{"id":1981,"date":"2024-03-31T00:19:24","date_gmt":"2024-03-30T18:49:24","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1981"},"modified":"2024-04-03T07:01:03","modified_gmt":"2024-04-03T01:31:03","slug":"q-in-india-deficit-financing-is-used-for-raising-resources-for","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-in-india-deficit-financing-is-used-for-raising-resources-for","title":{"rendered":"Q.\u00a0In India, deficit financing is used for raising resources for"},"content":{"rendered":"\n<ul class=\"mcq wp-block-list\">\n<li>Economic development<\/li>\n\n\n\n<li>Redemption of public debt<\/li>\n\n\n\n<li>Adjusting the balance of payments<\/li>\n\n\n\n<li>Reducing the foreign debt<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>Answer: (a) Economic development<\/strong><\/p>\n<\/blockquote>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"deficit-financing\">Deficit financing:<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Deficit financing is nothing but\u00a0<strong>financing the budget deficit incurred due to excess government expenditures.&nbsp;<\/strong>\n<ul class=\"wp-block-list\">\n<li>It means&nbsp;<strong>generating funds to finance the deficit&nbsp;<\/strong>which results from excess expenditure over revenue. The gap is being covered by&nbsp;<strong>borrowing from the public by the sale of bonds or by printing new money.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Deficit financing is a necessary evil in a welfare state as the states often fail to generate tax revenue which is sufficient enough to take care of the expenditure of the state.\n<ul class=\"wp-block-list\">\n<li>The&nbsp;<strong>basic intention behind deficit financing is to provide the necessary impetus to economic growth&nbsp;<\/strong>by artificial means.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Means of Deficit Financing<\/strong>:\n<ul class=\"wp-block-list\">\n<li><strong>External Aid:<\/strong>&nbsp;This is the best way to finance the deficit even if they are coming with soft interest rates.<\/li>\n\n\n\n<li><strong>External Borrowings:<\/strong>&nbsp;This is the next best way to manage the fiscal deficit with the condition that they are coming with a cheap rate of interest and are of long term.<\/li>\n\n\n\n<li><strong>Internal Borrowings:<\/strong>&nbsp;It is the third best way to finance the deficit. But it hampers the investment prospects of the government and the public sector.<\/li>\n\n\n\n<li><strong>Printing Currency:&nbsp;<\/strong>It is the last resort to finance the deficit and should be used only in exceptional circumstances. Its negative effects on the economy are: it increases inflation proportionally and it also increases pressure on the government for increasing wages and salaries of government employees-ultimately increasing government expenditure.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Purpose of Deficit Financing<\/strong>\n<ul class=\"wp-block-list\">\n<li>To finance defence expenditures during war<\/li>\n\n\n\n<li><strong>To lift the economy out of depression so that incomes, employment, invest\u00adment, etc. all rise<\/strong><\/li>\n\n\n\n<li>To activate idle resources as well as divert resources from unproductive sectors to productive sectors with the objective of&nbsp;<strong>increasing national income and, hence, higher economic growth<\/strong><\/li>\n\n\n\n<li>To raise capital formation by mobilizing forced savings made through deficit financing<\/li>\n\n\n\n<li>To mobilize resources to finance massive plan expenditure<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Answer: (a) Economic development Deficit financing:<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[60],"class_list":["post-1981","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-60"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":60,"label":"2013"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1981","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1981"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1981\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1981"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1981"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1981"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1981"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}