Question

Q. Fiscal consolidation is considered as one of the major goals of India’s economic policy. Which of the following is/are considered as the tools of fiscal consolidation?

Select the answer using the code given below:

• A. 1 only
• B. 2 only
• C. 1 and 2 only
• D. 1 and 3 only

Answer 1

The correct option is C 1 and 2 only

Explanation:

The revenue and expenditure measures planned by the Government to achieve Fiscal Consolidation are listed below.

1. Reduction in subsidies will reduce the expenditure of the government which will help in fiscal consolidation. The government should focus on better targeting government subsidies and extending the Direct Benefit Transfer scheme for subsidies.
2. Improving the efficiency of tax administration by eliminating evasion of tax, increasing tax compliance, reducing tax avoidance, etc.
3. Enhancing the tax GDP ratio by widening the tax base and minimizing tax concessions and exemptions also improves tax revenues.
4. A higher economic growth rate will help the government to get higher tax revenues as well. Augmentation of tax revenue is necessary to bring fiscal consolidation as there are limitations for reducing government expenditure in India.