INTRODUCTION

 The economic position of a country can be monitored, controlled and

regulated by the sound economic policies. The fiscal and monetary policies of
the nation are the two measures, which can help in bringing stability and
developing smoothly. Monetary and fiscal policy- comparative analysis in
developed and developing economies. Comparative analysis of
developed(U.S) and developing (India) economies in the aspect of monetary
and fiscal policy Developed economies have higher degree of growth
variables such as: per capita income GDP ( gross domestic production) level,
level of industrialization general standard of living amount of widespread
infrastructure non- economic factor( HDI, Literacy level, health, etc)
 Definition of developing(India) economies developing economies have low
degree of growth variable such as: per capita income GDP( gross domestic
production) level, level of industrialization general standard of living amount
of widespread infrastructure non- economic factor( hdi, literacy level, health,
etc)
 Outlines • objective of study • methodology used in study • comparative
anlysis of developed and developing economies in the aspect of monetary
and fiscal policy • role of monetary policy in inflation targeting •
conclusion
Objective of study • to find out the difference in instrument of monetary and
fiscal policy in developed and developing economies. • role of government and
central monetary authority to control monetary and fiscal policy in developed
and developing economies • to find out the variable target by monetary and
fiscal policy in developed and developing economies.
Methodology used in study • the method that i have used in my study was:
exploratory research and based on: secondary source of data like news paper,
magazine, internet, , central bank
Comparative analysis of developed(U.S) and developing (India) economies in
the aspect of monetary and fiscal policy • developed economies have higher
degree of growth variables such as: per capita income GDP ( gross domestic
production) level, level of industrialization general standard of living amount
of widespread infrastructure non- economic factor( hdi, literacy level, health,
etc)
Definition of developing(India) economies • developing economies have low
degree of growth variable such as: per capita income GDP ( gross dpmestic
production) level level of industrialization general standard of living amount of
widespread infrastructure non- economic factor( hdi, literacy level, health, etc)
Monetary Policy, is mainly concerned with the flow of money in the
economy.Monetary policy in developing(india) economies. monetary policy,
scheme carried out by the financial institutions like the Central Bank, to
manage the flow of credit in the country’s economy.• monetary policy: is the
macroeconomic policy laid down by the central bank. It involves
management of money supply and interest rate and is the demand side
economic policy used by the government of a country to achieve
macroeconomic objectives like. - inflation - consumption, - growth and
liquidity
Objective of monetary policy in developing(india) economies • neutrality of
money: increase and decrease in supply of money, effect should be neutral. •
price stability: in monetary policy we control inflation by the use of inflation
targeting. • stability of exchange rate: inflow and outflow of currency should
not affect to exchange rate. During inflow of currency in economy rbi adopt
these techniques: 1- to expand the credit in economy 2- to expand the
currency level in economy vice versa during outflow of currency. • full
employment • economic growth. Back
 Fiscal policy is the policy relating to government revenues from taxes and
expenditure on various projects.
 the word fisc means ‘state treasury’ and fiscal policy refers to policy
concerning the use of ‘state treasury’ or the government finances to achieve
the macroeconomic goals. • fiscal policy involves the decisions that a
government makes regarding collection of revenue, through taxation and
about spending that revenue. • it is sister strategy to monetary policy
through which a central bank influences a nation’s money supply.
 Objectives of fiscal policy 1. Development by effective mobilization of
resources 2. Reduction in inequalities of income and wealth 3. Price
stability and control of inflation 4. Employment generation 5. Reducing the
deficit in the balance of payment 6. Increasing national income 7.
Development of infrastructure
 Instruments of fiscal policy instruments of fiscal policy budget taxation
public expenditure public debt
The government does not decide on monetary policy. They only decide
on fiscal policy. The Central Bank decides on monetary policy. The
Central Bank is independent of the government.
Now that this is cleared up, here’s a really simple answer: governments
don’t prefer monetary policy because they don’t control monetary policy.
So why is it that you see monetary policy come up a lot more often than
fiscal policy in the news?
That’s because it’s a lot easier for a Central Bank to commit any action
regarding monetary policy.
In order for a government to pass a fiscal stimulus, it has to go through all
the political grind of passing the package through congress, committees,
getting it sent back, revised, make political concessions… that a fiscal
stimulus becomes very very slow to implement.
Central Bank, because of its independence from the government, does not
have any of these constraints. They can act and they can act as fast as is
needed. This means that whenever you see monetary policy announcement,
it’s not the government making the decision, it’s the Central Bank making
the decision because they don’t have to wait for the government to make a
decision.
 BASIS FOR
FISCAL POLICY MONETARY POLICY
COMPARISON
Meaning The tool used by the The tool used by the central
government in which it uses bank to regulate the money
its tax revenue and supply in the economy is
expenditure policies to affect known as Monetary Policy.
the economy is known as
Fiscal Policy.
Administered by Ministry of Finance Central Bank
Nature The fiscal policy changes The change in monetary
every year. policy depends on the
economic status of the
nation.
Related to Government Revenue & Banks & Credit Control
Expenditure
Focuses on Economic Growth Economic Stability
Policy instruments Tax rates and government Interest rates and credit ratios
spending
Political influence Yes No
Key Differences Between Fiscal Policy and Monetary Policy

The following are the major differences between fiscal policy and monetary policy.
•The policy of the government in which it utilises its tax revenue and expenditure
policy to influence the aggregate demand and supply for products and services the
economy is known as Fiscal Policy.
•The policy through which the central bank controls and regulates the supply of money
in the economy is known as Monetary Policy.
•Fiscal Policy is carried out by the Ministry of Finance whereas the Monetary Policy is
administered by the Central Bank of the country.
•Fiscal Policy is made for a short duration, normally one year, while the Monetary
Policy lasts longer.
•Fiscal Policy gives direction to the economy. On the other hand, Monetary Policy
brings price stability.
•Fiscal Policy is concerned with government revenue and expenditure, but Monetary
Policy is concerned with borrowing and financial arrangement.
•The major instrument of fiscal policy is tax rates and government spending.
Conversely, interest rates and credit ratios are the tools of Monetary Policy.
•Political influence is there in fiscal policy. However, this is not in the case of
monetary policy.
Conclusion

The main reason of confusion and bewilderment between fiscal policy and
monetary policy is that the aim of both the policies is same. The policies are
formulated and implemented to bring stability and growth in the economy.
The most significant difference between the two is that fiscal policy is made
by the government of the respective country whereas the central bank creates
the monetary policy. Fiscal Policy with its various instruments it influences
the economic stability of an economy. The fiscal policy of the Indian
government has been very successful in several fields such as mobilization of
resources for economic development, increasing rate of savings and capital
formation, developing cottage and small scale industries ,reducing the
incidence of poverty etc. For an effective anti-cyclical monetary policy, bank
rate, open market operations, reserve ratio and selective control measures are
required to be adopted simultaneously. But it has been accepted by all
monetary theorists that (i) the success of monetary policy is nil in a depression
when business confidence is at its lowest ebb; and (ii) it is successful against
inflation. The monetarists contend that as against fiscal policy, monetary
policy possesses greater flexibility and it can be implemented rapidly.