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?
- 1.Reducing revenue expenditure
- 2.Introducing new welfare schemes
- 3.Rationalizing subsidies
- 4.Reducing import duty
Select the correct answer using the code given below.
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Answer: C. Item 1 is correct: cutting revenue (day-to-day) spending lowers the deficit. Item 2 is wrong: new welfare schemes add to spending. Item 3 is correct: better-targeted subsidies cut spending. Item 4 is wrong: lower import duty reduces tax income and widens the deficit. So 1 and 3.
Watch for: Reducing import duty sounds like reform, but it cuts government revenue.
Why the other options are wrong
- A. Wrong because rationalizing subsidies also reduces the deficit.
- B. Wrong because new welfare schemes increase spending and the deficit.
- D. Wrong because new schemes and lower import duty both widen the deficit.
Source to check: NCERT Class 12 Introductory Macroeconomics, Chapter 5 'Government Budget and the Economy'
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.