Stimulus Package Stimulus package is a package of tax rebate | UPSC Notes EPFO Labour Law

Stimulus Package

Stimulus package is a package of tax rebates and incentives used by the governments of various countries to stimulate economy and save their country from a financial crisis.

The idea behind a stimulus package is to provide tax rebates and boost spending, as spending increases demand, which leads to an increase in employment rate which in turn increases income and hence boosts spending. This cycle continues until the economy recovers from collapse. One such stimulus package was used by the United States in 2008 during the time of the global recession, which was aimed at increasing employment and recovery of the US economy.

India too used its first stimulus package in 2008 to ensure the safety of bank deposits and stability of the financial system. The government took necessary steps to infuse liquidity into the banking system. In an effort to infuse liquidity into the banking system, RBI reduced the CRR as well as repo and reverse repo rates. Also, the problems faced by non-banking financing companies were addressed.

These measures were taken by the government to counter the impact of global recession and stimulate the Indian economy.