Read the following about Deficit reduction.
A. Government deficit can be reduced by an increase in taxes or reduction in expenditure.
B. In India, the government has been trying to increase tax revenue with greater reliance on direct taxes (indirect taxes are regressive in nature - they impact all income groups equally).
Identify the CORRECT statement/statements 9/24
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Both A and B.
Both statements A and B are correct.
A. Government deficit can indeed be reduced by either increasing taxes or reducing public expenditure. These measures help balance government revenue and spending, reducing the deficit.
B. In India, the government has focused on increasing tax revenue by relying more on direct taxes, which are progressive and impose higher rates on higher incomes, rather than indirect taxes, which tend to disproportionately affect lower-income groups. This approach aims to make the tax system fairer and reduce inequality.