How Fiscal Policies can impact your investments
The government stewards the country’s economy with a clear mandate – to steer the economy to grow at a predictable and sustainable momentum, while keeping inflation in check.
Beyond short-term economic stabilisation, policymakers use Fiscal Policy to help improve human capital, provide a social safety net, deal with climate change, or build food security for longer-term economic resilience.
India Covid-19 Fiscal Policy Measures
To cushion the impact of the Covid-19 outbreak on businesses and individuals, here are some examples of fiscal measures that the India Government has put in place.
Note: Information presented is non-exhaustive.
How Fiscal Policies work
Fiscal policies work through multiple channels:
- Changes in tax rates can alter the savings, investment, and spending pattern of the public and companies.
- Direct cash support schemes help boost consumer demand for goods and services.
- Job programmes support employment.
- Public sector infrastructure projects boost the economy’s efficiency and the potential to innovate and grow.
Conversely, the government may raise taxes – a contractionary measure, to tamper down unsustainable growth to prevent economic bubbles from occuring.
Key pitfalls of Fiscal Policies
The policy’s effectiveness could potentially be compromised when:
There is a policy lag – the interval from its implementation to the realisation of its
The intended outcome failed to move the economy in the desired direction.
Policymakers are not able to accurately determine the size and composition of the measures.
in the midst of an economic adjustment
Look out for businesses or sectors that stand to benefit from government spending.
This article is for information purposes only. We recommend you get in touch with your investment advisor for any financial advise.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
DBS Bank India Limited – AMFI registered Mutual Fund Distributor (ARN-155319)