, and internal audit.

2. Ensures Internal Accountability: Only if there is a robust internal accountability framework will the audit institutions be able to provide public accountability. Each level of public authority within the audit organisation is answerable to its higher level; for instance, the Secretary of the Ministry is in charge of the relevant programmes.

3. Ascertains Public Financial Accountability: It is reliant on public accountability, which is made possible by adhering to the correct budgeting and implementation methods.

4. Establishes the Accountability of Executive to Parliament/legislature: Audit guarantees that the executive is answerable to the legislative and/or parliament. The audit reports are used by the Public Accounts Committee to assess government revenue and spending.

5. Serves as an Aid to Administration: The policymakers, the administration, and many other stakeholders in governance greatly benefit from the CAG reports. Numerous sectors, including inefficiency and waste; inadequate tax assessment; evaluation of socioeconomic programmes, etc.

10. Discuss the functions of the Committee on Public Undertakings.

Ans) The Committee on Public Undertakings (CPU) operates similarly to the other two committees, with the exception of its own area of responsibility. The following are some topics and issues that their committee is debating:

1. According to its mandate, the CPU reviews the accounts and reports of the public undertakings it has chosen.

2. In order for the committee members to research the chosen topic, it is requested that the public sector initiative submit the necessary data.

3. When necessary, study groups can be formed to conduct in-depth analyses of various topics.

4. The CPU also goes on study tours if an immediate study is required. During these tours, unofficial meetings take place.

5. Ministries are asked for notes relating to a particular study of a study of a subject.

6. While on tour, members of the CPU can also casually meet Confederation of Indian Industries members to discuss the relevant topic.

7. Based on these informal gatherings and sessions, the CPU officially invites witnesses to testify in Parliament.

8. Additionally, it carries out any additional duties assigned to it by the Lok Sabha Speaker.