Question

Which of the following is/are included in "Deficit Financing" in India? (The term is used frequently in economic planning)
A. Borrowing from the Reserve Bank of India
B. Issue of new currency notes
C. Withdrawal of past balances/surpluses etc

• A. Only (A)
• B. Only (B)
• C. Only (C)
• D. Only (A) and (B)

Answer 1

The correct option is D Only (A) and (B)

Deficit financing is defined as a situation in which the government spends more than the revenue, the difference being made by borrowing or minting new funds. Hence, funds are borrowed from the Reserve Bank of India. Deficit financing is also used in economic planning. Thus, deficit financing includes borrowing from the Reserve Bank Of India or the withdrawal of past balances/surpluses.