Dr.

Parul Gupta Monetary & Fiscal Policy 1

MONETARY &
FISCAL POLICY
Dr. Parul Gupta Monetary & Fiscal Policy 2
SESSION DETAILS
SESSION ONE: Types of Fiscal Policy,
Fiscal Policy Instruments- Taxation and
Public expenditure and Their Impact on
Economy

SESSION TWO: Types of Monetary Policy
and Monetary Policy Instruments.
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FISCAL POLICY
The fiscal policy is concerned with
the raising of government revenue
and incurring of government
expenditure.
in broad term fiscal policy refers to
that segment of national economic
policy which is primarily
concerned with the receipts and
expenditure of central government

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Fiscal policy golden rule
The Government's fiscal policy
framework is based on the five
key principles set out in the
Code for fiscal stability -
transparency, stability,
responsibility, fairness and
efficiency
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OBJECTIVES
1. Development by effective mobilization of
resources
Taxation
Public Savings
Private Savings




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OBJECTIVES
2. Efficient allocation of financial resources
3.Reduction of inequalities and income distribution
5. Price stability and control of inflation
6.Employment generation
7. Balanced regional development
8. Capital formation
9. Development of infrastructure
10. Increase in national income
11. Foreign exchange earnings
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TYPES OF FISCAL POLICY
expansionary fiscal policy
contractionary fiscal policy

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FISCAL POLICY INSTRUMENTS
1. Public/ Government expenditure
2. Taxes
3. Public debts
4. Budgetary surplus and deficit
5. Deficit financing
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Meaning of Monetary Policy
How much should be the supply of money
in the economy?
How much should be the ratio of interest?
How much should be the viability of
money? etc.

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Definition of Monetary Policy

"A policy employing the central banks
control of the supply of money as an
instrument for achieving the objectives of
general economic policy is a monetary
policy.

Prof. Harry Johnson
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Objectives of Monetary Policy
Rapid Economic Growth
Price Stability
Exchange Rate Stability
Balance of Payments (BOP) Equilibrium
Full Employment
Neutrality of Money
Equal Income Distribution

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Monetary Policy Instruments
A) Quantitative Instruments or General Tools:
1. Bank Rate Policy (BRP)
2. Open Market Operation (OMO)
3. Variation in the Reserve Ratios (VRR):

B) Qualitative Instruments or General Tools:
1. Fixing Margin Requirements
2. Consumer Credit Regulation
3. Publicity
4. Credit Rationing
5. Moral Suasion
6. Control Through Directives
7. Direct Action

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