A government budget is a statement of the estimates of the government receipts and expenditure during a given period of time or given a financial year (fiscal year).
Main Elements of government budget
It’s a statement of estimates of government receipts and expenditure .
Budget estimates to a fixed period of time.
expenditure and sources of finance are planned with in order of objectives of government budget.
Objectives Of Government Budget
Reallocation of resources
Economic growth
Redistribution of income
Reduction in inequalities/Redistribution of income
Reallocation resources
Government aims to reallocate their resources of a country with accordance the social and economic need of country, which is done by
.Its refers to the change in the direction o resources from one use to another.
. Its done with a view of balance the goals of profit maximization and social welfare.
. production of goods with charging high tax on that its very injurious for health (like wine,alcohol,beer etc.) .
– Tax concession and subsidies.
– Directly providing good and services.
This is also known as allocation of resources.
Economic Growth
Economic growth of a country refers to develop the growth in GDP. The primary sector of the government budget to boost GDP growth by promoting balanced economic development and improving poor people’ standard of living. That is done by general public of welfare like government can expenditure on (road,railways ,highways,hospital,etc.)government can expenditure on that automatically start growth of economic.
Disperities Employment Generation
Social welfare is the most important objective of a country’s government budget. This budget is set in a way to ensure that every Indian have to provide basic requirements like housing, clothing, food, a basic education and healthcare. A country budget is also set in goals like eradication of poverty by generating employment and social welfare .
Reduction in inequalities
To reduce inequality in the country, the government can measures like impose taxes or granting subsidies . The government usually imposes taxes on the country’s affluent to reduce their income and undertakes schemes to aid the country’s poor. The government also provides amenities and subsidies to those in need. Redistribution of income is another measure undertaken by the government to promote economic welfare government have to impose high tax on rich or granting subsidies on poor also providing directly goods and services. it’s automatically reduce the inequalities and income redistribution between poor and rich people.
Components of Government Budget
components of government budget are two types ;
Capital budget
revenue budget
1 .Capital Budget
It is the excess of government expenditure over the government receipts during the fiscal year , capital expenditure government’s part helps to create assets and reduce liabilities. The capital budget, is an account of these liabilities and assets under the government, which denote a change in total capital budget.
Capital Budget are two types; 1.capital expenditure 2.capital receipts
1. Capital Expenditure
They neither create an asset nor reduces the liability of the government.they are recurring in nature and their is no future obligation. (Example-building purchase by government).
2.Capital Receipts
They either create an asset or reduces liability of the government .they are non-recurring in nature and their is a chances of future obligation. it is shown in account of balance sheet( example- long term liability).
2. Revenue Budget
It is a excess of revenue expenditure over a revenue receipts during a fiscal year. the revenue budget refers to revenue receipts generated and expense s connect revenue. These receipts include both tax and non-tax revenue earned by a government during the financial year.
Revenue Budget are two types; 1.Revenue expenditure 2.Revenue budget
1. Revenue Expenditure
They neither create a liability of nor reduces an asset of the government.they are recurring in nature .it is benefit for Day By Day of running of the business .( EXAMPLE- Rent,software upgrade,inventory etc).
2.Revenue Receipts
They either create a liability of the government or reduces an asset of the government .they are non-recurring in nature. it in is shown in trading account of profit and loss account. revenue receipts are two types DIRECT TAX and INDIRECT TAX (Example of DIRECT TAX- tax collected by government from public) (Example of INDIRECT TAX- Aid received by government from foreign country).
Types Of Budget in Deficit
Three types of deficit ; 1. Balance deficit
2. surplus deficit
3. Budget deficit
1.Balance Deficit
In a Budget Balance deficit means when Revenue income is equal to Expenditure of the government .
2.Surplus Deficit
In a Budget Surplus Deficit means when Revenue income is more than expenditure of he government.
3.Budget Deficit
In a budget Budget deficit means when government expenditure is more than revenue income.
Three Types of Budget Deficit
Revenue Deficit
Fiscal Deficit
Primary Deficit
1. Revenue Deficit
Revenue Deficit means Total Revenue Expenditure exceeds from Total Revenue receipts . That means net income is less than net Expenditure.( Formula = TOTAL REVENUE EXPENDITURE – TOTAL RECEIPTS = REVENUE DEFICIT
2. Fiscal Deficit
Fiscal Deficit means Total Expenditure exceeds from Total Receipts.(Formula = TOTAL EXPENDITURE – TOTAL REVENUE = FISCAL DEFICIT ( Excluding Borrowings )
3.Primary Deficit
Primary Deficit mean Fiscal Deficit as reduces by Interest payment .(Formula = FISCAL DEFICIT – INTEREST PAYMENT) Excluding Interest payment on long – term debt.
