What Is Fiscal Policy? | How its related to Indian Stock Market скачать в хорошем качестве

What Is Fiscal Policy? | How its related to Indian Stock Market

WHAT IS FISCAL POLICY Fiscal Policy is the policy which is used to regulate the money supply in India by the Government by adjusting the government expenditure and adjusting the taxation. Monetary policy and this fiscal policy is interconnected, because both objective is create the stable economy. Stable economy is formed by making the price stable and the main objective of fiscal and monetary policy is to regulate the inflation in the economy. The main difference of monetary policy and fiscal policy is that, monetary policy is used by RBI and it adjust the interest rates to regulate the money supply to achieve inflation, but fiscal policy is used by Government and it adjust the tax slabs to regulate the money supply to achieve inflation. TYPES OF FISCAL POLICY Expansionary Fiscal Policy It is one of the types of policy, which is used for increase the supply of money. It can be done by adjusting the taxation by decrease the tax slabs, therefore consumers, corporates etc., can consume or spend more money in their needs. Contractionary Fiscal Policy It is one of the types of policy, which is used for decrease the supply of money. It can be done by adjusting the taxation by increase the tax slabs, therefore consumers, corporates etc., can consume or spend less money in their needs. IMPORTANT TOOLS OF FISCAL POLICY Government Spending Government spending is one of the important tools of fiscal policy to regulate the money supply. Major spending is depends on the tax revenue. During the time of recession government spend more money in welfare programs and infrastructure projects etc., therefore public get the employment so that, income will generate and then money supply will increase. Taxation Another way is Taxation, by increase and decrease the tax slabs government can adjust the revenue to regulate the money supply. HOW THIS POLICY RELATED TO INDIAN STOCK MARKET Based on the above information, by adjusting the tax rates, money supply will be regulated. If the tax rate increases, consumer spending and investment capability will decrease this will result in decline in stock market. If the tax rate decreases, consumer spending and investment capability will increase this will result in good show in stock market.