There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit? 1. Reducing revenue expenditure 2. Introducing new welfare schemes 3. Rationalizing subsidies 4. Expanding industries Select the correct answer using the code given below.

A deficit budget occurs when the government's total expenditure exceeds its total revenue. To reduce this deficit, the government needs to either increase its revenue or decrease its expenditure. Let's analyze the given actions: 1. Reducing revenue expenditure: Revenue expenditure includes spending on salaries, subsidies, interest payments, etc. Directly reducing these expenses would lower the government's total expenditure and thus help reduce the deficit. This statement is correct. 2. Introducing new welfare schemes: New welfare schemes typically involve increased government spending, which would exacerbate (increase) the deficit, not reduce it. This statement is incorrect. 3. Rationalizing subsidies: Subsidies are a significant component of government expenditure. Rationalizing them (e.g., reducing the amount, targeting them better, or eliminating non-essential ones) would directly decrease government spending and help reduce the deficit. This statement is correct. 4. Expanding industries: While expanding industries can potentially lead to higher tax revenues in the long run, it often requires initial capital outlay or support from the government, which could increase expenditure in the short to medium term. As a direct and immediate measure to *reduce* the *current* deficit, this is not the most effective action. This statement is incorrect as a primary deficit-reduction measure. Therefore, reducing revenue expenditure and rationalizing subsidies are effective actions to reduce a budget deficit.