Definition
Fiscal Stimulus
Fiscal stimulus is a temporary increase in government spending or cut in taxes designed to boost demand during an economic slowdown.
When private demand weakens, the government can deploy a fiscal stimulus — extra spending, tax relief or transfers — to support activity, accepting a wider fiscal deficit in the short run. India's pandemic-era packages combined direct outlays with credit guarantees and relief measures under the Atmanirbhar Bharat label.
Stimulus is most effective when it is timely, targeted and temporary. Poorly designed stimulus can leave behind a permanently higher deficit without lasting growth, which is why governments typically pair it with a later fiscal consolidation path.
Related terms
- Fiscal ConsolidationFiscal consolidation is the process of reducing the government's fiscal deficit and debt over time through higher revenues or lower spending growth.
- Fiscal MultiplierThe fiscal multiplier measures how much total economic output rises for each rupee of additional government spending.
- Atmanirbhar BharatAtmanirbhar Bharat is the government's self-reliant India policy thrust aimed at boosting domestic manufacturing, reducing import dependence and supporting local industry.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.