| Consider the following statements regarding fiscal Policy; |
| 1. Fiscal consolidation means improvement in government finances and maintaining the same. |
| 2. Fiscal consolidation is critical as it can enable government to spend more on infrastructure and social sectors. |
| 3. Tax reforms, disinvestment, better targeting of subsidies are the hallmarks of fiscal consolidation. |
| Of these statements |
A) 1, 2 and 3 are correct
B) 2 and 3 are correct
C) 1 and 2 are correct
D) 1 and 3 are correct
Correct Answer: A
Solution :
[a] Explanation: A conscious policy effort is needed by the government to live within its means and thereby bring down the fiscal deficit and public debt. It includes, among other things, efforts to raise revenues and bring down wasteful expenditure such as subsidies. As a larger mandate, it also involves the participation by state governments in the process. But the whole initiative is planned as a long-term exercise by the government through a road map for fiscal reform rather than through a single Budget announcement. This is particularly true for a country like India where the government's expenditure is way beyond its revenues, forcing it to borrow.
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