Government's Fiscal Policies

Father continues, “As we can understand the importance of RBI and its monetary policy, we should also know the importance of Government’s role in the economy, how even the policies taken by the government i.e. the Fiscal Policies also affect everyone in the society, from the poorest to the richest!”

Ram to his astonishment said “Oh really? So like RBI controls the economy with Monetary policy, our government’s weapon is the Fiscal policy!” “Yes!” said father, and all the steps that would be taken or has taken by the government is stated in the government’s budget! The term budget is derived from the French word "Budgette" which means a leather bag or a wallet. Budget is most important financial information document of the government. It is a statement of the financial plan of the government. It shows the income and expenditure of the government during a financial year, which in India runs from 1st April to 31st March. 

Whether to raise or cut taxes, whether to reduce taxes across the board or reduce them for low and middle-income families; how much to spend on education, defence, infrastructure, social development, etc these and many related issues involve the fiscal policy.