Govt. Budget 2024

Government budget
1. Meaning of government budget

It is a statement showing the estimated receipts
and payments of the government during a fiscal
year which runs from 1st april to 31st march.
The budget prepared by the central govt. is
known as union budget and it is presented by
finance minister in the parliament on the first day
of February every year which comes into effect
from the coming 1st april.
It reveals the performance of the govt. in the last
financial year and the policies in the upcoming
year.
2. Components of budget.
It is mainly divided into 2 parts-
1. Budget receipts- estimated income of the
govt. in the upcoming year
2. Budget expenditure- estimated payment to
be made by the govt in the upcoming year
Budget receipts
(DAIL)
Revenue receipts Capital receipts
Neither decrease in asset, nor Either decrease in asset or

increase in liability increase in liability
(no DAIL) (DAIL)
It mainly includes –
Tax receipts Non tax receipts
1. Borrowing (as it
Income from all the It includes-
increase the liability of
taxes and duties –it is 1. Interest on loan govt.)
divided into two types received 2. Disinvestment( as it
direct and indirect 2. Fees , fines penalties decrease the assets of
received by govt. the govt.)
1. Direct tax- such 3. Profits and dividends 3. Recovery of loan ( it
as income tax, received by govt. decreases the assets of
company the govt.)
property tax,
4. Gifts and grants 4. Small savings by post
corporate tax office such as NSC (it
received by govt.
2. Indirect tax such 5. Escheat increase the liability of
as GST, custom 6. Forfeiture the govt.)
duty, excise duty 7. Special assessment
Notes-
1. tax- a compulsory payment made to the govt,
without expecting any direct benefit in return.
Direct tax- a tax in which impact (liability to
pay) and incidence ( actual burden) is on the
same person.it means burden can’t shift.
Indirect tax- a tax in which impact (liability to
pay) and incidence ( actual burden) is on the
different person.it means burden can shift.
2. Non tax rveneue
Escheat-income received by govt. from the
property without any legal heir
Forfeiture- penalty amount received by govt.
on breach of contract and duties
Special assessment- income received by govt.
from the people who benefitted from the
property development activities.
3. Capital receipts
Disinvestment- sale of shares of PSU (public
sector undertakings) to the private sector
Recovery of loan- loan was given by central
govt. to the state govt. on basis of assets
mortgaged and central govt. receives back the
loan.
Budget expenditure (IADL)
Revenue expenditure Capital expenditure

(no IADL) (IADL)
Expense that neither increase the Expense that either increase the
assets of the govt. nor reduces the assets of the govt. or increases the
liability of the govt. liability of the govt.
It includes- It includes-
Salary, pension, interest on 1. Construction or purchase

