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.
[UPSC Civil Services Exam – 2016 Prelims]
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, 3 and 4
Answer: (c)
Explanation:
- A budget deficit occurs when government spending exceeds its revenues. Reducing revenue expenditure and rationalizing subsidies are effective measures to reduce the deficit. Statements 1 and 3 are correct.
- Increasing taxes is another strategy to address the deficit by boosting revenue. However, introducing new welfare schemes can contribute to the budget deficit, so statement 2 is incorrect.
- Similarly, expanding industries in the short run may not immediately contribute to tax revenues, potentially increasing the budget deficit, making statement 4 incorrect.
