Question

According to the Golden Rule of Public Finance, government borrowing is justified primarily for:

Q: Answer-According to the Golden Rule of Public Finance, government borrowing is justified primarily for:

Golden Rule Over the economic cycle, borrow only to invest, not to fund current spending. Indian context FRBM targets elimination of revenue deficit not total deficit precisely for this reason. Option C describes Keynesian functional finance, not the Golden Rule.

A Financing current revenue expenditure such as salaries and subsidies to maintain public services without raising taxes

B Financing capital expenditure (public investment) that generates future returns — ensuring the debt burden is matched by productive assets that benefit future generations who service the debt

C Stabilising the economy during recessions through deficit spending, regardless of the nature of expenditure

D Keeping the fiscal deficit below 3% of GDP as mandated by the FRBM Act