Question

Discuss four fiscal policy objectives with reference to India.

Answer 1

The following are the main objectives of fiscal policy.

1. Raising Revenues: In order to meet the state expenditure for carrying out its functions, the government levy taxes of different types so that its revenue may increase.
2. Economic Growth: Economic growth is nothing, but an increase in the economic activities or economic variables over a period of time along with reduction in poverty, unemployment and income inequalities.
   Economic growth enables a country to produce more goods and services and thereby help in raising the standard of living of the people. Moreover, high rate of economic growth helps in solving the problems of poverty and unemployment in developing countries like India.
3. Full Employment: Keynes regarded fiscal policy as an instrument to attain and maintain full employment in the economy. He suggested that public expenditure has to be incurred in a planned way to finance public works programmes and provide social security measures.
4. Price Stability: Economic stability is another major objective of a sound fiscal policy. Price stability here means relative price stability. Price stability is needed because it keeps the value of money constant eliminates economic fluctuations, brings stability in the economy.