Question

In India which one among the following formulates the Fiscal Policy

• A. R.B.I.
• B. Planning Commission
• C. Ministry of Finance
• D. Finance Commission

Answer 1

Answer:

C. Ministry of Finance

Fiscal Policy Formulation in India

In India, the primary responsibility for formulating and implementing fiscal policy lies with the Ministry of Finance.

Key Functions and Responsibilities:

• Policy Design: The Ministry of Finance, through its various departments, designs the overall fiscal strategy of the government. This includes decisions on taxation, government spending, and public debt management.

• Budget Preparation: The annual Union Budget, presented by the Finance Minister, is the most visible outcome of fiscal policy formulation. It outlines the government's revenue and expenditure plans for the upcoming financial year.

• Revenue Mobilization: This involves setting tax rates (direct and indirect taxes), expanding the tax base, and ensuring efficient tax collection mechanisms.

• Expenditure Management: Decisions on allocating funds to various sectors like infrastructure, defense, social welfare, education, and healthcare are crucial components of fiscal policy.

• Debt Management: The Ministry manages the government's borrowing program, both domestic and external, to finance budget deficits and manage public debt sustainability.

Objectives of Fiscal Policy:

The main objectives typically include:

• Economic Growth: Stimulating aggregate demand and investment.

• Price Stability: Controlling inflation.

• Employment Generation: Creating job opportunities.

• Poverty Reduction: Through targeted social spending and economic development.

• Redistribution of Income: Using progressive taxation and social welfare programs.