Question
UPSC Prelims 2015 Question:
There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit?
- Reducing revenue expenditure
- Introducing new welfare schemes
- Rationalizing subsidies
- Expanding industries
Select the correct answer using the code given below.
Answer (Detailed Solution Below)
Option 1: 1 and 3 only
Detailed Solution
Explanation:
- When the government spends more than it receives in tax and other revenues, it borrows to cover the difference. A budget deficit occurs when expenses exceed revenue.
- Reducing revenue expenditure would reduce the deficit. Subsidies are also part of the expenditure. Rationalizing subsidies will also reduce expenditure too. So, points 1 and 3 are correct.
- Introducing new welfare schemes or expanding industries will result in more expenditure leading to the widening of the budget deficit. So, points 2 and 4 are not correct.
Therefore, option (1) is the correct answer.
Subject: Economics | Public Finance
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