UPSC Prelims 1995 · General Studies
Question 95: Economy and Social Development
The largest source of financing the public sector outlay of the Eighth Five-Year Plan comes from
AnswerThe answer is (d).
The Eighth Plan's public sector outlay was to be financed through four heads: balance from current revenues, the contribution of public enterprises, government borrowing and deficit financing, the last being the money created when the government borrows from the RBI. The given key names deficit financing as the largest of these. Remember: deficit financing adds to the money supply and so to inflation, which is why it is kept limited.
Why each option is right or wrong
- (a) Balance from current revenue was weak, since revenue deficits were large.
- (b) Public enterprises' own resources were a major part of the financing.
- (c) Government borrowing was also a major source.
- (d) The given key: deficit financing.
Worth knowing: Disputed: deficit financing was only a small slice of the Eighth Plan's resources, and the contribution of public enterprises or government borrowing was larger.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 1995, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.