Objectives of Fiscal Policy
Fiscal policy is the use of taxation and spending by the government to affect a nation’s level of economic activity. Governments employ fiscal policy to accomplish a number of economic goals, such as:
Infrastructure Development
- In order to achieve economic growth, the government has prioritized infrastructure construction. Taxation and other fiscal policy initiatives bring in money for the state. The development of the infrastructure is funded in part by tax money. All economic sectors benefit as a result of this.
Decreasing the payment deficit
- Fiscal measures like the exclusion of income tax on export revenues, the exclusion of central excise charges and customs, the exclusion of sales tax and octroi, etc. are all attempts by fiscal policy to increase exports.
- The balance of payments problem is helped by the foreign exchange saved through import substitutes and earned through exports. In this method, a negative balance of payments can be fixed by taxing imports or by subsidizing exports.
Effective Regional Development
- Balanced regional development is one of the fiscal policy’s other primary goals. The government offers a variety of incentives for establishing projects in underdeveloped areas, including cash subsidies, Tax holidays are a type of tax and duty concession. financing with lowered interest rates, etc.
Price Stability and Control of Inflation
- Controlling inflation and maintaining price stability is one of the fiscal policy’s primary goals. As a result, the government always strives to keep inflation under control through the reduction of fiscal deficits, the introduction of tax savings plans, the efficient use of financial resources, etc.
What is Fiscal Policy?
Learn about Fiscal Policy, including its Meaning of Fiscal Policy, Instruments of Fiscal Policy, Tools of Fiscal Policy, and real-world Examples of Fiscal Policy, to understand its role in economic management.
Fiscal policy, which refers to the use of government spending and taxation to impact the economy, is an important component of economic management. Governments need it to handle economic issues and accomplish macroeconomic goals including lowering unemployment, fostering growth, and containing inflation. In this article, we’ll explore what fiscal policy is, why it’s important, and give instances of when it’s been utilised well. This article will provide you with a thorough introduction to fiscal policy, whether you’re an economist, a policymaker, or just curious about how the economy functions.
Table of Content
- What is a Fiscal Policy?
- Tools of Fiscal Policy
- Examples of Fiscal Policy
- Changing Tax Rates
- How does Fiscal Policy Work?
- Instruments of Fiscal Policy
- Objectives of Fiscal Policy
- Taxation in Fiscal Policy
- Why is Fiscal Policy Necessary?
- Types of Fiscal Policy
- Economic Influence of Fiscal Policy
- Components of Fiscal Policy
- Altering Government Spending
- Fiscal Policy and Business Effects
- How Does Fiscal Policy Affect People?
- Government Spending and Fiscal Policy
- Government Transfers
- Who Handles Fiscal Policy?
- Fiscal Policy for Strong Economy
- Act on Financial Responsibility and Budget Management (FRBM)
- Sustainable Economic Growth through Fiscal Policy