The correct answer is Option 3: 1 and 3 only. Reducing revenue expenditure and rationalizing subsidies are the two actions that the Government can take to reduce the deficit.

Reducing revenue expenditure: The Government can cut down on unnecessary expenses, such as reducing administrative costs and decreasing the amount spent on non-essential items. This can be achieved by optimizing resource allocation and focusing on cost-effective measures. The Government can also take measures to control expenditure on salaries, pensions, and other benefits to public servants. This would lead to a decrease in the revenue expenditure of the Government, which in turn would help in reducing the deficit.

Rationalizing subsidies: The Government can rationalize subsidies, which means that it can identify and eliminate subsidies that are not effective or are not reaching the intended beneficiaries. For instance, the Government can eliminate subsidies that are being availed by people who do not need them or subsidies that are being misused. By rationalizing subsidies, the Government can reduce its expenditure and channelize the funds to more productive areas.

Introducing new welfare schemes and reducing import duty, as mentioned in options 2 and 4, are not necessarily effective measures for reducing the deficit. Introducing new welfare schemes would increase the expenditure of the Government, while reducing import duty would reduce revenue, which could potentially increase the deficit.

In summary, to reduce the deficit, the Government should focus on reducing revenue expenditure and rationalizing subsidies. By doing so, it can lower its expenses and channelize funds to more productive areas.