Importance of Fiscal Policy:The importance of this policy was not at all acknowledged by economists before the publication of Keynes’s General Theory of Employment, Interest and Money. Keynes provides the concept of fiscal policy new meaning and procedure of the public finance a new perspective. He made it apparent that taxation, public spending and public debt are the efficient instruments of public policy capable of determining the extent of output and employment.
The significance of fiscal policy in current economies occurs from the fact that the State beneath democracy is termed upon to play an active and significant role in promoting economic development and giving a vast number of necessary public utilities and services such as drinking water, civic services, sanitation, primary education, public health, social welfare, defence, and so on. Most of such goods are characterized by the property that is, non-marketable; that it can’t be sold in the market to the consumer. However payment has to be regulated in another manner, via taxation.
In underdeveloped economies, public finance has to suppose yet another role, while in developed economies; it aims at sustaining economic stability. In underdeveloped economies, desirous of attaining quick economic development, the function of public finance is to promote quick economic development of the country, besides sustaining economic stability.
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