This document provides an overview of monetary and fiscal policy in India. It defines monetary policy as the process by which a central bank controls money supply and interest rates to maintain price stability and economic growth. The key instruments of monetary policy are discussed, including bank rate, cash reserve ratio, and open market operations. Fiscal policy is defined as the government's use of taxation and expenditures to influence economic activity. The objectives, instruments, and positions (neutral, expansionary, contractionary) of fiscal policy are outlined. Inflation is discussed in the context of how monetary policy can raise or decrease prices.

1. Monetary and Fiscal Policy.
- By Sudarshan jha

2. Content• Introduction
• Monetary Policy
– Role & Objectives
– Methods
– Inf lation
• Fiscal Policy
– Role & Objectives
– Fiscal Deficit

3. INTRODUCTION

4. Monetary Policy
Monetary policy is the process by which
monetary authority of a country, generally a
central bank controls the supply of money in
the economy by exercising its control over
interest rates in order to maintain price stability
and achieve high economic growth.
In India, the central monetary authority is the
RBI.

5. Objectives
• Maintaining price stability
• Rapid economic growth
• Exchange rate Stability
• Promoting Priority sector
• Balance of payment equilibrium
• Employment generation.
• Equal income distribution

6. INSTRUMENTS OF MONETARY POLICY
Bank Rate
Statutory Liquidity Ratio
Open Market Operations
Cash Reserve Ratio
Repurchase Auction Rate(Repo) and Reverse Repurchase Auction Rate (Reverse Repo)
Margin Requirement
Credit Ceiling
Direct Action
Moral Persuasion

7. How does monetary policy affect inflation and
other problems?
raises
decreases

8. FISCAL POLICY

9. Meaning
"Fiscal policy is the part of the
government policy which is concerned
with the raising revenue through
taxation and other means to decide
on the level and pattern of
expenditure“

10. INSTRUMENTS OF FISCAL POLICY
Public
Expenditure
Taxation Policy
Public Debt
Deficit Financing

11. Fiscal Policy there are three possible
positions
• A Neutral position applies when the budget outcome has
neutral effect on the level of economic activity where the
govt. spending is fully funded by the revenue collected
from the tax.
• An Expansionary position is when there is a higher
budget deficit where the govt. spending is higher than the
revenue collected from the tax.
• An Contractionary position is when there is a lower
budget deficit where the govt. spending is lower than the
revenue collected from the tax.

12. OBJECTIVES OF FISCAL POLICY
• Increase in capital formation.
• To achieve desirable price level.
• To achieve desirable consumption level.
• To achieve desirable employment level.
• To achieve desirable income distribution.

13. Limitations Of Fiscal Policy
Lack Of accurate Forecasting
Delay in Decision
Poor Tax Administration
Implementation leg
Impact lag

14. References
• V. k. ohari -Principles of Macro economics.
• Gradeup notes.
• Diff. Internet web sites.