Deficit Financing in India

Deficit financing refers to government spending more money than it collects in revenue, financing the gap through borrowing or creating new money. In developing economies like India, deficit financing has been traditionally used to fund capital expenditure on infrastructure and social programs aimed at economic development. This Keynesian approach supports growth during development phases. Option (b) relates to debt management, not the primary use of deficit financing. Options (c) and (d) relate to external sector management, not the fundamental purpose of deficit financing. Deficit financing for development was a key tool during India's planned development period. > Deficit Financing = Tool for Development Spending (not debt reduction). Answer: (a).