Q.State any two objectives of fiscal policy in the context of the Indian economy.

Fiscal policy's objectives mirror the wider goals of the budget itself, applied specifically through tax and spending decisions.

Two of the principal objectives of fiscal policy in the Indian context are:

1. Achieving economic stability. By raising government spending and lowering taxes during a slowdown, and doing the reverse — cutting spending and raising taxes — during high inflation, fiscal policy smooths out the swings of the business cycle rather than letting booms and slumps run unchecked.

2. Reducing inequalities of income and wealth. Progressive taxation (charging higher tax rates on higher incomes) combined with welfare expenditure — subsidised food and fuel, social-security transfers, and public health and education spending targeted at the poor — narrows the gap between richer and poorer sections of Indian society. …

Students sometimes state 'raising revenue' as if it were the sole objective of fiscal policy — while taxation does raise revenue, the deeper policy objectives (stability, growth, reduced inequality, e …