Objectives of Fiscal Policy in India
Fiscal policy in India aims to achieve several key objectives that contribute to the overall economic stability and growth of the country. These objectives include:
- Economic Growth
- Price Stability
- Employment Generation
- Redistribution of Income
- External Stability
- Infrastructure Development
- Fiscal Discipline
Let’s explore each objective in detail with suitable examples.
1. Economic Growth
Objective: To promote sustainable economic growth by investing in infrastructure, education, health, and other key sectors.
Example:
- National Infrastructure Pipeline (NIP): Launched to develop infrastructure across various sectors, aiming to invest over ₹111 lakh crore by 2024-25. This includes projects in energy, roads, railways, urban development, and digital infrastructure. The focus on infrastructure boosts economic activities, creates jobs, and enhances productivity.
2. Price Stability
Objective: To control inflation and stabilize prices by regulating aggregate demand through government expenditure and taxation.
Example:
- Fiscal Measures to Control Inflation: During periods of high inflation, the government may reduce its spending or increase taxes to decrease aggregate demand. For instance, in 2010-11, when India faced high inflation, the government cut down subsidies and reduced public expenditure to control price levels.
3. Employment Generation
Objective: To create job opportunities through government projects and incentives for private sector employment.
Example:
- Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): Provides at least 100 days of wage employment to rural households every year. This scheme not only generates employment but also improves rural infrastructure, contributing to long-term economic growth.
4. Redistribution of Income
Objective: To reduce income inequalities by implementing progressive taxation and welfare programs.
Example:
- Pradhan Mantri Jan Dhan Yojana (PMJDY): Aims to provide universal access to banking facilities, ensuring financial inclusion. Through this scheme, the government opened millions of bank accounts for the underprivileged, enabling direct benefit transfers (DBTs) of subsidies and financial aid, thus redistributing income and reducing poverty.
5. External Stability
Objective: To manage the balance of payments and stabilize the currency.
Example:
- Export Promotion Policies: The government implements various export promotion schemes, such as the Merchandise Exports from India Scheme (MEIS) and the Service Exports from India Scheme (SEIS). These schemes provide incentives to exporters, helping to improve the balance of payments and stabilize the Indian rupee.
6. Infrastructure Development
Objective: To develop physical and social infrastructure that supports economic activities and improves the quality of life.
Example:
- Smart Cities Mission: An urban renewal and retrofitting program aimed at developing 100 smart cities across the country. The mission focuses on sustainable and inclusive development by improving urban infrastructure, such as water supply, electricity, sanitation, and public transport.
7. Fiscal Discipline
Objective: To maintain a sustainable level of government borrowing and public debt.
Example:
- Fiscal Responsibility and Budget Management (FRBM) Act: Enacted to ensure fiscal discipline by setting targets for reducing fiscal deficits and debt. The act mandates the government to limit the fiscal deficit to a certain percentage of GDP, promoting responsible fiscal management.
Conclusion
The objectives of fiscal policy in India are designed to foster economic stability, growth, and social welfare. Through targeted government spending, effective taxation, and strategic management of public debt, fiscal policy aims to create a conducive environment for economic development, reduce inequalities, and enhance the overall quality of life for citizens. By addressing these key objectives, the government can ensure balanced and sustainable growth for the nation
