FISACL POLICY IN INDIA:A REVIEW

Fiscal policy is a policy of government’s actions and reactions .Every country does not want to grow only but develop also. In other words increase in National income and per capita income along with increased welfare of masses. For this the govt. Needs a sound fiscal policy which can help them to achieve desired objectives. This essay reviews the trends and trajectory of India’s fiscal policy with a focus on historical trends, fiscal discipline frameworks, and fiscal responses to the global financial crisis and subsequent return to a fiscal consolidation path. The initial years of India’s planning strategy were featured by a conservative fiscal policy whereby deficits were kept under control. The tax system was geared to transfer resources from the private sector to finance the large public sector driven industrialization process and also cover social welfare schemes. However, growth was hampered and the system was prone to inefficiencies. In the 1980s some attempts were made to reform particular sectors. But the public debt increased, as did the fiscal deficit. India’s balance of payments crisis of 1991 led to economic liberalization. The reform of the tax system commenced. The fiscal deficit was controlled. When the deficit and debt situation again threatened to go out of control in the early 2000s, fiscal discipline legalizations were instituted. The deficit was brought under control and by 2007-08 a benign macro-fiscal situation with high growth and moderate inflation prevailed. During the global financial crisis fiscal policy responded with counter-cyclical measures including tax cuts and increases in expenditures. The post-crisis recovery of the Indian economy is witnessing a correction of the fiscal policy path towards a regime of prudence. In the future, the focus would probably be on bringing in new tax reforms and better targeting of social expenditures.