The document outlines key aspects of government budgets in India. It provides estimates of planned receipts and expenditures for the coming fiscal year. The budget is presented annually in Parliament and must be approved before implementation. It aims to allocate resources according to priorities like agriculture, education, and infrastructure, while also pursuing fiscal consolidation and tax reforms.

1. Government budget is an annual statement, showing item
wise estimates of receipts and expenditure during fiscal
year i.e. financial year. The receipts and expenditure, shown
in the budget, are not the actual figure, but the estimated
values for the coming fiscal year.
A document containing detailed programmes
and policies of action for the given fiscal year.

2. • Estimated expenditures and receipts are planned as per
the objectives of the government.
• Economic Survey: CSO (Vol. 1 &2)
• In India, Budget is presented in the parliament on such a
day, as the President may direct. By convention, it is
prepared on the last working day of February each year.
• It is required to be approved by the parliament, before it
can be implemented.

3.  Reallocation of Resources in accordance with
priorities
◦ Tax Concession and Subsidies
◦ Directly producing goods and services
 Reducing inequality in income and wealth
distribution
 Economic Stability
 Management of Public Enterprises
 Economic growth
 Reducing regional disparity

4. Revenue
receipts
Revenue
Expenditure
Revenue
Budget
Capital
Receipts
Capital
Expenditure
Capital
Budget

5.  Estimated money receipts of the government from all
sources during a given fiscal year
• Tax
• Non-tax
Revenue
Receipts
• Loan recovery
• Borrowings
• Others
Capital Receipts

6.  The receipts must not cause decrease in the
assets.
 The receipts must not create a liability for the
government
 regular and recurring in nature and government
receives them in its normal course of activities

7. Basis Direct Taxes Indirect Taxes
Meaning
Imposed on property and
income of individuals and
companies and are paid directly
by them to the government.
Affect the income and
property of individuals and
companies through their
consumption expenditure.
Impact
Levied on individuals and
companies.
Levied on goods and
services.
Shift Of Burden
The burden of cannot be
shifted, i.e. impact and
incidence is on same person.
The burden of tax can be
shifted, i.e. impact and
incidence is on different
person.
Nature They are generally progressive
in nature.
They are generally
proportional in nature.
Coverage They have limited reach as they
do not reach all the sections of
the economy.
They have a wide coverage
as they reach all sections of
the sections of the society.

8.  Interest: Interest on loans to state government, private enterprises and
general public.
 Profit and Dividends: Profit earned through public sector undertakings
like Indian Railways , LIC, BHEL, etc.
 Fees: Charges imposed to cover the cost of recurring services
 Fines and Penalties: They refer to those payments which are imposed on
law breakers. For Example, fine for jumping red light or penalty for non-
payment of taxes.
 Gifts and Grants: Government receives gifts and grants from foreign
governments and international organisations.
 Special Assessment: It refers to the payment made by owners of those
properties whose value has appreciated due to developmental activities
of the government.

9.  The receipt must create a liability for the
government
 The receipts must cause a decrease in the assets
 They are non-recurring and non-routine in nature

10. 1. Borrowings: Funds raised by government to meet excess expenditure.
o Open Market(Public)
o Reserve Bank of India(RBI)
o Foreign governments
o International Institution
2. Recovery from Loans: Government grants various loans to state governments or
union territories. Recovery of such loans is a capital receipt as it reduces the
assets of the government
1. Other Receipts:
o Disinvestment: Disinvestment refers to the act of selling a part or the whole of
shares of selected public sector undertakings(PSU) in the form of equity
shares.
o Small Savings: Small saving refer to funds raised from the public in the form of
Post Office deposits, National Saving Certificates, Kisan Vikas Patra etc.

11. Basis Revenue Receipts Capital Receipts
Meaning
They neither create any liability nor
reduce any asset of the government.
They either create any liability
or reduce any asset of the
government.
Nature
They are regular and recurring in
nature.
They are irregular and non-
recurring in nature.
Future
Obligation
There is no future obligation to return
the amount.
In case of certain capital
receipts(like borrowings),
there is future obligation to
return the amount along with
interest.
Example Tax revenue and Non-tax revenue
Borrowings, Disinvestment,
etc.

12. • Salary
• Subsidy
• Social Security
Revenue
Expenditure
• New development programmes
• Construction/maintenance
• Interest payment
Capital
Expenditure
Estimated expenditure of the government during a given
fiscal year

13.  The expenditure must not create an asset of
the government.
 The expenditure must not cause decrease in
an liability.
 It is incurred on normal functioning of the
government.
 Examples: Payment of salaries, pensions,
interests, etc.

