Question : Which policy aimed to reduce the fiscal deficit and promote fiscal discipline in the 1991 economic policy?
Option 1: Monetary policy
Option 2: Fiscal policy
Option 3: Public debt policy
Option 4: External debt policy
Correct Answer: Fiscal policy
Solution : The correct answer is (b) Fiscal policy.
Fiscal policy refers to the use of government spending and taxation to influence the economy. In the context of the 1991 economic policy in India, fiscal policy measures were implemented to address the high fiscal deficit, which refers to the excess of government expenditures over revenues. These measures included reducing unproductive government expenditure, rationalizing subsidies, increasing tax revenues, and implementing fiscal consolidation measures to bring the deficit under control and promote fiscal discipline.
