Fiscal Policy
How governments use taxation and spending to influence the economy.
Tax and Spend
Fiscal policy is what governments do with taxes and spending. India's government collects revenue through income tax, GST, corporate tax, and customs duties. It spends on defense, infrastructure, education, health, subsidies, and interest payments on debt.
Deficits and Debt
When government spends more than it collects, it runs a fiscal deficit — borrowing the difference. India's fiscal deficit is typically 5-6% of GDP. Government debt is about 83% of GDP. Is this sustainable? It depends on growth rates, interest rates, and the purpose of borrowing.
- •Fiscal deficit = Government spending - Government revenue
- •Expansionary fiscal policy (more spending, less tax) stimulates the economy
- •Contractionary fiscal policy (austerity) slows the economy to control inflation
- •India's Union Budget is presented annually in February
💡 Did You Know?
India's GST (Goods and Services Tax), launched in 2017, replaced 17 different taxes. The tagline was 'One Nation, One Tax' — it was one of the largest tax reforms in the world.