Fiscal Policy
General Economics Beginnerराजकोषीय नीति
Definition
Fiscal policy refers to the government's use of taxation and spending to influence the economy. Expansionary fiscal policy (higher spending, lower taxes) stimulates growth during slowdowns. Contractionary fiscal policy (lower spending, higher taxes) cools an overheating economy. The Union Budget is the primary instrument of fiscal policy in India.
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Why Fiscal Policy Matters
Understanding fiscal policy is essential for anyone following government finances, preparing for competitive exams, or analysing India's economic policy. This concept directly affects how the government allocates resources and plans its fiscal strategy.
In the context of India's Union Budget 2026-27, with a total size of Rs 53.47 lakh crore, terms like fiscal policy help citizens and analysts evaluate whether the government is on the right fiscal path. The numbers in the budget are only meaningful when one understands the underlying concepts.
For UPSC aspirants, fiscal policy is frequently tested in both Prelims and Mains, particularly in Paper III (Economic Development). For CA and MBA students, this concept appears in public finance and macroeconomics courses.
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