Fiscal Policy of Bangladesh regarding SME
Fiscal Policy generally refers to the use of TAXATION and government expenditure to regulate the aggregate level of economic activity in a country. Fiscal policy in Bangladesh basically comprises activities, which the country carries out to obtain and use resources to provide services while ensuring optimum efficiency of the economic units. The policy influences the behavior of economic forces through public finance. Major objectives of the fiscal policy of Bangladesh are to ensure macroeconomic stability of the country, promote economic growth, and develop a mechanism for equitable distribution of income. The main tools to achieve these objectives are variation in public revenue, variation in public expenditure, and management of public debt. These are reflected in the budgetary operations of the government, prepared and implemented on year-on-year basis. In the initial years of independence, the government of Bangladesh had to spend a large amount of its resources in reconstruction and rehabilitation work. It had negative public savings and limited private investment. Despite large inflows of FOREIGN AID, the increasingly large financing gap became the main concern of the government. The tax structure was such that any increase in taxes due to built-in consequences of economic growth was virtually not possible. This was because of the fact that despite a moderate growth of the economy, INCOME DISTRIBUTION was skewed, and had been pushing more and more people below the POVERTY line each year. As such, the proportion of POPULATION with taxable surplus went down overtime. More than 80% of the total tax revenue came from indirect taxes, amongst which taxes on imports contributed about 60%. Since most imports were in the government sector and basic need-oriented, it was hardly possible to increase import duty. Despite higher production costs, prices of most public goods could not be rationalized due to socio-economic reasons. As such, these were kept lower, which resulted in inadequate cost recovery. Current expenditure had always been underestimated in the country, while current surplus as well as foreign loans and grants were overestimated. Therefore, the overall fiscal deficit experienced a large variability all the time. The whole scenario may be described as such that the fiscal policies of the past could not be used as an adequate tool for 'fine-tuning' the economy towards achieving macro-economic stability and higher economic growth.
SMEs are recognized as engine of economic growth and employment generation for sustainable industrialization in both developed and developing countries of the world. In context of Bangladesh, there is no alternative of small and medium enterprises for rapid industrialization and national economic growth through lower capital investment and employment generation. The SME Foundation is playing its role in helping the SME entrepreneurs including the women entrepreneurs by conducting various programs with an aim to develop the SMEs of Bangladesh. One of the major aims of SME is to bring the grassroots entrepreneurs into the main stream of economic development through employment generation, reduction of social discrimination & poverty alleviation. Small and Medium Enterprises (SMEs) have historically been one staples of the enterprise landscape within economies globally. Especially growth with clear benefits for poverty reduction puts a premium on integrating, productively and profitably, small and medium enterprises in the very process of economic growth. A historically accelerated pace of trade liberalization in Bangladesh since the early 1990s by spurring a veritable deluge of imports has quite significantly increased competitive pressure on SMEs in Bangladesh. Rapidly falling cost of communications have by unifying global markets heightened the intensity of...
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