 It’s a significant instrument for stabilizing the

fluctuations to produce the desirable effect on

the national income, output and employment.
 Its main objective is to achieve the aims of the
economy policy or macro economic goals like
Monetary policy.
 Both Fiscal and Monetary policy are
complementary to each other.
 The objective of “social justice and equity” can be
achieved through it.
 Fiscal Policy refers to the decisions made by the
government regarding its spending (Public
Expenditure) and Income/Revenue (Taxation).
 Expansionary or Inflationary:-Increase in
price levels and ,increase in output and
thereby in Employment, High Expenditure
done by the Government towards public)

 Contradictionary or Deflationary- Vice- versa.

 High level of employment.
 Sustained Economic growth. ( Production of
Goods and services more than previous year)
 Positive economic stability. ( In regards to
GDP and Inflation )
 Social Justice with Equity.
 Government Expenditure. ( Includes Defence,
Education, Health services, Repayment of
debts, Transfer Payments-Pensions etc.
 Taxation. ( Direct tax:- Income tax, Capital
gain tax and Indirect tax :- Custom duty,
Excise duty, sales tax)
 Public Borrowings. ( From Central Bank (RBI)
or by Issuing Govt. Securities,or from
IMF/World bank)
 Impact on Demand for Goods and Services.
 Impact on price levels.
 Impact on Investments(Mainly Pvt Sectors/co.)
 Impact on savings.
 Impact on future savings and investments.
 Impact on Global trade and exchange rates.
 Impact on Growth and development.