{"id":5646,"date":"2024-11-06T01:07:00","date_gmt":"2024-11-06T01:07:00","guid":{"rendered":"https:\/\/www.nextias.com\/blog\/?p=5646"},"modified":"2025-11-08T10:07:24","modified_gmt":"2025-11-08T10:07:24","slug":"fiscal-policy","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/blog\/fiscal-policy\/","title":{"rendered":"Fiscal Policy in India: Meaning, Objectives, Instruments &#038; Types"},"content":{"rendered":"\n<p><em><strong>Fiscal Policy in India <\/strong>is the cornerstone of its economic strategy, which steers the country through various phases of growth, development, and challenges. It plays crucial role in shaping the nation&#8217;s development trajectory, influencing its macroeconomic stability, and addressing socio-economic challenges. This <strong>article of NEXT IAS delves into the nuances of Fiscal Policy in India, including its meaning, objectives, instruments, types and other aspects.<\/strong><\/em><\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_56_1 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Definition_of_Fiscal_Policy\" title=\"Definition of Fiscal Policy\">Definition of Fiscal Policy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Objectives_of_Fiscal_Policy_in_India\" title=\"Objectives of Fiscal Policy in India\">Objectives of Fiscal Policy in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Tools_of_Fiscal_Policy\" title=\"Tools of Fiscal Policy\">Tools of Fiscal Policy<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Public_Expenditure\" title=\"Public Expenditure\">Public Expenditure<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Taxation\" title=\"Taxation\">Taxation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Public_Borrowing\" title=\"Public Borrowing\">Public Borrowing<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Difference_between_Fiscal_Policy_and_Monetary_Policy\" title=\"Difference between Fiscal Policy and Monetary Policy\">Difference between Fiscal Policy and Monetary Policy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Types_of_Fiscal_Policies\" title=\"Types of Fiscal Policies\">Types of Fiscal Policies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Cyclicality_of_the_Fiscal_Policy\" title=\"Cyclicality of the Fiscal Policy\">Cyclicality of the Fiscal Policy<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Counter-Cyclical_Fiscal_Policy\" title=\"Counter-Cyclical Fiscal Policy\">Counter-Cyclical Fiscal Policy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Pro-Cyclical_Fiscal_Policy\" title=\"Pro-Cyclical Fiscal Policy\">Pro-Cyclical Fiscal Policy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#FAQs_on_Fiscal_Policy_in_India\" title=\"FAQs on Fiscal Policy in India\">FAQs on Fiscal Policy in India<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#What_is_fiscal_consolidation\" title=\"What is fiscal consolidation?\">What is fiscal consolidation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#Who_prepares_fiscal_policy_in_India\" title=\"Who prepares fiscal policy in India?\">Who prepares fiscal policy in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#What_are_the_three_types_of_fiscal_policy\" title=\"What are the three types of fiscal policy?\">What are the three types of fiscal policy?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#What_is_contractionary_fiscal_policy%E2%80%8B\" title=\"What is contractionary fiscal policy\u200b?\">What is contractionary fiscal policy\u200b?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.nextias.com\/blog\/fiscal-policy\/#What_are_the_tools_of_fiscal_policy%E2%80%8B\" title=\"What are the tools of fiscal policy\u200b?\">What are the tools of fiscal policy\u200b?<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-cef03af234479873eeb37e60895bb463\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Definition_of_Fiscal_Policy\"><\/span><strong>Definition of Fiscal Policy<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It refers to government policy in respect of public expenditure, taxation and public debt. It is the means by which the government adjusts its spending levels and tax rates to monitor and influence a nation\u2019s economy.<\/p>\n\n\n\n<p>It is based on the principles of Keynesian economics, which basically states that governments can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"433\" height=\"276\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/02\/Screenshot-2024-02-08-171105.png\" alt=\"fiscal policy in india\" class=\"wp-image-5653\" style=\"width:425px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/02\/Screenshot-2024-02-08-171105.png 433w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/02\/Screenshot-2024-02-08-171105-405x258.png 405w\" sizes=\"auto, (max-width: 433px) 100vw, 433px\" \/><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-3c51ef2b827cab64c4fa0b2f41849001\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Objectives_of_Fiscal_Policy_in_India\"><\/span><strong>Objectives of Fiscal Policy in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Some of the main objectives or role of fiscal policy in India can be seen as follows:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>To mobilise additional resources into socially necessary lines of development<\/li>\n\n\n\n<li>To achieve and maintain economic stability<\/li>\n\n\n\n<li>To stabilize the price level.