What is the contribution of Fiscal Policy in India's economic development ? Explain the shortcomings of fiscal policy.
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Importance of Fiscal Policy in India:
In a country like India, fiscal policy plays a key role in elevating the rate of capital formation both in the public and private sectors. Through taxation, the fiscal policy helps mobilise considerable amount of resources for financing its numerous projects.
Poor information. Fiscal policy will suffer if the government has poor information. E.g. If the government believes there is going to be a recession, they will increase AD, however, if this forecast was wrong and the economy grew too fast, the government action would cause inflation.
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