Question

In India, deficit financing refers to:

Options

• Selling public sector enterprises to private buyers

• Borrowing from foreign governments to cover the deficit

• Reducing government expenditure to balance the budget

• Issuing more currency to meet the budget deficit

Answer 1

Deficit financing is a revenue instrument of fiscal policy. In India, it specifically refers to issuing more currency to meet the budget deficit, distinguishing it from public debt, which is borrowing by the government from the public.