<\/li>\n\n\n\n<li>To maintain the growth rate of the economy.<\/li>\n\n\n\n<li>To maintain equilibrium in the balance of payments.<\/li>\n\n\n\n<li>To raise the standard of living of the citizens of the country.<\/li>\n\n\n\n<li>To reduce extreme inequality in income and wealth<\/li>\n\n\n\n<li>To provide the necessary incentives to the private sector for its healthy growth. etc<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-9f7b077afceefbc3deb44cda46b30f8a\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Tools_of_Fiscal_Policy\"><\/span><strong>Tools of Fiscal Policy<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Major tools of this policy used by the government are as follows:<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-3ebd600ad720208ad8502991c613cdcc\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Public_Expenditure\"><\/span><strong>Public Expenditure<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It includes subsidies, transfer payments including welfare programs, public works projects and government salaries. By increasing or decreasing its spending, the government can directly influence economic activity. For example, more government spending can increase demand, leading to higher output and employment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-560cefa86997c68b2bb9e1015ab9f461\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Taxation\"><\/span><strong>Taxation<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The government can influence economic activity through its taxation policy. By reducing taxes, the government leaves individuals and businesses with more income to spend and invest, which can boost economic growth. Conversely, increasing taxes can help cool down an overheated economy by reducing the amount of disposable income available.<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#ebecf0\"><strong>Further Reading:<\/strong> <a href=\"https:\/\/www.nextias.com\/blog\/taxation-system-in-india\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/taxation-system-in-india\/\"><strong>Taxation System in India<\/strong><\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-ee34ef889d77680afde647fc9be83ebc\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Public_Borrowing\"><\/span><strong>Public Borrowing<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Public borrowing refers to the means by which governments finance their expenditures that exceed tax revenues. Under it, the government raises money from the domestic population or from abroad through instruments such as bonds, NSC, Kisan Vikas Patra, etc. Public borrowing is a common practice used to fund public services, infrastructure projects, welfare programs, and to manage the country\u2019s policy.<\/p>\n\n\n\n<div class=\"wp-block-group has-background\" style=\"background-color:#ebecf0\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p><strong>Other Measures<\/strong><\/p>\n\n\n\n<p><strong>Other fiscal measures adopted by the government include:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Rationing and price control<\/li>\n\n\n\n<li>Regulation of wages<\/li>\n\n\n\n<li>Increase the production of goods and services.<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-428584e5435675797286862cc340b304\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Difference_between_Fiscal_Policy_and_Monetary_Policy\"><\/span><strong>Difference between Fiscal Policy and Monetary Policy<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#fff2cc\"><thead><tr><th><\/th><th><strong>Fiscal Policy<\/strong><\/th><th><strong>Monetary Policy<\/strong><\/th><\/tr><\/thead><tbody><tr><td><strong>Definition<\/strong><\/td><td>It is a macro-economic policy used by the government to adjust its spending levels and tax rates to monitor and a nation\u2019s economy<\/td><td>It is a macro-economic policy used by the Central Bank to influence money supply and interest rates.<\/td><\/tr><tr><td><strong>Institutional Control<\/strong><\/td><td>Controlled by the Government<\/td><td>Controlled by the Central Bank<\/td><\/tr><tr><td><strong>Prime Objective<\/strong><\/td><td>To influence the economic condition<\/td><td>To influence the money supply and interest rates.<\/td><\/tr><tr><td><strong>Major Tools<\/strong><\/td><td>Public Expenditure, Taxation, Public Borrowing etc<\/td><td>Bank Rate, Cash Reserve Ratio, Statutory Liquidity Ratio etc.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"546\" height=\"294\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/02\/fiscal-vs-monetary-policy.png\" alt=\"difference between fiscal policy and monetary policy\" class=\"wp-image-10637\" style=\"width:620px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/02\/fiscal-vs-monetary-policy.png 546w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/02\/fiscal-vs-monetary-policy-460x248.png 460w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/02\/fiscal-vs-monetary-policy-150x81.png 150w\" sizes=\"auto, (max-width: 546px) 100vw, 546px\" \/><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-6438290f1181ed7aace156b18a2b60db\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Types_of_Fiscal_Policies\"><\/span><strong>Types of Fiscal Policies<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Based on the economic conditions and the objectives that governments aim to achieve, It can be categorized into three main types<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#fff2cc\"><thead><tr><th><\/th><th><strong>Expansionary<\/strong><\/th><th><strong>Contractionary\/Tight<\/strong><\/th><th><strong>Neutral<\/strong><\/th><\/tr><\/thead><tbody><tr><td><strong>Mechanism<\/strong><\/td><td>Fiscal policy that increases aggregate demand directly through an increase in government spending is called expansionary.