Prelims 2015 · Economy · Question 98
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
1 and 3 only
1. Reducing revenue expenditure — This directly lowers government spending and helps reduce the fiscal deficit. Correct.
2. Introducing new welfare schemes — New schemes usually increase revenue expenditure unless fully offset elsewhere; by itself this worsens the deficit. Incorrect.
3. Rationalizing subsidies — Better targeting or reducing inefficient subsidies cuts expenditure and helps contain the deficit. Correct.
4. Expanding industries — This may raise growth and revenue in the long run, but it is not a direct budgetary action to reduce a persistent deficit; it can even require more public spending initially. Incorrect.
Hence, only 1 and 3 are correct.