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What is the effect of revenue deficit ? |
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Answer» For economic development government should put a control on revenue deficit. A high revenue deficit warns the government either to cut its expenditure or increases its tax and non-tax receipts. But in a country like India, where people are poor, it is difficult to force them to pay more taxes. In such a situation, revenue deficit can be made up either through borrowing or disposal of assets, i.e., disinvestment. While borrowing creates liability for the government, disinvestment reduces her assets. A government should try to strike a proper balance between its assets and liabilities otherwise the financial system of the economy will be destabilised. |
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