Economics • Economic BasicsHard
How does the heavy dependence on institutional stubble-burning mitigation subsidies impact the macroeconomic fiscal deficit of the Punjab state government?
A. It expands capital expenditure allocations, temporarily widening revenue deficits unless centrally reimbursed✓ Correct Answer
B. It directly increases tax revenue through carbon taxation on smallholder farmers
C. It eliminates the state fiscal deficit by generating surplus export earnings from agricultural machinery
D. It has no measurable fiscal impact as all expenditures are absorbed entirely by private banking entities
💡 Solution & Explanation
Subsidies for crop residue management machinery expand current revenue expenditures and increase fiscal deficits for the Punjab government unless offset by central grants. Carbon taxes are not levied on smallholder farmers in India, and machinery distribution does not generate direct export surpluses for the state treasury. Public expenditure management in Punjab is tightly scrutinized under fiscal responsibility legislations due to mounting debt burdens. State-level fiscal consolidation remains a primary policy objective for successive finance commissions.
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