14.  It adds to capital stock of the economy and
increases its productivity through expenditure on
long period development programmes.
 The expenditure must create an asset for the
government.
 The expenditure must cause a decrease in the
liabilities.
 Examples: Loan to states and Union Territories, etc.

15. Expenditure on the programmes detailed
in the current five year plan. For example,
expenditure on agriculture and allied
activities, irrigation, energy, transport,
communication, etc.
1. Projects covered under the Central
Plans
2. Central Assistance for State and
Union Territories
Expenditure other than related to the
current five year plan. For example,
payment of interest, expenditure on
defence services, subsidies etc. It is
incurred on routine functioning of the
government. Therefore, it is a must for
general welfare
Plan
 Non Plan

16. • Expenditure which is directly related to
economic and social development of the
country.
• For example, expenditure on education,
health, social welfare etc.
• It adds to the flow of goods and services
in the economy
•Expenditure which is incurred on the
essential general services of the
government.
•For example, expenditure on defence,
administrative services, police, justice etc.
•It does not directly contribute to economic
development, but it indirectly helps in the
development of the economy.
Developmental
 Non
Developmental

17. o Balanced Budget:
Government budget is said to be balanced budget if
estimated government receipts are equal to the estimated
government expenditure.
o Surplus Budget:
Estimated government receipts are more than the
estimated government expenditure
o Deficit Budget:
Estimated government receipts are less than the estimated
government expenditure

18. Budgetary deficit is the excess of total estimated
expenditure over total estimated revenue. When the
government spends more than it collects, then it incurs
a budgetary deficit.
1) Revenue Deficit
2) Fiscal Deficit
3) Primary Deficit

19.  Revenue Deficit is concerned with the revenue
expenditures and receipts of the government.
 It refers to excess of revenue expenditure over
revenue receipts during the given fiscal year.
Revenue Deficit = Revenue Expenditure – Revenue Receipts
 It signifies that government’s own revenue is
insufficient to meet the expenditures on normal
functioning of government departments and provisions
for various services.

20.  It indicates the inability of the government to meet its regular and
recurring expenditure I the proposed budget.
 It implies that government is dissaving, i.e. government is using up
savings of other sectors of the economy to finance its consumption
expenditure.
 It also implies that the government has to make up this deficit from
capital receipts, i.e. through borrowings or disinvestment.
 Use of capital receipts for meeting the extra consumption
expenditure leads to an inflationary situation in the economy. Higher
borrowings increase the future burden in terms of loan amount and
interest payments.
 A high revenue deficit gives a warning signal to the government to
either curtail its expenditure or increase its revenue.

21.  Reduce Expenditure: Government should take
serious steps to reduce its expenditure and
avoid unproductive or unnecessary
expenditure.
 Increase Revenue: Government should
increase its receipts from various sources of
tax and non-tax revenue.

22.  Fiscal Deficit refers to the excess of total expenditure over total receipts
(excluding borrowings) during the given fiscal year.
 Fiscal deficit presents a more comprehensive view of budgetary imbalances.
Fiscal Deficit= Total Expenditure – Total Receipts excluding borrowings
Sources Of Financial Fiscal Deficit:
Government has to look out for different options to finance the fiscal deficit.
The main two sources are:
 Borrowings: Fiscal Deficit can be met by borrowings from the internal
sources or external sources.
 Deficit Financing: Government may borrow from RBI against its securities to
meet the fiscal deficit. RBI issues new currency for this purpose. This process
is known as deficit financing.

23.  Debt Trap: Fiscal deficit indicates the total borrowings
requirements of the government. Borrowings not only
involve repayment of principal amount, but also require
payment of interest.
 Inflation: Government mainly borrows from Reserve Bank
of India (RBI) to meet its fiscal deficit. RBI prints new
currency to meet the deficit requirements.
 Foreign Dependence: Government also borrows from rest of
the world, which raises its dependence on other countries.
 Hampers Future growth: Borrowings increase the financial
burden for future generations. It adversely affects the future
growth and development prospects of the country.

24. Primary deficit refers to difference between fiscal deficit of the current year
interest payments on the previous borrowings.
Primary Deficit = Fiscal Deficit – Interest Payments
Implications:
 It indicates, how much of the government borrowings are going to meet
expenses other than the interest payments.
 The difference between fiscal deficit and primary deficit shows the amount
of interest payments on the borrowings made in past.
 So, a low or zero primary deficit indicates that interest commitments have
forced the government to borrow.

25.  Agriculture and farmer welfare with an aim to double farmers'
income in the next five years
 Rural sector
 Social sector including healthcare
 Educational skills and job creation to make India a knowledge
based and productive economy
 Infrastructure investment to enhance quality of life
 Financial sector reforms
 Governance reforms and ease of doing business
 Prudent management of government finances
 Tax reforms to reduce compliance burden
9 Pillars