There has been a persistent deficit budget year after year. Which action/actions of the following can-be taken by the Government to reduce the deficit? 1. Reducing revenue expenditure 2. Introducing new welfare schemes 3. Rationalizing subsidies 4. Reducing import duty Select the correct answer using the code given below.

Defines fiscal deficit as total expenditure minus receipts and notes that governments often cut productive capital or welfare expenditure when reducing expenditure.

A student can infer that adding a new welfare scheme raises expenditure and so would tend to increase fiscal deficit unless receipts rise or other expenditures are cut.

Gives the concrete identity of fiscal deficit as the borrowing required when receipts fall short of expenditure (fiscal deficit = total borrowing).

Use this rule to test whether a new scheme increases borrowing (and thus deficit) unless financed by new receipts or reallocation.

States that when faced with revenue deficits, governments generally reduce productive capital and welfare expenditure to cover excess revenue expenses.

Suggests that to keep deficit down when introducing a new welfare scheme, the government would likely need to cut other expenditures or raise revenue.

Lists the two main ways to reduce deficit: increase taxes (receipts) or reduce expenditure; mentions raising receipts via PSU disinvestment and making spending more efficient.

Implies a new scheme could avoid increasing the deficit if accompanied by tax increases, asset sales, or efficiency gains (e.g., more efficient transfers).

Treats deficit financing as something to avoid and notes decreasing non-developmental government expenditure as a tool of fiscal policy.

Leads to testing whether a new welfare scheme is financed by reallocating non-developmental spending or by deficit financing, which would affect the fiscal deficit differently.

States a general rule: government deficit can be reduced by increasing taxes or reducing expenditure — linking tax revenue changes to fiscal deficit.

A student can apply this rule to import duties (an indirect tax): reducing duties would lower tax receipts unless offset by other revenue gains or spending cuts.

Gives concrete examples of changes in customs duty rates and exemptions, showing that import duties are policy levers the government uses to alter revenues.

Using these examples, a student can note that lowering customs duty is a policy that tends to reduce direct receipts from imports, and then check import volumes or compensating measures to judge net fiscal impact.

Provides the definition of fiscal deficit as total expenditure minus receipts (excluding borrowings), clarifying that receipts include tax revenues.

A student can place changes in import duty receipts into the 'total receipts' term to see how lower duties mechanically affect the fiscal deficit unless receipts elsewhere change.

Offers an historical example where trade-related policy (abolition of export subsidies) was used as part of fiscal stabilisation to reduce fiscal deficit.

By analogy, a student can reason that trade/tariff measures have fiscal consequences and check whether lowering import duties could be counterbalanced by other trade-related fiscal measures.

Explains that revenue deficit is part of fiscal deficit and that governments often cut capital/welfare expenditure to cover revenue shortfalls.

A student can use this to assess whether a government facing lower import-duty receipts might instead reduce spending (thus affecting growth/welfare) to keep fiscal deficit unchanged.