Question

Which one of the following is not an element of fiscal reforms?
a) Taxation reforms
b) Change in interest rate
c) Public expenditure
d) Control on public debt​

Answer 1

Answer:

• The four main components of fiscal policy are (i) expenditure, budget reform (ii) revenue (particularly tax revenue) mobilization, (iii) deficit containment/ financing and (iv) determining fiscal transfers from higher to lower levels of government.

Answer 2

Answer:

b) change in interest rate

Explanation:

Changing interest rate is not an element of Fiscal reforms. This is because, with liberalisation, the role of RBI has changed from a controller to a mere facilitator of the operations of the financial sector. As a facilitator, RBI can fix interest rate on his own for commercial banks. So, changing interest rate comes under the Financial Sector Reforms and not Fiscal Reforms.