1.
ROLE OF FISCAL POLICY IN DEVELOPMENT
Aashfa Ahsan | Afia Siddiqui | Divyanshu Yadav | Gurucharan Chhabra
M. Plan (Urban Planning) | Sem 3

2.
Fiscal Policy :
An introduction
Fiscal policy is that a part of government policy that is concerned
with Raising Revenue through Taxation. It directly affects the
monetary resources power within the hands of the general public.
In economics and political science, fiscal policy is the use of
government revenue collection (mainly taxes) & expenditure
(spending) to influence the economy. The fiscal policy will be
accustomed stabilize the economy over the course of the
fluctuation.

3.
What does Fiscal Policy mean?
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The word fisc means “state treasury” and fiscal policy refers to policy concerning the
use of “state treasury” or the government finances to achieve the macroeconomic goals.
• Fiscal policy can foster growth and human development through a number of different channels.
• The Fiscal Policy is concerned with raising revenue through taxation and other eans and deciding on the level and the pattern
of expenditure.
• The Fiscal Policy operated through the budget which is an estimate of the government expenditure and revenue for the
ensuing financial year.

4.
Difference between Fiscal and Monetary
Policy
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• Fiscal policy are often distinguished from monetary policy, in this fiscal policy deals with taxation and government disbursement and is commonly
administered by a government under laws of a legislature, whereas monetary policy deals with the money supply, lending rates and interest rates
and is commonly administered by a central bank.
• Fiscal policy deals with the taxation and expenditure selections of the government. monetary policy, deals with the supply of cash within the
economy and also the rate of interest.
• Fiscal policy consists of several components like tax policy, expenditure policy, investment or withdrawal ways and debt or surplus management.
economic policy is a vital constituent of the economic framework of a country and is thus intimately connected with its general economic policy
strategy.

5.
Constituents of the Fiscal Policy
PUBLIC EXPENDITURE
The public expenditure can affect
the economic development of a
country through its size and
composition. Expenditure on
defense policiesand such other
activities being unproductive can
rarely help the groth of a countyr.
And also productive expenditure
on development of infrastructure.
TAXATION
The taz structure in a developing
country should be designed in
such a anner that it can raise
adequate resources for the
government’s developmental as
well as non developmental
activities without having adverse
effects on investment activity in
the rpiavtae sector.
PUBLIC BORROWING
Public borrowing may be used to
check non essential private
consumption expenditure. The
government may issue
debentures, bonds etc, with
attractive rate of interest for this
purpose. When the government
faisl to collect the sufficient
resources it may resort to
compulsory savings.
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6.
Stances of Fiscal Policy
NEUTRAL STANCE
This results in large tax
revenue government.
Spending is fully funded by tax
revenues and overall budget
has a neutral effect on the
level of economic activity.
EXPANSIONARY STANCE
Government expenditure is
more than the tax receipts
CONTRATIONARY
STANCE
Government expenditure is
less than the taxes and
revenue received.
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7.
Objectives of Fiscal Policy
ATTAINMENT OF FULL EMPLOYMENT
It is of supreme importance to developing countries to
avoid unemployment if not attained full employment. The
state, therefore, has to spend on social and economic
overhead in order to create employment.
PRICE STABILITY
Fiscal policy measures are deployed to control the
inflationary tendencies of the economy.
ACCELERATING THE RATE OF
DEVELOPMENT
Fiscal measures such as taxation, public borrowing
and deficit financing, etc. are engaged effectively to
enhance production, consumption, and distribution and
thereby increase the national per capita income.
OPTIMUM ALLOCATION OF RESOURCES
Fiscal policy measures guide public expenditure.
Government reallocates resources towards equitability
and enhanced social security for the weaker sections.
Spending on subsidies, incentives, etc are the best
examples of such interventions.
ECONOMIC STABILITY
The budgeting system should have built-in flexibility so that
the government's income and expenditures automatically
offer a compensatory effect on the increase or fall of the
nation's income and prevent the economy from external
shocks.

8.
WHAT IS DEVELOPMENT?
DEFINITION BY SOCIETY FOR
INTERNATIONAL DEVELOPMENT
Development is a process that creates growth, progress, positive change, or the addition of
physical, economic, environmental, social, and demographic components. The purpose of
development is a rise in the level and quality of life of the population and the creation of expansion of local
regional income and employment opportunities, without damaging the resources of the environment.
Development is about improvement and change. Providers of development co-operation and developing
countries define how they want to change by setting goals and managing for sustainable results.

9.
Role of development in
country
The various tools of economic policy like budget, taxation, public
expenditure, structure and debt can go an extended means for
maintaining full employment while not inflationary and deflationary
forces in underdeveloped economies.
A tax program will increase income of the individual, promotes
consumption and investment.
This may finally end in increase in disbursement activities that
successively, increase effective
demand of the people.
Fiscal policy plays very important role for promoting economic
development and stability of underdeveloped countries.
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10.
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Types of Fiscal Policy in development
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2 3

11.
Importance of fiscal policy
• Fiscal policy refers to the use of government spending and tax
policies to influence economic conditions, especially
macroeconomic conditions, including aggregate demand for
goods and services, employment, inflation, and economic
growth.
• The major purpose of these measures is to stabilize the
economy.
• Fiscal policy measures are frequently used in tandem with
monetary policy to achieve these macroeconomic goals.
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12.
Tools of Fiscal
Policy
GOVERNMENT
SPENDING
Government spending can have
an impact on economic output.
Government expenditure can be
classed as Government Final
Consumption Expenditure since
it comprises the acquisition of
goods and services for the benefit
of the community. The government
through its spending can redirect
its fiscal priorities.
TRANSFER PAYMENTS
Government payments to
individuals through social welfare
programs, student subsidies, and
Social Security are referred to as
transfer payments.
TAXES
Taxes are a fiscal policy tool since
they allow for changes in the
economy.

