Which of the following statement is correct regarding the government budget? I. Subsidies are an important policy instrument which aim at increasing welfare. II. Defence expenditure, is committed expenditure in the sense that given the national security concerns, there exists little scope for drastic reduction.
Both I and II
The government budget is an annual statement of the estimated receipts and expenditure of the government for a financial year.
Statement I is correct: subsidies, such as those on food, fertiliser and fuel, are a key policy instrument used by the government to promote social welfare and support vulnerable sections.
Statement II is also correct: defence expenditure is treated as committed expenditure because national security concerns leave very little room for any drastic cut.
Committed expenditure refers to spending the government is largely bound to make, such as on defence, interest payments and salaries.
Since both statements correctly describe features of the government budget, neither can be rejected.
Hence the option that includes both statements is the required answer.
Therefore, the correct answer is Both I and II.
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