Fiscal Policy
The government's use of taxation and spending to influence economic activity.
Formula
Fiscal Impulse = Change in the Fiscal Deficit as a percentage of GDP, adjusted for the cycle
Unit
%
In depth
Fiscal policy works directly on demand — a rupee of government spending enters the economy immediately, while a rate cut must pass through banks and borrowers first. Its composition matters as much as its size: capital expenditure on infrastructure has a larger and longer-lasting multiplier than revenue spending on subsidies. It also interacts with monetary policy, since heavy government borrowing pushes up yields and can crowd out private investment. In India the Union Budget in February is the main annual statement of fiscal policy, and markets react to its borrowing figure as much as to its announcements.
Worked example
Capital expenditure of ₹11 lakh crore with a multiplier near 2.5 adds roughly ₹27.5 lakh crore of activity over time. The same amount on revenue spending, with a multiplier near 1, adds ₹11 lakh crore.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Fiscal Policy” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.