Government Budget – Meaning, Components, Objective

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Looking for What is government budget. It’s meaning, definition, components, and objective as per the syllabus of class 12.

I have explained all the above topics in detail.

What do you mean by government Budget?

See, all country’s government aim is the maximization of the welfare of country’s people.

The welfare of the people can be achieved through

  1. Price stability and
  2. Reduction in the inequalities in the distribution of the income.
  3. Optimum allocation of the available resources.

The government endeavors to achieve it through revenue expenditure policy (fiscal policy).

The Government planned its revenue resources and expenditure application for the coming fiscal year in advance each year.

The government document all these in a written document. Such a document is called a government budget.

Definition of the Government Budget

I am giving a general definition given in various reference books and NCERT with the same words as given.

A government’s budget is a statement showing item wise estimated receipts and expenditures of the government under various heads during a given year.

S.K Aggarwal

Government budget is an annual statement, showing item wise estimates of receipts and expenditures during a fiscal year.

Sandeep Garg

Government Budget is a statement of expected receipts and expected expenditure of the government (for the financial year to come) that reveals the budgetary policy of the government to achieve the twin objective of growth with stability.

TR Jain

Which article of the constitution of India make mandatory to present the budget.

Article 112 of the Indian constitution says it is mandatory to present before the parliament a statement of estimated receipts and expenditures of the government in respect of every financial year (1st April – 31st March).

On Which date annual budget is presented by the government in Parliament.

On 1st of February.

Objectives of the Government Budget

As I already mentioned above the government’s main aim is to increase the welfare of the people by maintaining economic stability.

following are the way a government intervenes in the economy.

Allocation Function of Government Budget:-

The government provides certain goods and services which can not be provided by the market mechanism (private sector).

It is due to the lack of profits or it involves huge investment expenditures.

For example:- National Defence, roads, government administration, water supply, sanitation, etc.

Such goods are referred to as public goods. The production of such goods is necessarily undertaken by the government in the public interest.

Apart from it, the government can also encourage the private sector through tax concessions, subsidies, etc., to undertake certain production in the public interest.

This way government influences the allocation of the available resources.

Redistribution Function of the Government Budget:-

The government’s aim is to reduce the income inequalities in society. It can be achieved by two fiscal policy steps.

First, the government can impose higher rates of tax on the income and the goods consumed by the rich.

It will reduce the disposable income of the rich.

Second, the government can spend more amount on providing free services to the poor like education, medical treatment, ration, etc.,

It will raise the disposable income of the poor.

In this way, the government can reduce income inequalities between rich and poor.

Stabilization Function of the Government Budget:-

The stabilization function means maintaining economic stability. The economic stability refers to the absence of large-scale fluctuation in the price level.

The fluctuations in price level create uncertainties and hardship for the people.

Such instability in price can be control through taxes and expenditure.

For example in an inflationary situation, the government can discourage spending by increasing taxes and at the same time reduces its own expenditure.

In a deflationary situation, the government can encourage spending by decreasing taxes and at the same time increases its own expenditure.

Components of Government Budget:-

The components of the Budget refers to the structure of the budget.

Although the budget document relates to the receipts and expenditure of the government for a particular financial year.

The impact of it will be there in subsequent years.

There is a need therefore to have two accounts –

  1. those that related to the current financial year (Revenue Budget)
  2. Those that concern the assets and liabilites of the government (Capital Budget)

Thus there are two main components of the budget

  • Revenue Budget:-

It deals with the revenue (day-to-day) aspect of the government budget. It records and explains how revenue is generated (collected) by the government and how it is allocated among various revenue expenditure heads.

Revenue Budget has two parts

  1. Revenue Receipts
  2. Revenue Expenditure
  • Capital Budget:-

It deals with capital (Assets – Liabilities) aspects of the government budget.

It consists of two parts

  1. Capital Receipts
  2. Capital Expenditure

Note:-

The components of the budget can also be categorized according to receipts and expenditures.

  1. Budget Receipts that includes 1. Revenue Receipts 2. Capital Receipts
  2. Budget Expenditure that includes 1. Revenue expenditure 2. Capital Expenditure
TopicChapters (Unit)
SyllabusSyllabus of Government Budget and the Economy chapter Economics class 12

S.NGovernment Budget and the Economy
1.What is Government Budget class 12 | Definition of Government Budget
What are the components of the government Budget?
2.What are Revenue Receipts in Government Budget class 12 | Definition of Revenue Receipts in Government Budget
What the Types of Revenue Receipts in government | What are examples of Revenue Receipts in Government Budget
3.What are Capital Receipts in Government Budget | Definition of Capital Receipts in Government Budget
What are the Types of Capital Receipts in Government Budget | What are the examples of Capital Receipts in Government Budget?
4.What is Revenue Expenditure in Government Budget class 12 | Definition of Revenue Expenditure in Government Budget?
What are the Types of Revenue Expenditure in Government Budget
What are the examples of Revenue Expenditure in Government Budget?
5.What is Capital Expenditure in Government Budget | Definition of Capital Expenditure in Government Budget
What are the Types of Capital Expenditure in Government Budget | What are the examples of Capital Expenditure in Government Budget?
6.What is Budgetary Deficit in Government Budget | Definition of Budgetary Deficit in government Budget
What are the Types of Budgetary Deficit in Government Budget | What are the examples of Budgetary Deficit in Government Budget?
7.What is Revenue Deficit in Government Budget | Definition of Revenue Deficit in Government Budget
The formula of Revenue Deficit in Government Budget
Numerical of Revenue Deficit in Government Budget
8.What is Fiscal Deficit in Government Budget | Definition of Fiscal Deficit in Government Budget,
The formula of Fiscal Deficit in Government Budget
Numerical of Revenue Deficit in Government Budget
9.What is Primary Deficit in Government Budget | Definition of Primary Deficit in Government Budget
The Formula of Primary Deficit in Government Budget
Numerical of Primary Deficit in Government Budget

MCQs of Government Budget for class 12, CUET, CBSE, ISC and state Board

1. MCQS of Government Budget class 12, CUET, CBSE, ISC
2.Assertion Reason MCQs of Government Budget class 12, CUET, CBSE, ISC
3.Matching Type MCQs of Government Budget class 12, CUET, CBSE, ISC
4.Case/situation Based MCQs of Government Budget class 12, CUET, CBSE, ISC
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Anurag Pathak
Anurag Pathak

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