Budget and Its Objectives

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 Meaning of Budget

 A government budget is an annual financial statement that estimates the government's receipts and expenditures for the fiscal year There are two components of govt budget – Revenue budget and Capital Budget. 

Key Components of the Budget:

  • Revenue Budget:
    This deals with the government's regular income and expenses.
    • Revenue Receipts: These are receipts that do not increase government liabilities or decrease assets (e.g., taxes, interest receipts, dividends). 
    • Revenue Expenditure: These are expenses that do not create assets or reduce liabilities (e.g., salaries, subsidies, interest payments). 

    • Capital Budget:
  • This focuses on transactions that affect the government's assets and liabilities.
    • Capital Receipts: These receipts either create liabilities (borrowings) or reduce assets (disinvestment). 
    • Capital Expenditure: These expenses either create assets (infrastructure) or reduce liabilities.
  • Objectives of a Government Budget:
    • Resource Allocation:
      The government can influence the allocation of resources by encouraging or discouraging certain activities through taxation and subsidies. 
    • Redistribution of Income and Wealth:
    • By taxing the wealthy and providing subsidies or welfare programs to the poor, the government can reduce income inequality. 
    • Economic Stability:
    • The government can use the budget to manage economic fluctuations and promote stability through fiscal policy. 
    • Economic Growth:
    • Investments in infrastructure, education, and healthcare, funded through the budget, can contribute to long-term economic growth. 
    • Managing Public Enterprises:
      The budget also includes provisions for managing government-owned businesses and industries. 

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