Fiscal Policy And Monetary Policy Of India
Fiscal Policy And Monetary Policy Of India
Fiscal Policy and Monetary Policy of India: Fiscal Policy is the main part of Economic Policy. Fiscal Policy's first word Fiscal is taken from French word "Fisc"; it means treasure of Government. Therefore, we can define_fiscal policy as the revenue and expenditure policy of Government of India. It is prime duty of Government to make fiscal policy. By making this policy, Government collects money from different resources and utilises it in different expenditure. Thus, fiscal policy is related to development policy. All welfare projects are completed under this policy.Objectives of Fiscal Policy: There are following objectives of fiscal policy:
1. Development of Country
2. Employment
3. Removal of Inequality
4. Fixation of Govt. ResponsibilityEffective use of resources is the duty of the Government, and by making of fiscal policy, different minister's accountability can be checked.
Techniques of Fiscal Policy:
1. Taxation Policy: Government of India passes finance bill every year. In this bill, the government determines the rate of taxes. It can increase or decrease these tax rates and amend previous rules of taxation. The main source of government's earnings is taxation. However, more tax on public will adversely affect the development of economy.
2. Expenditure Policy: Large public expenditure is involved in opening of govi schools, colleges and universities, making ofbridges, roads and new railway tracks, All this expenditure is based on government's expenditure policy. Government can inerease or decrease the amount of public expenditure by changing the budget.3. Deficit Financing: If Government's expenditure is more than its revenue, it bridges this deficit through borrowings from central bank of country. But, deficit financing will reduce the purchasing power of currency. More new currency will increase inflation.
4. Public Debt Policy: Government can take loan trom worla bank of trom public by issuing government securities andbonds. But it will also increase the cost of debt m the fom of iterest, which government has to pay on the amount of loan,
Limitations of Fiscal Policy:
1. Inflation in India is increasing rapidly and living of poor person has become difficult. This shows the failure of Indian fiscal policy.
2. Government fiscal policy has failed to reduce the black money.
3. Loans from World Bank imply that government has to obey the rules and regulations of World Bank and IMF.
4. Rate of unemployment is increasing fast
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