Fiscal policy deals with the taxation and expenditure decisions of the government. It is composed of various parts. These comprise expenditure policy, tax policy, disinvestment or investment strategies and surplus or debt management. Fiscal policy is a significant component of the overall economic framework of the nation & is thus closely linked with its all - purpose economic policy strategy.
Instruments of Fiscal Policy
The main instruments of fiscal policy are the alterations in the composition and level of taxation & government spending in various sectors. These amendments can have an effect on the following variables in an economy:
• Aggregate demand & level of economic activity
• Investments and savings in the economy
• Distribution of income
Major objectives of Fiscal Policy in India
1. Development by successful Mobilization of Resources
The financial resources can be mobilized by:
• Taxation
• Public Savings
• Private Savings
2. Efficient allocation of Financial Resources
3. Reduction in inequalities of Income and Wealth
4. Price Stability and Control of Inflation
5. Employment Generation
6. Balanced Regional Development
7. Reducing the Deficit in the Balance of Payment
8. Capital Formation
9. Increasing National Income
10. Development of Infrastructure
11. Foreign Exchange Earnings
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