10-08-2012, 02:19 PM
FISCAL POLICY PLANNING OF DEVELOPING, DEVELOPED & UNDERDEVELOPED COUNTRIES
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Fiscal Policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection (taxation) to influence the economy.
Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nation's economy.
‘Fiscal policy' is that under which the government uses its revenue and expenditure programs to produce desirable effects on national income, production and economy. It is thus used as a balancing device in the economy. Two major elements of fiscal policy are taxation and public expenditure.
Objectives Of Fiscal Policy
The role of fiscal policy in developed economies is to maintain full employment and stabilize growth. In contrast, in developing countries, fiscal policy is used to create an environment for rapid economic growth. The various aspects are as follows:
Mobilization of resources:
Developing economies are characterized by low levels of income and investment, which are linked in a vicious circle. This can be successfully broken by mobilizing resources for investment energetically.
Acceleration of economic growth:
The government has not only to mobilize more resources for investment, but also to direct the resources to those channels where the yield is higher and the goods produced are socially acceptable.
Limitations Of Fiscal Policy
Fiscal policy has been a great success in developed countries but only partially so in developing countries. The tax structure in the developing countries is rigid and narrow. Thus, conditions conducive to the growth of well-knit and integrated tax policies are absent and sorely missed. Following are some of the reasons that are hindrances for its implementation in developing countries:
A sizable portion of most developing economies is non-monetized, rendering fiscal measures of the government ineffective and self-defeating.
Lack of statistical information as regards the income, expenditure, savings, investment, employment etc. makes it difficult for the public authorities to formulate a rational and effective fiscal policy.
Conclusion On Fiscal Policy of India
The objectives of fiscal policy such as economic development, price stability, social justice, etc. can be achieved only if the tools of policy like Public Expenditure, Taxation, Borrowing and deficit financing are effectively used.
Though there are gaps in India's fiscal policy, there is also an urgent need for making India's fiscal policy a rationalised and growth oriented one.
The success of fiscal policy depends upon taking timely measures and their effective administration during implementation.
Conclusion On Fiscal Policy of US
Only a few years ago, the conditions for movement on these fronts seemed to be in place in the United States, with the demographic shock still half a generation away and government debt set to be all but eliminated within a decade. Since then, however, a combination of cyclical, geopolitical, and policy factors have erased a decade's worth of fiscal consolidation, just a short time before the retirement of the baby boom generation begins.
The discussion in this and subsequent sections suggests that the U.S. fiscal problem is still manageable, and there remains a window of opportunity for reform. However, the experience of recent decades has shown that fiscal consolidation is difficult to achieve and perhaps even more difficult to hold on to. Therefore, the room for maneuver is narrowing quickly.