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.

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.

Accepted Answer

1 and 3 only

Explanation: ✅ Statement 1 – Correct: Reducing revenue expenditure (salaries, pensions, subsidies, interest payments) directly decreases government spending and helps narrow the fiscal deficit.❌ Statement 2 – Incorrect: Introducing new welfare schemes increases government expenditure, thereby widening the budget deficit rather than reducing it.✅ Statement 3 – Correct: Rationalizing subsidies (targeting, reducing non-merit subsidies) controls unnecessary revenue expenditure and improves fiscal management.❌ Statement 4 – Incorrect: Expanding industries may increase tax revenue in the long term but requires initial capital expenditure and does not immediately reduce the deficit.

Detailed Explanation:

Question 8 of 10 Fiscal Deficit, Revenue Deficit and Public Debt

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