<\/td><td>Fiscal policy that reduces demand via lower spending is called contractionary or tight.<\/td><td>A neutral fiscal policy refers to a strategy by which the government&#8217;s budget is designed to neither stimulate nor restrain economic growth.<\/td><\/tr><tr><td><strong>Objective<\/strong><\/td><td>The objective of Expansionary Fiscal Policy is to reduce unemployment and also results in better GDP.<\/td><td>The objective of Contractionary Fiscal Policy is to reduce inflation.<\/td><td>The objective of Neutral Fiscal policy is to maintain the status quo in the economy.<\/td><\/tr><tr><td><strong>Caution<\/strong><\/td><td>It can cause some inflation.<\/td><td>It can trigger some unemployment.<\/td><td>It may lead to degradation due to inaction in prevailing conditions.<\/td><\/tr><tr><td><strong>Suitability<\/strong><\/td><td>This type of policy is usually undertaken during recessions to increase the level of economic activity.<\/td><td>This type of policy is usually undertaken during inflationary periods to control excess money supply.<\/td><td>This type of fiscal policy is usually followed when an economy is in equilibrium.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-d81587fa4ee3e737703fed81bddf13e4\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Cyclicality_of_the_Fiscal_Policy\"><\/span><strong>Cyclicality of the Fiscal Policy<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>cyclicality of the fiscal policy<\/strong> refers to a change in direction of government expenditure and taxes based on economic conditions and fluctuations in economic growth.<\/p>\n\n\n\n<p>There are <strong>two types of cyclical fiscal policies:<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-0c51d0f5df7634ea986d7e330a93960d\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Counter-Cyclical_Fiscal_Policy\"><\/span><strong>Counter-Cyclical Fiscal Policy<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It refers to the steps taken by the government that go against the direction of the economic or business cycle.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>For example<\/strong>, in a recession or slowdown, the government, usually, takes the route of expansionary fiscal policy. This increases expenditure and reduces taxes to create a demand that can drive an economic boom. This increases the consumption potential of the economy and helps soften the recession.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-89d4315c38b785536e0c29de47df991a\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Pro-Cyclical_Fiscal_Policy\"><\/span><strong>Pro-Cyclical Fiscal Policy<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It refers to the type of <strong>fiscal policy<\/strong> wherein the government reinforces the business cycle by being expansionary during good times and contractionary during recessions.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Pursuing a <strong>pro-cyclical fiscal policy<\/strong> is generally regarded as dangerous as it could raise macroeconomic volatility, depress investment, hamper growth and harm the poor. For example, adopting Contractionary Fiscal Policy during a recession will reduce the government expenditure and increase the taxes. This will further decrease the consumption potential of the economy and deepen the recession.<\/li>\n<\/ul>\n\n\n\n<div class=\"wp-block-group has-background\" style=\"background-color:#ebecf0\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"has-text-align-center has-text-color has-link-color wp-elements-910cdad4e32151318951de4238a5695c\" style=\"color:#015aa7\"><strong>Related Concepts<\/strong><\/p>\n\n\n\n<p><strong>Fiscal Deficit<\/strong><\/p>\n\n\n\n<p>Fiscal Deficit refers to the gap between the government&#8217;s total expenditure in a given financial year and its total revenue (excluding borrowings) in the same financial year. It is expressed as a percentage of the Gross Domestic Product (GDP) and is an indicator of the government\u2019s financial health.<\/p>\n\n\n\n<p><strong>Fiscal Consolidation<\/strong><\/p>\n\n\n\n<p>Fiscal consolidation is a process where the government&#8217;s fiscal health is improved by reducing the fiscal deficit to levels which are manageable and bearable for the economy. Improved tax revenue realization and better aligned expenditure are important components of fiscal consolidation.<\/p>\n\n\n\n<p><strong>Fiscal Drag<\/strong><\/p>\n\n\n\n<p>Fiscal drag is an economic term whereby <a href=\"https:\/\/www.nextias.com\/blog\/inflation\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/inflation\/\"><strong>inflation<\/strong><\/a> or income growth moves taxpayers into higher tax brackets. It occurs mainly due to Progressive Taxation, whereby individuals are moved into higher tax brackets because of inflation or increased income.