In India, deficit financing is used for raising resources for
[UPSC Civil Services Exam – 2013 Prelims]
(a) Economic development
(b) Redemption of public debt
(c) Adjusting the balance of payments
(d) Reducing the foreign debt
- Deficit financing is a necessary evil in a welfare state as the states often fail to generate tax revenue that is sufficient enough to take care of the expenditure of the state.
- The basic intention behind deficit financing is to provide the necessary impetus to economic growth by artificial means.
- Hence option 1 is correct.
Main objectives of Fiscal Policy in India
- Economic growth: It helps to maintain the economy’s growth rate so that certain economic goals can be achieved.
- Price stability: It controls the price level in the country so that when inflation is too high, prices can be regulated.
- Full employment: It aims to achieve full employment, or near full employment, as a tool to recover from low economic activity.