There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit?1.Reducing revenue expenditure2.Introducing new welfare schemes3.Rationalizing subsidies4.Expanding industriesSelect the correct answer using the code given below

1. A

   1 and 3 only

   Cutting revenue expenditure and rationalising subsidies both reduce the fiscal deficit, other things equal. New welfare schemes and expanding industries (as spending) do not. Hence 1 and 3 only is the official key.

2. B

   2 and 3 only

   New welfare schemes raise expenditure; they do not reduce a persistent deficit. Rationalising subsidies helps, but pairing it with statement 2 fails. This option is not the key.

3. C

   1 only

   Reducing revenue expenditure helps, but subsidy rationalisation is also a valid consolidation step, so ‘1 only’ is incomplete. This option is not the key.

4. D

   1, 2, 3 and 4

   All four would include new welfare schemes and industry expansion as deficit-cutting tools. Those typically raise outlays. This option is not the key.

Summary. Official key is (a) 1 and 3 only. A persistent deficit is closed by raising revenue or cutting spending. Revenue-expenditure control and subsidy reform are spending-side consolidation. New welfare schemes add committed expenditure. Expanding industries is not a deficit-reduction instrument in this list; it may even need public outlay. Statements 2 and 4 therefore fall.