<\/p>\n\n\n\n<p><strong>Fiscal Neutrality<\/strong><\/p>\n\n\n\n<p>Fiscal neutrality is when a government taxing, spending, or borrowing decision has or is intended to have no net effect on the economy. Any new spending introduced by a policy change that is fiscally neutral in this sense is expected to be entirely offset by additional revenues generated. Thus, Fiscal Neutrality creates a condition where demand is neither stimulated nor diminished by taxation and government spending.<\/p>\n\n\n\n<p><strong>Crowding Out Effect<\/strong><\/p>\n\n\n\n<p>The crowding out effect is an economic theory suggesting that increased government spending leads to a reduction in private sector spending. This phenomenon occurs because the resources used by the government must come from somewhere, typically through increased taxation or borrowing. Thus, the private sector is left with lesser resources to invest.<\/p>\n\n\n\n<p><strong>Pump Priming<\/strong><\/p>\n\n\n\n<p>Pump priming is the action taken to stimulate an economy usually during a recessionary period, through government spending, and interest rate and tax reductions. Pump priming involves introducing relatively small amounts of government funds into a depressed economy in order to spur growth.<\/p>\n\n\n\n<p><strong>Economic Stimulus<\/strong><\/p>\n\n\n\n<p>An economic stimulus is the use of monetary or <strong>fiscal policy<\/strong> changes to kick start growth during a recession. Governments can accomplish this by using methods such as lowering interest rates, increasing government spending and quantitative easing, to name a few.<br>In the wake of COVID-19 Pandemic, the Government announced 3 tranches of economic stimulus under the Atma Nirbhar Bharat Programme.<\/p>\n<\/div><\/div>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-9cf2c0420188afce8d3732bddb37f2ea\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"FAQs_on_Fiscal_Policy_in_India\"><\/span><strong>FAQs on Fiscal Policy in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1707391791546\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What_is_fiscal_consolidation\"><\/span><strong>What is fiscal consolidation?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<div class=\"rank-math-answer \">\n\n<p>Fiscal consolidation refers to improving the government&#8217;s fiscal health by reducing fiscal deficit.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1707391806119\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"Who_prepares_fiscal_policy_in_India\"><\/span><strong>Who prepares fiscal policy in India?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<div class=\"rank-math-answer \">\n\n<p>It is formulated in India by the Finance Ministry of the Central or State Governments.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1707391814975\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What_are_the_three_types_of_fiscal_policy\"><\/span><strong>What are the three types of fiscal policy?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<div class=\"rank-math-answer \">\n\n<p>Based on the objective, there are <strong>three types of fiscal policies &#8211; Expansionary, Contractionary and Neutral<\/strong>.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1762498588172\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What_is_contractionary_fiscal_policy%E2%80%8B\"><\/span><strong>What is contractionary fiscal policy\u200b?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<div class=\"rank-math-answer \">\n\n<p>This policy involves reducing government spending and increasing taxes to decrease aggregate demand, control inflation, and slow economic growth.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1762498601541\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What_are_the_tools_of_fiscal_policy%E2%80%8B\"><\/span><strong>What are the tools of fiscal policy\u200b?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<div class=\"rank-math-answer \">\n\n<p>The major tools of fiscal policy are government spending, taxation, and public borrowing. Government spending influences economic activity, taxation regulates disposable income, and borrowing finances deficits to manage the economy effectively.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fiscal Policy in India is the cornerstone of its economic strategy, which steers the country through various phases of growth, development, and challenges. <\/p>\n","protected":false},"author":9,"featured_media":5660,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[62],"tags":[72],"class_list":["post-5646","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-indian-economy","tag-gs-3"],"_links":{"self":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts\/5646","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/comments?post=5646"}],"version-history":[{"count":19,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts\/5646\/revisions"}],"predecessor-version":[{"id":22838,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts\/5646\/revisions\/22838"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/media\/5660"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/media?parent=5646"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/categories?post=5646"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/tags?post=5646"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}