Question

Discuss any two objectives of fiscal policy in a developing economy.

Answer 1

1. Economic Growth: Achieving a high rate of economic growth is one of the main goals of economic policy in developing nations. The process through which a nation’s actual per capita income rises over an extended period of time is known as economic growth. Economic growth raises the standard of living for people by enabling the economy to produce more goods and services. Economic growth is thought to be the primary driver of long-term improvements in people’s quality of life. Furthermore, a greater pace of economic growth aids in resolving the issues of unemployment and poverty in developing nations like India. Therefore, it should come as no surprise that policymakers everywhere are worried about quickening the pace of economic expansion.
2. Price Stability: Another goal of fiscal policy in a developing economy is to keep prices stable. Prices tend to grow in these countries due to high total expenditure in the economy without a corresponding increase in output during the early stages of economic development. As a result, there is a need to regulate the price increase.