Question : The 1991 economic policy aimed to reduce the fiscal deficit and promote fiscal discipline through:
Option 1: Increased government spending
Option 2: Higher taxes on individuals
Option 3: Public debt management
Option 4: Fiscal consolidation measures
Correct Answer: Fiscal consolidation measures
Solution : The correct answer is (d) Fiscal consolidation measures
The 1991 economic policy in India aimed to address the economic challenges the country was facing, including a high fiscal deficit. Fiscal deficit refers to the excess of government spending over its revenue. To tackle this issue and promote fiscal discipline, the policy introduced several fiscal consolidation measures.
Fiscal consolidation measures typically involve a combination of expenditure control and revenue enhancement. The objective is to reduce the fiscal deficit and bring the government's finances on a sustainable path. Some of the measures adopted under the 1991 economic policy included:
1. Reduction in unproductive and wasteful government expenditure.
2. Rationalization of subsidies and targeted delivery mechanisms.
3. Introduction of tax reforms to broaden the tax base and increase revenue collection.
4. Streamlining public debt management to improve debt sustainability.
5. Enhancing transparency and accountability in public finances.
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