Fiscal and Monetary Policy

Fiscal Policy: Fiscal policy refers to the government's policy regarding public revenue , public expenditure , and public debt. Fiscal policy is prepared by the finance department and implemented through the budget. When the economy is unstable, the government implements fiscal policy to stabilize it. Governments can intervene in the economy through measures such as taxation and government spending.

Monetary Policy: Monetary policy is the control that the Reserve Bank of India imposes on the quantity, availability and price of money to achieve the objectives of the general economic policy. When there is inflation in the country, commercial banks pay money to the Reserve Bank and buy short-term government bonds. The rate for this is one percentage point lower than the repo rate. This is the reverse repo rate.