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 codes given below:

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CollectorBabu · Accepted Answer

Correct Answer: 1 and 3 only. ● Budgetary deficit is the difference between all receipts and expenses in both revenue and capital account of the government. ● In order to reduce the budgetary deficit, expenses should be reduced and receipts should be increased. ● Welfare schemes increase the expenses of government, hence they would increase the deficit. ● Rationalizing subsidies aims at an efficiency increase by better use of existing possibilities i.e., reducing subsidies and related leakages would reduce expenses of government. Hence this step would reduce the deficit. ● The fourth measure is incorrect as for expanding the industries will require an investment that increases the expenditure, which in turn increases the budget deficit.

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