Consider the following:

  1. Foreign direct investment
  2. Domestic borrowing
  3. Foreign borrowing

  Which of the above can be used to finance fiscal deficit in an economy?

Answer: [C] 2 & 3 Only

The difference between total revenue and total expenditure of the government is termed as fiscal deficit. Borrowing either from domestic market or from foreign market is the major source for financing fiscal deficit. FDI is not used for FD financing.

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