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India’s Monetary and Fiscal Policy Overview

The document discusses monetary policy and fiscal policy in India. It defines monetary policy as how central banks control money supply to influence inflation, interest rates, and economic stability. Fiscal policy involves adjusting government spending and taxes to influence economic growth. The objectives of both policies are to achieve price stability, full employment, and economic growth. Monetary policy tools include interest rates and money supply measures, while fiscal policy tools are taxes and government spending.

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Ashish Kumar
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17 views10 pages

India’s Monetary and Fiscal Policy Overview

The document discusses monetary policy and fiscal policy in India. It defines monetary policy as how central banks control money supply to influence inflation, interest rates, and economic stability. Fiscal policy involves adjusting government spending and taxes to influence economic growth. The objectives of both policies are to achieve price stability, full employment, and economic growth. Monetary policy tools include interest rates and money supply measures, while fiscal policy tools are taxes and government spending.

Uploaded by

Ashish Kumar
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

MONETARY POLICY & FISCAL

POLICY OF INDIA
MONETARY POLICY
 Monetary policy is the process by which the
monetary authority of a country, like the central
bank or currency board, controls the supply of
money, often targeting an inflation rate or
interest rate to ensure price stability and general
trust in the currency
OBJECTIVES OF MONETARY POLICY

 To maintain economic growth and stability

 To manage inflation

 To reduce unemployment

 To maintain predictable exchange rates with


other currencies
TYPES OF MONETARY POLICY
 Contractionary Monetary Policy
 Controlling inflation
 Raising interest rates
 Selling securities

 Expansionary Monetary Policy:


 Reducing unemployment
 Avoiding recession
 Reducing interest rate
 Buying securities
 Increasing liquidity
DECISIONS RELATED TO MONETARY POLICY
 Short-term interest rates
 Long-term interest rates
 Velocity of money through the economy
 Exchange rates
 Credit quality
 Bonds and equities (corporate ownership and debt)
 Government versus private sector spending/savings
 International capital flows of money on large scales
 Financial derivatives such as options, swaps and future
contracts
FISCAL POLICY
 Fiscal policy is the means by which a government adjusts
its spending levels and tax rates to monitor and influence a
nation's economy.

 The role of fiscal policy for economic growth relates to the


stabilization of the rate of growth of an advanced country.
Fiscal policy through variations in government expenditure
and taxation profoundly affects national income,
employment, output and prices.
TYPES OF FISCAL POLICY
 Neutral Fiscal Policy
 Government spending is equal to tax revenue

 Expansionary Fiscal Policy/ Reflationary Fiscal


Policy
 Government spending is more than tax revenue

 Contractionary Fiscal Policy


 Government spending is less than tax revenue
 Tax revenue is used to pay Government Debts
OBJECTIVES OF FISCAL POLICY

 To maintain and achieve full employment.

 To stabilise the price level.

 To stabilise the growth rate of the economy.

 To maintain equilibrium in the balance of


payments.

 To promote the economic development of


underdeveloped countries.
METHODS OF FUNDING FOR FISCAL POLICY

 Taxation

 Seigniorage

 Borrowing money from the population or from


abroad

 Consumption of fiscal reserves

 Sale of fixed assets


Fiscal Policy Monetary Policy

Definition Fiscal policy is the use of Monetary policy is the process by which the
government expenditure and monetary authority of a country controls the
revenue collection to influence supply of money, often targeting a rate of
the economy. interest to attain a set of objectives oriented
towards the growth and stability of the
economy.

Principle Manipulating the level of Manipulating the supply of money to influence


aggregate demand in the outcomes like economic growth, inflation,
economy to achieve economic exchange rates with other currencies and
objectives of price stability, full unemployment.
employment, and economic
growth.

Policy Government (Ministry of Central Bank (RBI)


maker Finance)

Policy tools Taxes; amount of government Interest rates; reserve requirements; currency
spending peg; discount window; quantitative easing;
open market operations; signalling

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