Objectives of Fiscal Policy

Fiscal policy is the government’s tax efforts, public expenditure and public borrowing with which the government promotes and exercises control over consumption, investment and saving habits.

Here are the key objectives of fiscal policy.

• The first and prime objective is to maximize the aggregate saving. This is achieved by encouraging people to reduce the current and future consumption.

• Maximization of capital information is referred to as the second objective. The country tries to achieve an accelerated economic growth with this objective.

• Third objective is to divert the available resources from the less productive to most productive purposes. This resource allocation also refers to assigning
available resources of the economy to specific uses.

• Fiscal policy helps protect the economy from inflation from preventing it from consuming the benefits of growth.

• The policy also helps remove the sectoral imbalance in the economy during the growth process.

• It provides necessary incentives for the industries which can generate employment opportunities at a larger scale.

• Another important objective is that it brings down and eliminate the inequalities in income to ensure equal distribution of income and wealth in the society.

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