Which measure was intended to enhance India's economic stability through…
2026
Which measure was intended to enhance India's economic stability through post-1991 fiscal policy?
Answer: A. By implementing fiscal discipline and reducing budget deficits — ConceptFiscal stability depends on keeping government expenditure, revenue, and borrowing on a sustainable path. Fiscal consolidation narrows a persistent…
- A.
By implementing fiscal discipline and reducing budget deficits
- B.
By limiting foreign investment
- C.
By expanding subsidies without fiscal responsibility
- D.
By increasing public-sector borrowing
Show answer & explanation
Correct answer: A
Concept
Fiscal stability depends on keeping government expenditure, revenue, and borrowing on a sustainable path.
Fiscal consolidation narrows a persistent budget deficit by strengthening revenue and controlling expenditure, which limits debt accumulation and macroeconomic pressure.
Application
After the 1991 balance-of-payments crisis, fiscal reform formed part of India's stabilization programme. The relevant mechanism was fiscal discipline: restraining expenditure, improving revenue mobilisation, and reducing the budget deficit and dependence on deficit financing.
Contrast
Limiting foreign investment concerns capital inflows and does not describe fiscal consolidation.
Expanding subsidies without matching revenue or expenditure control increases fiscal pressure.
Increasing public-sector borrowing adds debt and future interest obligations.
Cross-check
A stability-oriented fiscal measure should reduce the government's financing gap and borrowing need. Fiscal discipline does this directly, whereas the other measures either concern a different policy channel or enlarge fiscal pressure.
Result
Therefore, the intended measure was implementing fiscal discipline and reducing budget deficits.