Assertion: Economic reforms have placed limits on the growth of public expenditure, especially in social sectors.

Reasoning: The tax reductions in the reform period, aimed at yielding larger revenue and curb tax evasion, have not resulted in increase in tax revenue for the government.

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.

Economic reforms have placed limits on the growth of public expenditure, especially in social sectors. The tax reductions in the reform period, aimed at yielding larger revenue and curb tax evasion, have not resulted in increase in tax revenue for the government. Also, the reform policies, involving tariff reduction, have curtailed the scope for raising revenue through custom duties. In order to attract foreign investment, tax incentives are provided to foreign investors which further reduced the scope for raising tax revenues. This has a negative impact on developmental and welfare expenditures.