2016 GS Paper I, all questions

UPSC Prelims 2016 · GS Paper I

Question 3: Economy and Social Development

There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit?

  1. 1.Reducing revenue expenditure
  2. 2.Introducing new welfare schemes
  3. 3.Rationalizing subsidies
  4. 4.Reducing import duty

Select the correct answer using the code given below.

a1 only
b2 and 3 only
c1 and 3 only
d1, 2, 3 and 4

AnswerUPSC’s answer is (c).

A deficit narrows when spending falls or receipts rise. Cutting revenue expenditure and rationalizing (better targeting) subsidies both reduce government spending. New welfare schemes add spending, and a cut in import duty reduces customs revenue, so both would widen the deficit. Remember the rule: lower spending or higher receipts shrinks a deficit; the opposite widens it.

  • 1. Lower revenue expenditure directly reduces the gap between spending and receipts.
  • 2. New welfare schemes add expenditure and increase the deficit.
  • 3. Rationalizing subsidies cuts the subsidy bill.
  • 4. Lower import duty cuts customs revenue and widens the deficit.

How you could have got this

  1. If you were sure statement 2 is not correct, (b) and (d) go: each of them includes 2.

    What you needed to know: New welfare schemes add expenditure and increase the deficit.

  2. Then, if you were sure statement 3 is correct, (a) goes: it leaves 3 out.

    What you needed to know: Rationalizing subsidies cuts the subsidy bill.

Only (c) is left. You didn’t need statements 1 or 4.

Which options go is worked out from UPSC’s key and the options, not by a model.

Why each option is right or wrong
  • (a) Reducing revenue expenditure helps, but rationalizing subsidies also helps.
  • (b) New welfare schemes raise spending, so they do not reduce the deficit.
  • (c) Right: cutting revenue expenditure and rationalizing subsidies both reduce spending.
  • (d) New schemes and lower import duty both widen the deficit.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2016, General Studies Paper I, Series A. The paper on upsc.gov.in.