Which of the following government actions would genuinely help in reducing a persistently high fiscal deficit?
1. Reducing revenue expenditure
2. Introducing new welfare schemes
3. Rationalising subsidies
4. Reducing import duty on goods
Select the correct answer using the code given below.

Question

Accepted Answer

C. 1 and 3 only. Reducing revenue expenditure directly cuts government spending, and rationalising subsidies trims a major recurring expenditure item, so both genuinely shrink the fiscal deficit. Introducing new welfare schemes adds fresh spending, which widens rather than narrows the deficit, and reducing import duty cuts government revenue from customs collections, which also widens it, so neither action helps. Since only reducing revenue expenditure and rationalising subsidies actually help, option C is correct.

Answer

A. 1 and 2 only

Answer

B. 2 and 4 only

Answer

C. 1 and 3 only

Answer

D. 1, 3 and 4