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?
- Reducing revenue expenditure
- Introducing new welfare schemes
- Rationalizing subsidies
- Reducing import duty
Select the correct answer using the code given below.
Correct Answer: Option C
To reduce a persistent deficit budget, the government needs to focus on reducing expenditure and increasing revenue.
Statement 1: Reducing revenue expenditure will help reduce the deficit. Revenue expenditure often constitutes a large portion of government spending, and cutting unnecessary expenditure will directly impact the fiscal deficit.
Statement 2: Introducing new welfare schemes will increase the fiscal deficit. Welfare schemes generally involve significant government spending.
Statement 3: Rationalizing subsidies will help reduce the deficit. Subsidies are a major component of government expenditure. Rationalizing them, by making them more targeted and efficient, can lead to significant savings.
Statement 4: Reducing import duty will likely increase the fiscal deficit. Import duties are a source of tax revenue for the government. Reducing them will decrease revenue and potentially increase the deficit.
Statement 1 is correct. Statement 2 is not correct. Statement 3 is correct. Statement 4 is not correct.
Hence, only statements 1 and 3 are correct.
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