Resources need to be mobilised so that there can be funds for financing the development programs in the public sectors. Desirable levels of prices: – The desirable level of prices can be achieved with the change in rate of taxes. In order to gear the economy, the government can push the growth of social infrastructure through fiscal measures. It adds to the existing literature on fiscal redistribution in developing economies by taking a global (as opposed to regional) developing-country perspective of fiscal redistribution. Report a Violation, Role of Fiscal Policy in Developing Countries, Role of Fiscal Policy for Mobilization of Resources in Developing Countries. SIGNIFICANCE OF THE STUDY This study will throw more light into the fact that fiscal deficit siphon funds from the private sector investment retarding growth and ultimately reducing the standards of living. During the period of recession, government should undertake public works programmes through deficit financing. TOS 7. Among developing countries, the decade of the 1990s was characterized by two major macroeconomic developments. To mobilize resources for financing the development programmes in the pubic sector. Therefore, a balanced growth is needed to breakdown the vicious circle which is only feasible with higher rate of capital formation. The first and foremost objective of fiscal policy in a developing economy is to achieve and maintain full employment in an economy. Equitable distribution of income and wealth. But a high rate of economic growth cannot be achieved and maintained without stability in the economy. The principal objectives of fiscal policy in a developing economy are: 1. Objectives of Fiscal Policy in Developing Countries! The main objectives of fiscal policy in the case of developing countries are: •Increasing rate of investment •Encouraging a socially optimum pattern of investment •Reducing inequalities in income and worth •Reducing unemployment •Controlling inflationary tendencies Three stances of fiscal policy A developed country may adopt full employment or price stabilisation or exchange stability as a goal of the monetary policy. Prohibited Content 3. Fiscal measures, to a larger extent, promote economic stability in the face of short-run international cyclical fluctuations. Macroeconomics : Fiscal Policy and Budget Deficit: Chapter 15 Fiscal policy means government's plan for expenditure, revenues and borrowing to finance fiscal deficits. Therefore, fiscal policy must be designed to be performed in two ways-by expanding investment in public and private enterprises and by diverting resources from socially less desirable to more desirable investment channels. Regional disparities can also be removed by providing incentives to backward regions. In an environment of low growth in the advanced economies, developing countries have a strong incentive to seek out new domestic engines for efficiency and productivity growth, as well as for greater equity in development. The principle objectives of fiscal policy in a developing economy are as under: To mobilise resources for financing development; To promote economic growth in the private sector; To control inflationary pressure in the economy Above all, these countries suffer from deficiency of capital. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. One objective of foreign policy is the development of resources for private sector through borrowings. Share Your PDF File cyclical fiscal policy. Tripathi suggests the following steps to raise the saving ratio which provides the required finance for developmental schemes: (ii) Increasing the rate of existing taxes. Equitable Distribution of Income and Wealth: It is needless to emphasize the significance of equitable distribution of income and wealth in a growing economy. Prof. R.N. Disclaimer Copyright, Share Your Knowledge (iv) Public borrowing of non-inflationary nature. Objectives of Fiscal Policy in a Developing Economy (1) Mobilization of Resources. The fiscal deficit management adopted in developing countries including Nigeria have been effective in solving the country’s current account deficit problem. It needs accelerated rate of capital formation. To promote economic growth in the private sector by providing incentives to save and invest; 3. To promote economic growth in the private sector by providing incentives to save and invest; 3. The item Tax systems and policy objectives in developing countries: general principles and diagnostic tests represents a specific, individual, material embodiment of a distinct intellectual or artistic creation found in International Bureau of Fiscal Documentation. It will increase capital formation in the country. In such countries, even if full employment is not achieved, the main motto is to avoid unemployment and to achieve a state of near full employment. Attaining these objectives the study used data from 1990 to 2014 maintain the condition of full or... Protection is a general agreement that economic growth are fairly distributed policy in a economy... Should aim at imposing heavy taxation on the richer and exempting poorer sections of the economy as result... From deficiency of capital formation, concessions, subsidies and incentives can favorably influence the of... Is weak and fiscal multipliers are often small is only feasible with higher rate of investment in the pubic.! 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