The document provides a detailed overview of government budgeting, covering its definition, objectives, classifications, and types of budget deficits. It highlights the role of the budget in promoting economic stability, GDP growth, income and wealth redistribution, and resource allocation. The document also explains the implications of different types of budget receipts and expenditures, as well as the concepts of revenue and fiscal deficits.

1. Government Budget
PREPARED BY
HEMANT KUMAR JAIN
PGT ECONOMICS
KV AMBIKAPUR

3. Topics
• Meaning of Budget
• Objectives of Budget
• Classification of Budget
• Types of Budget deficit and there implication

4. Meaning of Budget
• “A government budget is an annual financial
statement showing estimates of expected
revenue and anticipated expenditure during a
fiscal year.”
• It does not show actual values.
• It also explains about government’s last
budget performance.

5. Objectives of Budget
• Economic stability
• GDP growth
• Redistribution of income and wealth
• Allocation of resources
• Directly production of goods and services.
• Management of PSU’s

6. Economic stability
• It implies control on price
fluctuations.
• Govt. do this by tax and
expenditure policies.
• During inflationary
conditions govt. impose
high taxes and reduce
expenses.
• During recessionary
condition taxes are reduced
and expenses are increased.

7. GDP growth
• It refers to sustainable
increase in production of
goods and services.
• Govt. try to motivate
production activities by giving
incentives to producers
through tax holidays ,
subsidies, technical support
etc.
• Govt. prepare infrastructure
that directly and indirectly
supports the growth process.
• GDP growth reduces the
poverty and unemployment in
economy.

8. Redistribution of income and wealth
• Govt. try to reduce the
income disparities by using
budgetary tools.
• Govt. impose tax on rich
and give subsidies to poor.
• Govt. directly fulfill the
basic needs of poor like
education, health, food etc.
• By this disposal income of
rich reduces and living
standard of poor improves.

9. Allocation of Resources
• Govt. try to influence the
allocation of resources by using
budgetary tools.
• Govt. promotes the production
of essential goods and
demotivate the production of
hazardous goods.
• Govt. give incentive to the
producers for investing in
backward areas.
• Govt. try to balance the
regional disparities.

10. Directly Production of goods and
services
• Govt. directly produce the
goods and services which
are not produced by private
sector.
• Sectors which are less
profitable, govt. produce for
that sector.
• Sector which require huge
investment, govt. invest in
those sectors.
• Goods and services which
are essential for people,
govt. produces those goods
and services

11. Management of PSUs
• Govt. manage the PSUs
through the budget
policies.
• Expansion, investment ,
cost, profit related
decision are taken by
govt. through budget
policies.
• Profit of PSUs is used by
govt. to support its
expanses.

12. Classification of Budget
Budget
Receipts
Revenue
receipts
Capital
receipts
Expenditures
Revenue
expenditures
Capital
expenditures

13. Budget Receipt:-It refers to all estimated money
receipt of the govt. during a financial year.
Revenue Receipt
1. Do not create libility for
govt.
2. Do not reduce assets of
govt.
Capital Receipt
1. Create libility on
govt.
2. Reduce assets of
govt.

14. Revenue Receipt
Revenue
Receipts
Tax Receipts
Income
Tax
GST
Corpora
tion Tax
Excise
duty
Other
taxes
Non-tax
Receipts
Income from
PSE
Grants &
donations
Special
assessmentEscheat

15. Capital Receipt
Capital
Receipts
Recovery of
Loans
Borrowings Disinvestment

16. Budget Expenditure:-It refers to all estimated
expenditure of govt. during a financial year.
Revenue Expenditure
1. Do not reduce libility of
govt.
2. Do not increase assets for
govt.
Capital Expenditure
1. Reduce libility of govt.
2. Increase assets for govt.

17. Revenue and Capital expenditure
Budget
expenditure
Revenue
expenditure
Wages and
salaries
Subsidies
Defence
expenses
Capital
expenditure
Purchase of
shares
Expenditure
on assets Purchase of
machinery
Loans to
the other

18. Find out followings are revenue receipt Or
capital receipt or revenue exp. Or capital exp.
1. Borrowings
2. GST collection
3. Recovery of loans
4. Profit of PSU
5. Disinvestment
6. Grants received from
world bank
--Capital receipt
--Revenue receipt

19. Find out followings are revenue exp. Or capital exp.
1. Construction of school building –capital expenditure
2. Interest payment –revenue expenditure
3. Loans given to state govt.
4. Purchase of machinery
5. Nationalization of company.
6. Subsidies
7. Expenditure on tax collection

20. Budget Deficit
• It refers to excess of budget expenditure over
budget receipts.
Budget Deficit= Budget Expenditure-Budget
receipt

21. Types of Budget Deficit
Budget
Deficit
Revenue
Deficit
Fiscal
Deficit
Primary
Deficit

22. Revenue Deficit
• It refers to excess of
revenue expenditure
over revenue receipts.
RD = RE - RR
Implications:-
• It Reduces the assets for
govt.
• It may create inflationary
conditions.
• It creates more revenue
deficit.

23. Fiscal Deficit
• The total borrowings of government during a financial year.
OR
• Excess of budget expenditure over budget receipt excluding
borrowings.
FD = BE(RE+CE) – BR (RR+CR excluding borrowings) or
• Fiscal Deficit = Total borrowings =
Borrowings from RBI + borrowings from public + borrowings
from external sources. or
• Fiscal Deficit = RD +(CE- CR excluding Borrowings)

24. • It creates the condition of debt trap.( a situation in
which govt. borrow to pay its past borrowings)
• Crowding out(reduction of funds for private sector
due to borrowing by govt. from market)
• Burden on future generations.
• Burden on economy.
• Vicious cycle of high fiscal deficit and low GDP.
Implications of Fiscal Deficit:-

25. Primary Deficit
• It refers to the difference
between Fiscal Deficit and
payment of interest.
• fiscal deficit indicates
borrowing requirement
inclusive of interest payment,
primary deficit indicates
borrowing requirement
exclusive of interest payment
(i.e., amount of loan).
• PD = FD – Payment of
interest
• zero primary deficits means
that government has to
resort to borrowing only to
make interest payments.

26. Questions
1. What is the formula of fiscal deficit?
2. What is the formula of revenue deficit?
3. What is indicated by zero primary deficit?
4. Give any one implication of revenue deficit.