Fiscal policies to reduce budget deficit Steps:

• Define budget deficit as government expenditure minus revenue; reducing it requires boosting revenue or cutting spending.
• Assess each option's impact on revenue or spending in the context of India's fiscal targets.
• Eliminate options that increase spending or fail to directly affect the deficit.
• Identify the direct revenue-enhancing measure.

Why B is correct:

• Selling state-owned assets (disinvestment) provides non-tax revenue, directly increasing government receipts and lowering the fiscal deficit as per India's FRBM framework.

Why the others are wrong:

• A: Lowers import tariffs, reducing customs revenue and potentially widening the deficit.
• C: Interest rate cut is monetary policy by RBI; it may indirectly boost growth and tax revenue but doesn't directly address fiscal deficit.
• D: Raises pension spending, increasing expenditure and worsening the deficit.

Final answer: B