Effects of the Union Budget on the economy

The Union Budget impacts the interest rates, stock market and the economy. Investment and expenditures in the budget affects the fiscal deficit of the country.

The degree of deficit and the methods for financing it, impact the cash flow and the interest rates in the economy. Higher interest rates mean a greater expense of capital for the business, lower benefits, and lower stock costs.

The expanded government expenditure may make a multiplier impact. In the event that the public sector spending generates employment, so that they will have more pay to spend prompting a further expansion in total interest. In these circumstances of extra limit in the economy, the public sector spending may cause greater expansion in GDP than underlying infusion.

If the economy is at full capacity, the expansion in government spending prompt to net expansion in Aggregate Demand changing from private sector spending to government sector spending.


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