of any asset such as flyover
loan paid, management
construction
expenses ,scholarship,
2. Loan repayment or
health services. etc. providing loans
3.Objectives of the budget (MEEERRR)
1. MANAGEMENT OF PUBLIC ENTERPRISES
Provision regarding management of public
enterprises is done in the budget. Financial help is
provided to them and still if they are no working
well govt. takes the decision of privatization.
2.EMPLOYMENT GENERATION
1.by investing in infrastructural projects like
construction of buildings. Flyovers etc.
2. by various schemes such as MGNERGA, PMRY
etc.
3. ECONOMIC GROWTH
A. it is measured in terms of real GDP , if GDP
increases it shows that economy is progressing
well.
B. it is done by spending on infrastructure
activities which raises the production capacity.
C. another alternative used by govt. is to provide
incentives and rebates which encourages the
saving and investment in country.
4.ECONOMIC STABILITY
A. it means to control the fluctuations of economy
i.e. no inflation or deflation in the economy.
B. in case of inflation( to control inflation),
surplus budget is prepared in which govt.
increases taxes and reduces the expenditure.
C. in case of deflation, govt. prepares deficit
budget in which govt. decrease taxes and increase
the expenditure.
5.REALLOCATION OF RESOURCES
A. govt. aims to reallocate the resources by
budgetary policy for economic and social benefit.
B.govt. makes use of taxes and subsidies for
allocation such as-
>taxes on hazardous goods
>subsidies on necessity goods
C. govt. can also provide public goods to the
people for increasing the social welfare.
6.REDUCING INEQUALITIES OF INCOME
AND WWEALTH.
A. Govt. aims to reduce the inequality of inceome
and wealth by fiscal policy(tax and expenditure)
B. govt. can impose taxes on the richer section to
reduce their disposable income.
C. govt. can spend more on the welfare of the
poor for increasing their standard of living.
7.REDUCING REGIONAL DISPARITY.
It is done by setting up special economic zone
(SEZ) where many tax rebates are offered for
encouraging economic development.
4. DEFICIT BUDGET.
There are three main types of budget
A. Balanced budget (total estimated receipts is
equal to the total estimated expenditure and it
shows financial stability)
B. Surplus budget (total estimated receipts is
more than the total estimated expenditure,
used to control inflation)
C. Deficit budget (total estimated receipts is less
than the total estimated expenditure, used to
control deflation)
Deficit budget or budgetary deficit= Total
receipts – total expenditure
There are three types of deficit-
1. REVENUE DEFICIT (RD)
A situation where revenue expenditure (RE) is
more than revenue receipts(RE)
RD=RE-RR
Implications of revenue deficit
1.it indicates the inability of the govt. to meet the
routine expenditure from the receipts available.
2. as receipts are less (and taxes and non tax
revenue cannot be increased much) govt. will resort
to capital receipts i.e. borrowings and
disinvestment.
3. borrowings lead to the problem of repayment of
interest which again increases the revenue
expenditure and revenue deficit will increase and
thus this cycle will keeps on going.
2. FISCAL DEFECIT (FD)
It refers to the excess of total expenditure(TE) over
total receipts (TR) excluding borrowing.
FD= TE-TR(excluding borrowings)
Fiscal deficit basically indicates the amount of
borrowing requirement by the govt. so
FD=borrowings
Implications of fiscal deficit
1.it results in debt trap as fiscal deficit indicates the
borrowing amountwhich creates the problem of
repayment of principal as well as interest and if
interest payment increases revenue expenses
increases which further increase the revenue deficit
, to cover this revenue deficit govt. will resort to
borrowings and again this cycle will continue.
2.if borrowing is done by govt. from RBI it will
cause inflation in the country as RBI uses deficit
financing (supply of money in the circulation) .
3. if govt. borrows from foreign it will create
foreign dependence.
4. as govt. increases the borrowing the financial
burden for future generation increases which will
hamper their growth.
Note- fiscal deficit can only includes non debt
creating capital receipts i.e. disinvestment and
recovery of loan (not borrowings because they are
debt creating capital receipts) so fiscal deficit
formula could be-
FD= TE- TR(ONLY NON DEBT CREATING
CAPITAL RECEIPTS)
OR
FD=(RE+CE)-
(RR+DISINVESTMENT+RRECOVERY OF
LOANS)
3.PRIMARY DEFICIT(PD)
It refers to the difference between fiscal deficit of
current year and interest payment on previous
year’s borrowing.
PD=FD-interest payment
Implication of primary deficit
1.it indicates the amount of borrowing which is
required to meet the expenses other than interest
payment.
2. if primary deficit is zero then it implies that-
A. Fd=interest payment
B. the payment of interest on previous year loans
forced the govt. to borrow the amt. this year (if
interest payment was not there borrowings need not
to be taken)

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Government budget

1. Meaning of government budget

Revenue receipts Capital receipts

Neither decrease in asset, nor Either decrease in asset or

(no DAIL) (DAIL)

Budget expenditure (IADL)

Revenue expenditure Capital expenditure

Salary, pension, interest on 1. Construction or purchase

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