Question

Discuss the issue of deficit reduction.

Answer 1

The deficit can be reduced through the following measures:

(i) Increase in receipts: Government can impose new taxes or increase the rate of existing taxes to increase its receipts. Receipts reduce the deficit.

(ii) Decrease in expenditure: Government can reduce the deficit by reducing its unproductive and administrative expenditures, and also encourage the private sector to undertake capital projects to reduce its expenditure.