Measures to reduce a persistent deficit budget — UPSC Prelims PYQ 2015
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
- Rationalising subsidies
- Expanding industries
Select the correct answer using the code given below:
- 1 and 3 only
- 2 and 3 only
- 1 only
- 1, 2, 3 and 4
Explanation
Option (a) is correct
- To reduce a persistent deficit budget, the government needs to focus on reducing expenditure or increasing revenue.
- Reducing revenue expenditure: Revenue expenditure includes day-to-day expenses such as salaries, subsidies, and interest payments. Cutting unnecessary or non-productive revenue expenditure can directly help reduce the deficit.
- Introducing new welfare schemes: New welfare schemes typically increase revenue expenditure, leading to a higher deficit unless additional revenue is generated.
- Rationalising subsidies: Rationalising or targeting subsidies can reduce non-essential or wasteful spending, which helps in reducing the fiscal deficit.
- Expanding industries: While expanding industries can increase revenue in the long term, it requires initial investments, which may worsen the deficit in the short term.
Answer: (a) 1 and 3 only; Difficulty Level: Easy
