<P> A rule - based policy can be more credible, because it is more transparent and easier to anticipate . Examples of rule - based policies are fixed exchange rates, interest rate rules, the stability and growth pact and the Golden Rule . Some policy rules can be imposed by external bodies, for instance the Exchange Rate Mechanism for currency . </P> <P> A compromise between strict discretionary and strict rule - based policy is to grant discretionary power to an independent body . For instance, the Federal Reserve Bank, European Central Bank, Bank of England and Reserve Bank of Australia all set interest rates without government interference, but do not adopt rules . </P> <P> Another type of non-discretionary policy is a set of policies which are imposed by an international body . This can occur (for example) as a result of intervention by the International Monetary Fund . </P> <P> The first economic problem was how to gain the resources it needed to be able to perform the functions of an early government: the military, roads and other projects like building the Pyramids . </P>

Explain the main objectives of the fiscal policy of india