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IAS Preparation (/free-ias-prep/) > UPSC Preparation Strategy (/free-ias-prep/upsc-exam-strategy/) > Fiscal Policy
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Fiscal Policy
What is Fiscal Policy? Fiscal Policy deals with the revenue and expenditure policy of the Govt. The word fiscal has
been derived from the word ‘fisk’ which means public treasury or Govt funds.
1. The Union Budget 2021 has signalled the emphasis on the Development Financial Institutions (DFIs)
(https://byjus.com/free-ias-prep/development-finance-institutions/) in the pursuit of long-term infrastructure
creation for the revival of the economy.
2. The establishment of the Dispute Resolution Committee (DRC) has been proposed in the Union Budget 2021
(https://byjus.com/free-ias-prep/union-budget-2021/) that can help provide quick relief to taxpayers in tax
disputes.
Get ready for your civil services examination (https://byjus.com/civil-services-exam/) with the help of the
following links:
1. Government Receipts
2. Government Expenditure
3. Public Debt
Aspirants should note that all the receipts and expenditures of the government are credited and debited from the
following:
Download the notes on the types of funds in India (https://byjus.com/free-ias-prep/types-of-funds-in-india/) from the Hi there! Got any questions?
Government Receipts
The categorisation of the government receipts is given below:
1. Revenue Receipt
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11/11/22, 7:52 PM Fiscal Policy in India - Objectives, Components, Latest Updates [UPSC Notes]
Tax Revenue
Direct Tax
Indirect Tax
Non Tax Revenue (https://byjus.com/free-ias-prep/non-tax-revenue/)
Fees
License and Permits
Fines and Penalties, etc
2. Capital Receipt
Loans Recovery
Disinvestments
Borrowing and other liabilities
Debt Trap – Situation where the borrower has to borrow again for the payment of an instalment on the previous debt.
A borrower unable to meet debt service obligations without borrowing is known to be in a debt trap.
Learn about the Direct Tax Code (DTC) (https://byjus.com/free-ias-prep/direct-tax-code/) comprehensively from the
linked article.
Disinvestment
When the government sells or liquidates its assets of Central Public Sector Enterprises, State Public Sector
Enterprises or other assets; it is referring to disinvestment. This approach caters to the objective of fiscal burden
reduction.
Learn more about Disinvestment and Department of Investment and Public Asset Management (DIPAM)
(https://byjus.com/free-ias-prep/disinvestment-policy-in-india-and-dipam/) in the linked article.
Government Expenditure
There are two classifications of public expenditure:
Candidates must note that plan and non-plan expenditure have been scrapped with the abolishing of the Planning
Commission of India (https://byjus.com/free-ias-prep/planning-commission-of-india/).
The government introduced the FRBM Act aiming for fiscal consolidation. Read about it below:
It means fiscal policy should be conducted in a disciplined manner or a responsible manner i.e. government deficits
or borrowings should be kept within reasonable limits and the government should plan its expenditure in accordance
with its revenues so that the borrowing should be within limits.
Along with the FRBM Act, also read about the NK Singh Committee on Fiscal Deficit (https://byjus.com/free-ias-
prep/nk-singh-fiscal-deficit-committee/) from the linked article.
Hi there! Got any questions?
The distribution of taxes between centre and states is mentioned in the 7th schedule of the Indian constitution
(https://byjus.com/free-ias-prep/7th-schedule-indian-constitution/).
https://byjus.com/free-ias-prep/fiscal-policy-india/ 2/8
11/11/22, 7:52 PM Fiscal Policy in India - Objectives, Components, Latest Updates [UPSC Notes]
There are 3 lists where the taxes are distributed
Union List
State List
Concurrent List
Minimum Alternate Tax (MAT) (https://byjus.com/free-ias- Tax Policy Council & Tax Policy Research Unit
prep/minimum-alternate-tax-mat/) (https://byjus.com/free-ias-prep/tax-policy-council-
and-tax-policy-research-unit/)
Difference Between Monetary Stimulus and Fiscal Difference Between Monetary Policy and Fiscal
Stimulus (https://byjus.com/free-ias-prep/difference- Policy (https://byjus.com/commerce/difference-
between-monetary-stimulus-and-fiscal-stimulus/) between-monetary-policy-and-fiscal-policy/)
UPSC Preparation:
UPSC Mains GS 3 Strategy, Syllabus and Structure Economy Questions from IAS Mains GS 3
(https://byjus.com/free-ias-prep/upsc-mains-gs-paper-3- (https://byjus.com/free-ias-prep/economy-upsc-
structure/) mains-questions/)
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