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?
1. Reducing revenue expenditure
2. Introducing new welfare schemes
3. Rationalizing subsidies
4. Expanding industries
Select the correct answer using the code given below.
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A.
1 and 3 only
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B.
2 and 3 only
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C.
1 only
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D.
1, 2, 3 and 4
Correct Answer:
A. 1 and 3 only
Explanation:
To reduce a persistent budget deficit, the following actions can be effective:
Reducing revenue expenditure
Rationalizing subsidies
Explanation:
Reducing revenue expenditure (non-developmental or non-essential spending) helps lower government outflows directly, thus reducing the deficit.
Rationalizing subsidies prevents misuse and wastage of government funds, which contributes to fiscal discipline.
Introducing new welfare schemes (item 2) would generally increase expenditure and worsen the deficit.
Expanding industries (item 4) is an economic growth strategy but does not directly reduce the deficit; it may help indirectly through increased tax revenues over time.
Therefore, the correct answer is (a) 1 and 3 only.The consistent problem of budget deficit can be addressed by:
Reducing revenue expenditure,
Rationalizing subsidies.
Introducing new welfare schemes typically increases expenditure and can worsen the deficit. Expanding industries can boost economic growth but does not directly or immediately reduce a budget deficit.
Hence, the correct answer is (a) 1 and 3 only
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