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.

QUESTION

Medium

Economy

Prelims 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?

Select the correct answer using the code given below.

Select an option to attempt

Explanation

To reduce a persistent budget deficit, the government can take actions that decrease spending or increase revenue.

Reducing revenue expenditure (Correct) This involves cutting back on non-essential government spending. This can include areas like administrative costs, travel, or certain subsidies.
Introducing new welfare schemes (Incorrect) This would likely increase government spending and worsen the deficit.
Rationalizing subsidies (Correct) Subsidies can be a significant source of government expenditure. Reviewing and potentially reducing or reforming subsidies can help control spending.
Expanding industries (Depends) While industrial expansion can lead to increased tax revenue in the long run, it might not have an immediate impact on the budget deficit. In the short term, the government might need to invest in infrastructure to support expansion, potentially increasing expenditure.

Therefore, the correct answer is 1 and 3 only (Reducing revenue expenditure and Rationalizing subsidies).

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