13.
Impact of Fiscal Policy in Indian economy
Mobilize Resources Provide employment
opportunities
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The foremost aim of
economic policy in
underdeveloped countries
is to mobilize resources
within the non-public
and public sectors.
Since in less developed
countries, population
grows at a really quick
rate, the aim of economic
policy in such countries is
to form high doses of
expenditures that are
useful to lift
employment
opportunities.
Promotion of
economic stability
Another role played by
the economic policy in
developing countries is of
maintaining
affordable internal and
external economic
stability.
Promotion of
economic stability
Generally, a developing
country is vulnerable to
the efforts of international
cyclic fluctuations. Such
countries primarily export
primary merchandise and
import manufactured and
capital goods.
Subsidies in
consumption and
production
Fiscal instruments also
are employed in below
developed economies to
supply subsidized food
and production inputs to
the poor individuals.
Subsidies in
consumption and
production
Government programmes
like public distribution
system, subsidy policy,
procurance of food
grains, promoting facilities
to the
producers, input offer
schemes, etc.
Encourage socially
optimal investment
In underdeveloped
countries, economic
policy encourages the
investment into those
productive channels that
are thought of socially
and economically
desirable
Inducement to
investment and capital
formation
Fiscal policy plays
fundamental role by
generating investment in
planned industries and
services of service on one
aspect and persuades
investment in private
sector

14.
Steps to Control inflationary
forces in the economy
1. Reducing the purchasing power of the people through
Compulsory Deposit Scheme
2. Mobilizing resources through public debt
3. Levying of Expenditure Tax
4. Imposing more taxes on rentier class
5. Raising the rate of Capital Gains Tax
6. Encouraging the habit of saving among the people
7. Raising the percentage deduction of provident fund
8. Making of public investment in such production projects as have
short gestation period,
9. Encouraging more production
10. Mobilizing more resources by way of public borrowing and using
the same in production projects.
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15.
Goals for economic development
Vital goals of economic policy developed by
the government of India is to achieve fast
economic development of the country.
To achieve such economic development
within the country, the economic policy of
the country has adopted following 2
objectives:
To raise the speed of productive investment
of each public and personal sector of the
country.
• To enhance the marginal and average
rates of savings for mobilizing adequate
monetary resources for creating
Investment publicly and personal
sectors of the economy.
• Optimum utilization of resources which
will replicate the positive impact on 15

16.
Advantages of Fiscal policy in India
EFFECTIVE ALLOCATION OF RESOURCES
The central and state governments have tried to
create economical allocation of financial resources.
Development Activities which has expenditure on
railways, infrastructure, etc. whereas Non-
development Activities includes expenditure on
defence, interest payments, subsidies, etc.
REDUCTION IN INEQUALITIES
Aims at achieving equity or social justice by
reducing financial gain inequalities among totally
different sections of the society.
PRICE STABILITY AND CONTROL
OF INCOME
to manage inflation and stabilize value. Therefore, the
government perpetually aims to manage the inflation
by Reducing fiscal deficits, introducing tax savings
schemes, Productive use of economic resources, etc
BALANCED REGIONAL DEVELOPMENT
To achieve a balanced regional development. There are
numerous incentives from the government for fixing
projects in backward areas like money subsidy,
Concession in taxes and duties within the form of tax
holidays, Finance at concessional interest rates, etc.
INCREASING NATIONAL INCOME
To extend the value of a country. this is often as a result
of fiscal policy facilitates the capital formation. This ends
up in economic growth, that successively will increase
the gross domestic product, per capita financial gain and
value of the country.
DEVELOPMENT OF
INFRASTRUCTURE
Government has placed stress on the infrastructure
development for the aim of achieving economic growth. The
fiscal policy measure equivalent to taxation generates
revenue to the
government. a section of the government's revenue is
invested with within the infrastructure development.

17.
Role of fiscal policy development in India
ATTAINMENT OF FULL EMPLOYMENT
It is of supreme importance to developing countries to
avoid unemployment if not attained full employment. The
state, therefore, has to spend on social and economic
overhead in order to create employment.
PRICE STABILITY
Fiscal policy measures are deployed to control the
inflationary tendencies of the economy.
ACCELERATING THE RATE OF
DEVELOPMENT
Fiscal measures such as taxation, public borrowing
and deficit financing, etc. are engaged effectively to
enhance production, consumption, and distribution and
thereby increase the national per capita income.
OPTIMUM ALLOCATION OF RESOURCES
Fiscal policy measures guide public expenditure.
Government reallocates resources towards equitability
and enhanced social security for the weaker sections.
Spending on subsidies, incentives, etc are the best
examples of such interventions.
ECONOMIC STABILITY
The budgeting system should have built-in flexibility so that
the government's income and expenditures automatically
offer a compensatory effect on the increase or fall of the
nation's income and prevent the economy from external
shocks.

18.
CONCLUSION
• Fiscal policy has a huge role in determining the trajectory of
the macro and microeconomic progress of the country.
• It plays a crucial role in resource allocation, reducing income
disparity, ensuring growth, and so on.
• Reduced taxes and/or increased government expenditure are
used in a fiscal expansion to boost aggregate demand and
growth. Fiscal policy contraction reduces aggregate demand and
output by cutting government expenditure and/or raising taxes.
• It is also a feature of fiscal policy that it tends to impact the
demand directly and quickly when compared to monetary policy,
the impact of which is even uncertain.

19.
THANK YOU
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