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.
- (a) 1 only
- (b) 2 and 3 only
- (c) 1 and 3 only ✓ UPSC's answer
- (d) 1, 2, 3 and 4
Why the answer is (c)
• A budget deficit is cut by lowering expenditure or raising revenue.
• Reducing revenue expenditure (1) — salaries, interest, subsidies — and rationalising subsidies (3) directly lower spending.
• Introducing new welfare schemes (2) adds expenditure, and reducing import duty (4) lowers customs revenue; both widen the deficit.
• Hence 1 and 3 only, option (c).
Why the other options are wrong
- (a) 1 only
- Rationalising subsidies also reduces the deficit.
- (b) 2 and 3 only
- New welfare schemes increase the deficit.
- (d) 1, 2, 3 and 4
- New schemes and lower import duty widen the deficit.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2016, held on 7 August 2016. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.