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      Question

      In the Union Budget 2025–26, the fiscal deficit target

      for FY26 is set at 4.4% of GDP. From a fiscal policy standpoint, this target primarily reflectsβ€”
      A Expansionary fiscal policy Correct Answer Incorrect Answer
      B Neutral fiscal policy Correct Answer Incorrect Answer
      C Contractionary fiscal policy Correct Answer Incorrect Answer
      D Discretionary monetary tightening Correct Answer Incorrect Answer
      E Counter-cyclical taxation Correct Answer Incorrect Answer

      Solution

      A reduction in fiscal deficit from 4.8% (FY25 RE) to 4.4% indicates fiscal consolidation, which is a contractionary stance aimed at stabilizing debt and reducing borrowing.

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