Economics • Indian EconomyHard
Examine the fiscal mechanism of 'Revenue Deficit' in India's public finance structure. Which of the following policy actions best aids in eliminating revenue deficit over medium-term fiscal consolidation plans?
A. Increasing capital outlay on long-term infrastructure projects like railways and national highways
B. Rationalizing non-developmental current expenditures such as untargeted subsidies and administrative overheads✓ Correct Answer
C. Enhancing short-term external commercial borrowings from international financial institutions
D. Reducing statutory tax rates across all personal income slabs to stimulate consumer demand
💡 Solution & Explanation
A revenue deficit occurs when current government expenditures exceed current revenues, implying borrowings are used to finance day-to-day consumption rather than asset creation. Eliminating it requires curtailing unproductive current spending, rationalizing subsidies, and expanding tax buoyancy. Capital expenditure, unlike revenue expenditure, creates productive physical assets that generate future economic returns.
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