The correct answer is All (a), (b), (c) Explanation & Key Takeaways: • Deficit financing is a necessary evil in a welfare state as the states often fail to generate tax revenue that is sufficient enough to take care of the expenditure of the state. • The basic intention behind deficit financing is to provide the necessary impetus to economic growth by artificial means. Related Concepts: • Main objectives of Fiscal Policy in India • Economic growth: It helps to maintain the economy’s growth rate so that certain economic goals can be achieved. • Price stability: It controls the price level in the country so that when inflation is too high, prices can be regulated. • Full employment: It aims to achieve full employment, or near full employment, as a tool to recover from low economic activity. • Deficit Financing in India • Deficit financing is defined as “borrowings from the Reserve Bank of India against the issue of Treasury Bills and running down of accumulated cash balances”. • When the government borrows from the Reserve Bank of India, it merely transfers its securities to the Bank. • On the basis of these securities the bank issues more currency and puts them into circulation on behalf of the government. This amounts to the creation of money. • The rationale for Deficit Financing: sometimes the government fails to mobilize adequate resources. In this situation, the option of deficit financing is required to meet fiscal deficit targets. • If the option of deficit financing is not utilized the government ends up compromising on growth targets.