Fiscal policy and economic growth: A study of India's macroeconomic environment

Abstract

This research review explores the impact of fiscal policy on economic growth in India from 2010 to 2024, focusing on government spending, taxation, fiscal deficits, and public debt. By analyzing year-wise data, the review highlights key trends and their implications for India's macroeconomic environment. The study finds that government spending has generally supported GDP growth, particularly in the aftermath of the global financial crisis and during the COVID-19 pandemic. However, the effectiveness of this spending is contingent on the efficiency of resource allocation, as evidenced by periods where increased expenditure did not proportionally translate into higher growth.The review also examines the introduction of the Goods and Services Tax (GST) in 2017, a significant reform that streamlined India's tax system and improved revenue collection. Despite initial disruptions, GST contributed to a more efficient tax regime, which bolstered fiscal health over time. Fiscal deficits and public debt emerged as persistent challenges, particularly during economic downturns. The review underscores the importance of managing these fiscal indicators to ensure long-term economic stability.The findings suggest that while fiscal policy has been crucial in driving economic growth, its sustainability depends on prudent management of deficits and debt. The study concludes with recommendations for future fiscal strategies, emphasizing the need for continued reforms and balanced fiscal discipline. This review contributes to a deeper understanding of the complex dynamics between fiscal policy and economic growth in India, offering insights for policymakers and researchers alike.