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Which of the following developments may not likely reduce the fiscal deficit?
- Increasing Foreign Direct Investment (FDI)
- Providing budgetary support to public sector enterprises
- Waiving off farm loans.
- Austerity measures should be adopted.
Select the correct code:
- a)1, 4
- b)2, 3
- c)2, 3, 4
- d)1, 2, 3
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Which of the following developments may not likely reduce the fiscal d...
Increasing Foreign Direct Investment (FDI)
- Increasing FDI can potentially reduce the fiscal deficit as it brings in foreign capital, which can be used to finance government expenditure and reduce the need for borrowing. This can help in bridging the fiscal deficit gap.
Providing budgetary support to public sector enterprises
- Providing budgetary support to public sector enterprises may not likely reduce the fiscal deficit. Public sector enterprises often require financial assistance from the government to meet their operational expenses and investment needs. This support adds to the government's expenditure, increasing the fiscal deficit.
Waiving off farm loans
- Waiving off farm loans may not likely reduce the fiscal deficit. When the government waives off farm loans, it forgives the outstanding debt of farmers. This leads to a direct increase in government expenditure, which in turn increases the fiscal deficit.
Austerity measures should be adopted
- Austerity measures refer to reducing government expenditure and increasing revenue through measures like cutting subsidies, reducing welfare programs, and increasing taxes. While austerity measures can help in reducing the fiscal deficit, it is not mentioned that they may not likely reduce the fiscal deficit.
Explanation:
- Option B (2, 3) is the correct answer because providing budgetary support to public sector enterprises and waiving off farm loans both add to the government's expenditure, increasing the fiscal deficit. Increasing FDI can potentially reduce the fiscal deficit, and the impact of austerity measures on the fiscal deficit is not specified in the question.
- Increasing FDI can potentially reduce the fiscal deficit as it brings in foreign capital, which can be used to finance government expenditure and reduce the need for borrowing. This can help in bridging the fiscal deficit gap.
Providing budgetary support to public sector enterprises
- Providing budgetary support to public sector enterprises may not likely reduce the fiscal deficit. Public sector enterprises often require financial assistance from the government to meet their operational expenses and investment needs. This support adds to the government's expenditure, increasing the fiscal deficit.
Waiving off farm loans
- Waiving off farm loans may not likely reduce the fiscal deficit. When the government waives off farm loans, it forgives the outstanding debt of farmers. This leads to a direct increase in government expenditure, which in turn increases the fiscal deficit.
Austerity measures should be adopted
- Austerity measures refer to reducing government expenditure and increasing revenue through measures like cutting subsidies, reducing welfare programs, and increasing taxes. While austerity measures can help in reducing the fiscal deficit, it is not mentioned that they may not likely reduce the fiscal deficit.
Explanation:
- Option B (2, 3) is the correct answer because providing budgetary support to public sector enterprises and waiving off farm loans both add to the government's expenditure, increasing the fiscal deficit. Increasing FDI can potentially reduce the fiscal deficit, and the impact of austerity measures on the fiscal deficit is not specified in the question.
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Which of the following developments may not likely reduce the fiscal d...
- Fiscal deficit (FD) is the difference between revenue receipts plus non-debt capital receipts on the one side and total expenditure including loans, net of repayments, on the other. It measures the gap between the government consumption expenditure including loan repayments and the anticipated income from tax and non-tax revenues.
- It also indicates the borrowing requirements of the government from all sources. The bigger the gap the more the government will have to borrow or resort to printing money to make both ends meet. Indiscriminate borrowings will push the economy into debt trap, while too much deficit financing may be inflationary.
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Which of the following developments may not likely reduce the fiscal deficit? Increasing Foreign Direct Investment (FDI) Providing budgetary support to public sector enterprises Waiving off farm loans. Austerity measures should be adopted.Select the correct code:a)1, 4b)2, 3c)2, 3, 4d)1, 2, 3Correct answer is option 'B'. Can you explain this answer?
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