FISCAL POLICY

Structure of government spending and taxation. Which influences the economy.

Overall effect of the budget outcome on economic activity.

Role of a Fiscal Policy

To achieve desirable price level
To Achieve desirable consumption level To Achieve desirable employment level

To achieve desirable income distribution

Increase in capital formation Degree of inflation

Effects of a fiscal policy

Fiscal policy changes the composition of aggregate demand. It regulates the level of spending of the general public. Changes the government budget on the overall economy. Helps in altering the tax rate of a particular segment or country.

Three stances of fiscal policy are:

A neutral stance of fiscal policy implies a balanced budget where G = T (Government spending = Tax revenue). An expansionary stance of fiscal policy involves a net increase in government spending (G > T). A contractionary stance of fiscal policy (G < T).

Government Spending
Governments spend money on a wide variety of resources, from the military to services like education and healthcare, as well as transfer payments.

To avail such funds, the government can opt for various sources such as: Taxation Seigniorage, the benefit from printing money Consumption of fiscal reserves. Sale of assets (e.g., land).

Taxation over the years

Change in Custom Duties

Excise duty on cigarettes and other tobacco products was increased. Additional component of excise duty on large cars, multi utility vehicles, and sports utility vehicles was increased from 20 per cent to 22 per cent. Customs duty was increased on crude petroleum from nil to 5 per cent; petrol and diesel from 2.5 per cent to 7.5 per cent. Customs duty on gold, silver, and platinum increased by 50 per cent of the earlier applicable specific rates.