Redistribution of income and wealth in a country, with the aim of reducing inequalities, can most effectively be brought about through which of the following fiscal policy combinations?

Introduction / Context:
One of the important goals of fiscal policy in many countries, including India, is to reduce excessive inequalities of income and wealth. Governments attempt to achieve this through the design of their tax systems and their patterns of public expenditure. This question asks you to identify which combination of taxation and expenditure policies is most suitable for redistributing income in favour of poorer sections of society.

Given Data / Assumptions:
- The focus is on reducing inequality and redistributing income.
- Progressive taxation means the tax rate rises as income increases, placing a higher burden on richer individuals.
- Regressive taxation means the effective tax burden falls as income increases, hurting the poor relatively more.
- Progressive public expenditure means spending targeted towards the poor and vulnerable, such as on health, education and social security.
- Regressive public expenditure would mainly benefit the rich, for example through subsidies that favour luxury consumption.

Concept / Approach:
To reduce inequality, the government should collect proportionally more resources from those with higher ability to pay and direct more benefits towards those with lower incomes. Progressive taxation achieves the first part by imposing higher marginal tax rates on higher income groups. Progressive public expenditure achieves the second part by focusing government spending on services and transfers that disproportionately help the poor. When both taxation and expenditure are progressive, the net effect is a clear redistribution of income from richer to poorer households.

Step-by-Step Solution:
Step 1: Analyse option A: progressive taxation plus progressive expenditure. Here, richer individuals face higher tax rates, and public spending is directed to schemes like education, rural development, and social protection, which mainly benefit lower income groups. This combination logically supports redistribution.Step 2: Analyse option B: progressive taxation plus regressive expenditure. Although the tax system is progressive, if public spending favours the rich (for example through subsidies on luxury goods), then much of the redistributive effect is undone.Step 3: Analyse option C: regressive taxation plus regressive expenditure. This is the opposite of redistribution; the poor pay proportionally more tax and receive fewer benefits.Step 4: Analyse option D: regressive taxation plus progressive expenditure. In this case, although spending supports the poor, the tax system itself burdens them heavily, reducing the net redistributive impact and possibly even making them worse off overall.

Verification / Alternative check:
You can verify the reasoning by thinking about real world examples. Many welfare states finance extensive social services through progressive income taxes and wealth taxes, combined with targeted benefits like unemployment allowances, public healthcare and free education. This tends to compress the income distribution. If instead a government relied mainly on indirect taxes that fall more heavily on the poor and spent heavily on subsidies for capital intensive sectors or luxury consumption, inequality would likely worsen.

Why Other Options Are Wrong:
Option B is wrong because regressive expenditure negates the progressive impact of taxation; resources may still flow disproportionately to those who are already better off. Option C is clearly wrong since both tax and spending sides favour the rich, increasing inequality. Option D is also unsatisfactory because a regressive tax system undermines the positive effects of progressive expenditure, leaving the overall distribution either unchanged or worse.

Common Pitfalls:
Some candidates focus only on the taxation side and forget that expenditure patterns are equally important. Others think that any progressive element, whether on the tax or spending side, is sufficient. The correct perspective is that long term redistribution requires a coherent combination: taxes that rise with ability to pay and expenditures that are targeted towards those most in need.

Final Answer:
Redistribution of income is most effectively achieved through Progressive taxation combined with progressive public expenditure.