Question
In India, deficit financing is used for raising resources for
(a) economic development
(b) redemption of public debt
(c) adjusting the balance of payments
(d) reducing the foreign debt
Answer:
A
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Explanation:
Deficit financing is a fiscal policy tool used by the government to bridge the gap between its expenditure and revenue. When the government's expenditure exceeds its revenue, it leads to a budget deficit. To finance this deficit, the government resorts to deficit financing.
In the Indian context, deficit financing is primarily used to raise resources for economic development. The government utilizes deficit financing to fund various developmental projects and programs aimed at promoting economic growth, infrastructure development, social welfare, education, healthcare, and other priority areas.
By injecting additional money into the economy through deficit financing, the government aims to stimulate demand, create employment opportunities, promote investments, and support overall economic development.