Which of the following will contribute to fiscal consolidation?

  1. RBI increasing Repo rate
  2. Increase in Statutory liquidity ratio
  3. Start-up India programme
  4. Issuing government bonds and T-bills

Select the correct code from options given below:

Answer: [A] Only 1 & 2

Recently, RBI Governor Raghuram Rajan urged the government to stick to the fiscal consolidation path. Fiscal consolidation refers to steps taken by government to reduce the spending and check Fiscal deficit. First statement is correct because RBI increasing Repo rate will curb the commercial banks lending and contribute to fiscal consolidation. Second statement is correct because increase in SLR will again curb the commercial banks lending capacity and contribute to fiscal consolidation. Third statement is incorrect Start-up India programme is leading to fiscal stimulus. Fourth statement is incorrect because government borrowing in bonds and T-bills will increase government’s liability and hence no fiscal consolidation.

This question is a part of GKToday's Integrated IAS General Studies Module