Fiscal discipline is defined as the ability of a government to sustain smooth monetary operation and long-standing fiscal condition.It is a benchmark for tax devolution. It was used since 11th Finance Commission to provide an incentive to states handling their finances deliberately. The index of fiscal discipline is accepted by comparing progress in the ratio of revenue receipts of a state to its total revenue expenditure comparative to the corresponding average across all states. It twigs into:
- Multi-year outlook on budgeting
- Mechanisms to sustain fiscal wellbeing and steadiness over business cycles
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Question for the Day on the Topic
Consider the following statements
- Fiscal discipline is defined as the ability of a government to sustain smooth monetary operation and long-standing fiscal condition.
- It is a benchmark for tax devolution.
Select the correct ones
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Frequently Asked Questions on Fiscal Discipline
Q 1. What is the meaning of fiscal discipline?
Q 2. What is the importance of fiscal discipline?
Q 3. What are the different types of fiscal policies?
Ans. There are three different types of fiscal policies:
- Neutral Policy
- Expansionary Policy
- Contractionary Policy