There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit?
- Reducing revenue expenditure
- Introducing new welfare schemes
- Rationalizing subsidies
- Reducing import duty
Select the correct answer using the code given below.
Detailed Explanation:
Answer: Option 3 — 1 and 3 only
✅ Statement 1 – Correct: Reducing revenue expenditure (salaries, interest payments, administrative costs) directly lowers total government spending without affecting asset creation, thereby reducing the budget deficit.
❌ Statement 2 – Incorrect: Introducing new welfare schemes increases government expenditure, which widens the budget deficit rather than reducing it.
✅ Statement 3 – Correct: Rationalizing subsidies through better targeting (DBT, eliminating leakages) reduces wasteful expenditure while maintaining benefits for intended beneficiaries, thus helping to narrow the deficit.
❌ Statement 4 – Incorrect: Reducing import duty decreases tax revenue for the government, which increases the deficit when expenditure remains constant.
Question 1 of 3 Government Budget
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