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Consider the following:
Disinvestment
Reducing expenditures
Raising tax rates
Rationalizing subsidies
Which of the actions mentioned above if adopted by Government would reduce its deficit?
- a)1 and 4 only
- b)1 , 2 and 4 only
- c)1, 2, 3 and 4
- d)2 and 3 only
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Consider the following: Disinvestment Reducing expenditures Raisi...
Disinvestment:
- Disinvestment refers to the sale or liquidation of government assets, such as shares in public sector enterprises or land holdings.
- By disinvesting, the government can generate revenue, which can be used to reduce the deficit.
- This is because the proceeds from disinvestment can be used to pay off debt or fund government expenditure, thereby reducing the deficit.
Reducing expenditures:
- Reducing expenditures involves cutting down on government spending in various sectors.
- This can be achieved by implementing austerity measures, reducing non-essential expenses, and increasing efficiency in the delivery of public services.
- By reducing expenditures, the government can lower its overall spending, which helps in reducing the deficit.
Raising tax rates:
- Raising tax rates means increasing the rates at which individuals and businesses are taxed.
- This can be done by increasing income tax rates, corporate tax rates, or introducing new taxes.
- By raising tax rates, the government can generate more revenue, which can be used to offset the deficit.
Rationalizing subsidies:
- Rationalizing subsidies involves reviewing and reforming the existing subsidy system.
- This may include reducing or eliminating subsidies that are not economically viable or targeting subsidies to those who truly need them.
- By rationalizing subsidies, the government can reduce its expenditure on subsidies, thereby helping to reduce the deficit.
Explanation:
- Option C includes all four actions - disinvestment, reducing expenditures, raising tax rates, and rationalizing subsidies.
- By adopting all of these actions, the government can generate additional revenue through disinvestment and higher taxes, while also reducing its expenditure through expenditure cuts and subsidy reforms.
- This combination of revenue generation and expenditure reduction helps in reducing the deficit.
- Therefore, option C is the correct answer as it includes all the actions that would help in reducing the government's deficit.
- Disinvestment refers to the sale or liquidation of government assets, such as shares in public sector enterprises or land holdings.
- By disinvesting, the government can generate revenue, which can be used to reduce the deficit.
- This is because the proceeds from disinvestment can be used to pay off debt or fund government expenditure, thereby reducing the deficit.
Reducing expenditures:
- Reducing expenditures involves cutting down on government spending in various sectors.
- This can be achieved by implementing austerity measures, reducing non-essential expenses, and increasing efficiency in the delivery of public services.
- By reducing expenditures, the government can lower its overall spending, which helps in reducing the deficit.
Raising tax rates:
- Raising tax rates means increasing the rates at which individuals and businesses are taxed.
- This can be done by increasing income tax rates, corporate tax rates, or introducing new taxes.
- By raising tax rates, the government can generate more revenue, which can be used to offset the deficit.
Rationalizing subsidies:
- Rationalizing subsidies involves reviewing and reforming the existing subsidy system.
- This may include reducing or eliminating subsidies that are not economically viable or targeting subsidies to those who truly need them.
- By rationalizing subsidies, the government can reduce its expenditure on subsidies, thereby helping to reduce the deficit.
Explanation:
- Option C includes all four actions - disinvestment, reducing expenditures, raising tax rates, and rationalizing subsidies.
- By adopting all of these actions, the government can generate additional revenue through disinvestment and higher taxes, while also reducing its expenditure through expenditure cuts and subsidy reforms.
- This combination of revenue generation and expenditure reduction helps in reducing the deficit.
- Therefore, option C is the correct answer as it includes all the actions that would help in reducing the government's deficit.
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Community Answer
Consider the following: Disinvestment Reducing expenditures Raisi...
- A deficit is an amount by which the expenditures in a budget exceed the income. A Government Deficit is the amount of money in the set budget by which the government expenditure exceeds the government income amount. This deficit provides an indication of the financial health of the economy. To reduce the deficit or the gap between the expenditures and income, the government may take several steps.
- Steps to reduce deficits of government include raising taxes to increase the tax revenues, divesting from nonessential services, disinvestment in public sector enterprise, rationalizing subsidies to reduce expenditures, etc., Hence option(c) is the correct answer.
- The government may also resort to borrowings to finance its deficits.
- Deficit financing is defined as “borrowings from the Reserve Bank of India against the issue of Treasury Bills and running down of accumulated cash balances”. When the government borrows from the Reserve Bank of India, it merely transfers its securities to the Bank. On the basis of these securities the bank issues more currency and puts them into circulation on behalf of the government. This amounts to the creation of money. The rationale for Deficit Financing is that sometimes the government fails to mobilize adequate resources. In this situation, the option of deficit financing is required to meet fiscal deficit targets. If the option of deficit financing is not utilized the government ends up compromising on growth targets. So, it is a way of financing the deficit, not reducing the deficit.
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Consider the following: Disinvestment Reducing expenditures Raising tax rates Rationalizing subsidies Which of the actions mentioned above if adopted by Government would reduce its deficit?a)1 and 4 onlyb)1 , 2 and 4 onlyc)1, 2, 3 and 4d)2 and 3 onlyCorrect answer is option 'C'. Can you explain this answer?
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Consider the following: Disinvestment Reducing expenditures Raising tax rates Rationalizing subsidies Which of the actions mentioned above if adopted by Government would reduce its deficit?a)1 and 4 onlyb)1 , 2 and 4 onlyc)1, 2, 3 and 4d)2 and 3 onlyCorrect answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following: Disinvestment Reducing expenditures Raising tax rates Rationalizing subsidies Which of the actions mentioned above if adopted by Government would reduce its deficit?a)1 and 4 onlyb)1 , 2 and 4 onlyc)1, 2, 3 and 4d)2 and 3 onlyCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following: Disinvestment Reducing expenditures Raising tax rates Rationalizing subsidies Which of the actions mentioned above if adopted by Government would reduce its deficit?a)1 and 4 onlyb)1 , 2 and 4 onlyc)1, 2, 3 and 4d)2 and 3 onlyCorrect answer is option 'C'. Can you explain this answer?.
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