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GOVERNMENT BUDGET AND THE ECONOMY

GOVERNMENT BUDGET AND THE ECONOMY

GOVERNMENT BUDGET AND THE ECONOMY

Budget in a layman’s language can be defined as an annual statement of the estimated Receipts and Expenditures of the Government over the fiscal year.

Budget is mainly divided into two broad categories:

  • Revenue Budget
  • Capital Budget

and there are two Budget Receipts:

  1. Revenue Receipts
  2. Capital Receipts

Furher, there are two types of Revenue Receipts:

  • Tax Revenue
  • Non-tax Revenue

whereas Capital Receipts consist of:

  1. a) Market Loans (loans raised from the public)
  2. b) Government Borrowings
  3. c) Loans received from International financial Institutions.

Difference between Revenue Expenditure and Capital Expenditure :

Revenue Expenditure is the expenditure incurred on day to day running of government departments and provision of various services like interest charges on debt, subsidies etc.,

Capital Expenditure is the expenditure mainly incurred on the acquisition of assets like land, building, machinery, equipment etc., and loans and advances granted by the Central Government to States & Union Territories.

Surplus Budget – A Surplus Budget is one where the estimated revenues are greater than the estimated expenditures.

There are four different concepts of Budget Deficits:

  1. a) Budget Deficit
  2. b) Revenue Deficit
  3. c) Primary Deficit and
  4. d) Fiscal Deficit

Budget Deficit: – It is the difference between the total expenditure, current revenue and net internal and external capital receipts of the government.

Fiscal Deficit: – It is the difference between the total expenditure of the government, the revenue receipts PLUS those capital receipts which finally accrue to the government.

Revenue Deficit: – It is the excess of government’s revenue expenditures over revenue receipts.

Primary Deficit: – It is the fiscal deficit MINUS Interest payments.

BALANCE OF PAYMENTS:

It is a systematic record of all economic transactions that took place between residents of a country and residents of foreign countries to purchase both visible and invisible items during a given period of time.

BALANCE OF TRADE

Balance of trade is the difference between the monetary value of exports and imports of material goods (visible item).

The major difference between Balance of payments as compared to Balance of trade is that it also keeps view of the (considers) transactions that took place on purchase of invisible items for e.g. Availing service from any service provider company. Hence it represents a better picture of a country‘s economic transactions with the rest of the world than the balance of trade.

You can also go through Interim Budget for 2019-20 and Most Important Abbreviations from Union Budget 2019-20

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March 10, 2019

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