Deficit financing used for economic development — UPSC Prelims PYQ 2013
In India, deficit financing is used for raising resources for
- economic development
- redemption of public debt
- adjusting the balance of payments
- reducing the foreign debt
Explanation
Option (a) is correct
- Deficit financing refers to the method of raising resources by the government to meet its expenditure when its income (revenues) falls short. The government borrows or prints additional money to finance the gap between its revenue and expenditure. This is mainly used for economic development by funding various government programs, infrastructure projects, and social welfare schemes.
Answer: (a) economic development; Difficulty Level: Easy
