FISCAL POLICY Objective PART 2 BY AYUSSH SANGHI
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Main Objectives of Fiscal Policy in India * The fiscal policy is designed to achieve certain objectives as follows:-
evelopment by effective Mobilisation of Resources The principal objective of fiscal policy is to ensure rapid economic growth and development. This objective of economic growth and development can be achieved by Mobilisation of Financial Resources. * The central and the state governments in India have used fiscal policy to mobilize resources. * The financial resources can be mobilised b The financial resources can be mobilised by:
evelopment by effective Mobilisation of Resources Taxation: Through effective fiscal policies, the government aims to mobilize resources by way of direct taxes as well as indirect taxes because most important source of resource mobilization in India is taxation. Public Savings: The resources can be mobilized through public savings by reducing government expenditure and increasing surpluses of public sector enterprises acreasing surpluses of public sector enterprises. Private Savings: Through effective fiscal measures such as tax benefits, the government can raise resources from private sector and households. Resources can be mobilized through government borrowings by ways of treasury bills, issue of government bonds, etc., loans from domestic and foreign parties and by deficit financing.
Efficient allocation of Financial Resources The central and state governments have tried to make efficient allocation of financial resources. These resources are allocated for Development Activities which includes expenditure on railways, infrastructure, etc, whereas Non- development Activities includes expenditure on defence, interest payments, subsidies, etc. But generally the fiscal policy should ensure that the resources are allocated for of goods and services which are socially desirable. Therefore, India's generation fiscal policy is designed in such a manner so as to encourage production of desirable goods and discourage those goods which are socially undesirable. irable goods and discourage those goods which are
Reduction in inequalities of Income and Wealth Fiscal policy aims at achieving equity or social justice by reducing income inequalities among different sections of the society. The direct taxes such as income tax are charged more on the rich people as compared to lower income groups. Indirect taxes are also more in the case of semi-luxury and luxury items, which are mostly consumed by the upper middle class and the upper class. The government invests a significant proportion of its tax revenue in the implementation of Poverty Alleviation Programmes to improve the conditions of poor people in society er income groups. Indirect taxes are also rm
Price Stability and Control of Inflation One of the main objectives of fiscal policy is to control inflation and stabilize price. Therefore, the government always aims to control the inflation by reducing fiscal deficits, introducing tax savings schemes, Productive use of financial resources, etc.
Employment Generation * The government is making every possible effort to increase employment in the country through effective fiscal measure.
Balanced Regional Development Another main objective of the fiscal policy is to bring about a balanced regional development. There are various incentives from the government for setting up projects in backward areas such as Cash subsidy, Concession in taxes and duties in the form of tax holidays, Finance at concessional interest rates, etc.