(a) (i) Distinguish between direct tax and indirect tax with the help of suitable examples. (ii) Explain the ‘redistribution of income’ objective of…

Government can reduce inequalities of income through taxes and public expenditure. It may impose high taxes on the rich to reduce their disposable income. Furthermore, government may incur more public expenditure for the welfare of the poor, like providing free services etc. By adopting these measures, the government tries to bridge the gap between the rich and the poor.

(b) (i) Revenue Deficit = (ii) – {(i) + (iii)}

= $\displaystyle 3,700$ – $\displaystyle 1,200$ – $\displaystyle 2,000$

= ₹ $\displaystyle 500$ crore

Fiscal Deficit = {(ii) + (v)} – {(i) + (iii) + (iv) + (vi)}

= $\displaystyle 3,700$ + $\displaystyle 500$ – $\displaystyle 1,200$ – $\displaystyle 2,000$ – $\displaystyle 145$ – $\displaystyle 120$

= ₹ $\displaystyle 735$ crore

(b) (ii) Public provision refers to those goods that are financed through the government budget and can be used without any direct payment by public.

Whereas;

Public production relates to those goods which are directly produced by the government.