Through its budgetary policy government uses fiscal instruments of taxation and subsidies with a view of improving the distribution of income and wealth in the economy.
- A government reduces the inequality in the distribution of income and wealth by imposing higher rates of direct taxes on the rich under progressive system of taxation.
- Government gives subsidies to the poor and spending more on the *** of the poor.
- Government spends money to give incentive to the producers who are investing in backward areas.
- It will reduce income of the rich and raises the living standard of the poor. Thus, it leads to equitable distribution of income.
- Expenditure on special anti *** and employment schemes and public distribution system may increase the living standard of the poor.
