Question

Discuss how equity can be achieved through the fiscal policy.

Answer 1

Equity refers to the fair distribution of income and wealth within an economy. It ensures that economic growth benefits all sections of society, reducing income disparities and promoting social justice. Fiscal policy can achieve equity through:

1. Progressive Taxation: Implementing a progressive tax system where higher-income groups are taxed at higher rates while providing tax exemptions or reduced rates for low-income groups. This approach reduces income inequality by redistributing wealth from the richer to the poorer sections of society.
2. Public Expenditure: Allocating government spending to welfare programs, education, healthcare, and social security schemes that benefit the economically weaker sections. For instance, subsidized education, affordable healthcare, and public housing projects directly support lower-income groups.
3. Regional Balance: Ensuring balanced regional development by investing in infrastructure and public projects in economically backward regions, thus reducing regional disparities in income and wealth distribution.