Chapter 4- Government Budget 

GOVERNMENT BUDGET

Chapter 4

Budget

  • It is the statement of estimated recei[ts and expenditure of the government for one financial year to meet the objectives of growth and stability.

Notes:

February 1 - The day Finance minister presents the annual budget of the government.

Budgetary Policy

  1. the programs or policies of the government.
  2. It has two aspects - revenue aspect and expenditure aspect.
  3. It is by managing the budgetary revenue and budgetary expenditure that the government tries to achieve ‘growth with stability’.

Objectives of government budget

GDP Growth

  • The central objective of government fiscal policy
  • Achieved in Two ways - (1) By making private investment (2) By inducing private investment expenditure (via tax rates and subsidies)

Allocation of Resources

  • Private enterprises desire to allocate resources to those areas of production where profits are high
  • These are may not promote social welfare
  • Hence, the government directs allocation of resources in a manner such that there is a balance between the goals of profit maximization and social welfare.
  • For eg - Production of goods which are injurious to health is discouraged with use of heavy taxes and use of useful products like khadi is encouraged through subsidies.

Provision of public goods

  • Supply and demand forces in an economy do not allow enough production of public goods.
  • The aim of these goods is to satisfy public needs
  • ==The objective is social welfare==
  • Eg - Law and order and defense. They are sufficiently provided with the help of budgetary allocation.

Redistribution of income and wealth ==(Imp)==

  • The government uses fiscal instruments of taxation and subsidies with a view to improving the distribution of income and wealth.
  • ^^Equitable distribution of income and wealth is a sign of social justice which is the principle objective of any welfare state.^^
  • Distribution of income and wealth is improved in 2 ways:
  • 1) By imposing taxes on rich and giving subsidies to the poor,
  • 2) By supplying Food grains to below poverty line population at low prices.

Balanced regional growth

  • The policy places priority on the development of backward regions of the country.
  • Acheived through liberal tex laws for backward regions
  • Example - Setting up of SEZs

Employment opportunities

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