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m02 Government Budget and The Economy
m02 Government Budget and The Economy
ECONOMY
MODULE- 2/2 (PPT)
PREPARED BY
MRS TANUPRIYA SINGH
PGT (ECO)
AECS-2, JADUGODA
PAGE NO-1
BUDGET EXPENDITURE
It is the estimated expenditure of the government relating to
its development and non- development programmes during a
fiscal year.
PAGE NO-2
REVENUE EXPENDITURE
Revenue Expenditure of the government is that expenditure
which shows the following two characteristics:
GUGL
STRUCTURE OF
GOVERNMENT BUDGET
AT A GLANCE
PAGE NO-6
DIFFERENCE BETWEEN REVENUE EXPENDITURE AND CAPITAL
EXPENDITURE
REVENUE EXPENDITURE CAPITAL EXPENDITURE
(i) Revenue expenditure does not (i)Capital expenditure impacts assets-
impact assets - liability status of the liability status of the government.
government. Assets are raised or Liabilities are
Assets and liabilities are not increased lowered.
or decreased
(iii) High revenue expenditure by the (iii) High capital expenditure by the
government (by way of subsidies or old- government points to the lack of private
age pension) points to poverty of the investment in the economy. Capital
people or backwardness of the expenditure by the government is raised
economy. when the economy is suffering from
deflationary gap
PAGE NO-7
TYPES OF BUDGET
❖ Balanced Budget:
Budget Receipts = Budget Expenditure
❖ Deficit Budget:
Budget Receipts < Budget Expenditure
❖ Surplus Budget:
Budget Receipts > Budget Expenditure
PAGE NO-8
BUDGET DEFICIT
Budget deficit (also called as government deficit) refers to a
situation when budget expenditure of the government are
greater than the budget receipts.
RD = RE - RR
IMPLICATIONS:
Since revenue receipts and revenue expenditure are related
largely to recurring expenses of the government (on
administration and maintenance ), high revenue deficit gives a
warning to the government either to cut its expenditure or
increases its tax/ non-tax receipts.
PAGE NO-10
FISCAL DEFICIT
Fiscal Deficit is equal to the excess of total
expenditure over the sum of revenue receipts and capital
receipts excluding borrowing.
IMPLICATIONS:
(i) Inflationary spiral
(ii) National Debt,
(iii) Vicious circle of high fiscal deficit and low GDP growth,
(iv) Crowding –out
(v) Erosion of government credibility
PAGE NO-11
PRIMARY DEFICIT
IMPLICATION:
Primary deficit indicates the extent to which the government
needs to borrow to implement its budgetary programmes and
policies for the year ahead.
...................................................x....................................................
PAGE NO-12
NUMERICALS
PAGE NO-13
Q2) Calculate Fiscal Deficit from the following data:
Items (₹ in crore)
(i) Total expenditure 75000
(ii) Revenue receipts 60000
(iii) Non-debt capital receipts 5000
PAGE NO-14
Q3) From the following data about a government
budget, find out (a) Revenue Deficit, (b) Fiscal Deficit and
(c) Primary Deficit
Items (₹ in crores)
(i) Tax revenue 47
(ii) Capital receipts 34
(iii) Non- Tax revenue 10
(iv) Borrowings 32
(v) Revenue expenditure 80
(vi) Interest payment 20
PAGE NO-15
Sol.(a) Revenue Deficit = Revenue Expenditure – Revenue
Receipts (Tax revenue + Non- Tax revenue)
= 80 – (47 + 10)
= 80 – 57
= 23
Revenue Deficit = ₹ 23 cr.