Fiscal Policy
Fiscal Policy
FISCAL POLICY: Fiscal policy is result of several component policies or mix of policy instruments. These include policy on taxation, subsidy, welfare expenditure, etc; investment or disinvestment strategies; and debt or surplus management. Fiscal policy is an important constituent of the overall economic framework of a country and is therefore intimately linked with its general economic policy strategy.
Public borrowing and Deficit Financing are a part of Fiscal Policy of the country. An effective fiscal policy is composed of policy decisions relating to entire financial structure of the government including tax revenue, public expenditures, loans, transfers, debt management, budgetary deficit, etc. The policy also tries to attain proper balance between these aforesaid units so as to achieve the best possible results in terms of economic goals.
Objectives of fiscal policy adopted by the Government of India:
In order to attain all these aforesaid objectives, the Government of India has been formulating its fiscal policy incorporating the revenue, expenditure and public debt components in a comprehensive manner. One of the important goals of fiscal policy formulated by the Government of India is to attain rapid economic development of the country .
To attain such economic development in the country, the fiscal policy of the country has adopted following two objectives:
The fiscal policy of the country is trying to attain both these two objectives during the plan periods.
Techniques of Fiscal Policy
Main objectives of taxation policy in India include:
Internal Debt: Internal debt indicates the amount of loan raised, by the Government from within the country. The Government raises internal public debt from the open market by issuing bonds and cash certificates and 15 years annuity certificates. The Government also borrows for a temporary period from RBI (treasury bills issued by RBI) and also from commercial banks.
External Debt: As the internal debt is insufficient thus the Government is also collecting loan from external sources, i.e., from abroad, in the form of foreign capital, technical know-how and capital goods. Accordingly, the Central Government is also borrowing from international financing agencies for financing various developmental projects.These agencies include World Bank, IMF, IDA, IFC etc. Moreover, the Government is also collecting inter-governmental loans from various developed countries of the world for financing its various infrastructural projects.
Merits or Advantages of Fiscal Policy of India:
Students / Parents Reviews [10]
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