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Eco Project Government Budgets
Eco Project Government Budgets
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INTRODUCTION
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MEANING OF GOVERNMENT
BUDGET
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IMPORTANT POINTS OF
GOVERNMENT
BUDGET
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BUDGET AT GLANCE 2018-2021
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OBJECTIVES
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RELOCATION OF RESOURCES:
PRICE STABILITY:
To maintain price stability and correct business cycles involving depression
characterized by falling output, prices and increasing unemployment.
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COMPONENTS OF GOVERNMENT
BUDGETS
The main components or parts of the government
budget are:
1. REVENUE BUDGET
This is a budget statement that has the revenue receipts of the
government i.e. revenue collected in the manner of taxes & receipts. It
additionally contains the items of expenditure met from such revenue.
A) REVENUE RECEIPT:
These are the incomes which are received by the government from various
sources in its ordinary course of governance. These receipts don’t produce a
liability or cause a reduction in assets. Revenue receipts can be further
classified as tax revenue and non-tax revenue.
Direct Tax:
Direct tax is a type of tax where the incidence and impact of taxation fall on the
same entity.
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In the case of direct tax, the burden can’t be shifted by the taxpayer to someone
else. These are largely taxes on income or wealth. Income tax, corporation tax,
property tax, inheritance tax and gift tax are examples of direct tax.
They are imposed on individuals and companies.
Indirect Tax:
Indirect tax is a type of tax where the incidence and impact of taxation does not fall
on the same entity.
In the case of indirect tax, the burden of tax can be shifted by the taxpayer to
someone else. Indirect tax has the effect to raising the price of the products on
which they are imposed. Customs duty, central excise, service tax and value
added tax are examples of indirect tax.
Fees: The government provides various sorts of services for which fees are ought to
be paid. E.g. fees for registration of property, births, deaths, etc.
Fines and penalties: Fines and penalties are imposed by the government on citizens for
violating the rules and regulations.
Profits from public sector enterprises: several enterprises are owned and managed by
the government. The profits received from them is a very important source of non-tax
revenue. For instance, in India, the Indian Railways, Oil and Natural Gas Commission,
Air India, Indian Airlines, etc. are owned by the Government of India. The profit
generated by them is a source of revenue for the government.
Gifts and grants: Gifts and grants are received by the government when natural
calamities like earthquakes, floods, famines, etc. occur. Citizens of the country, foreign
governments, and international organizations like UNICEF, UNESCO, etc. donate
funds during times of natural calamities.
B. REVENUE EXPENDITURE –
Revenue expenditure refers to expenditure incurred from the routine, usual, and
traditional day to day running of state departments and provision of various services
to citizens. It includes both development and non-development expenditure of the
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Central government. Typically, expenditures that don’t result in the creations of
assets are considered revenue expenditure.
2.CAPITAL BUDGET –
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This a part of the budget includes receipts & expenditure on capital
account projected for the succeeding year. The capital budget consists
of capital receipts & capital expenditures
Note: All capital receipts are tax-free, unless there is a proviso to tax it.
Capital receipts can be both non-debt and debt receipts.
Borrowings by the government from RBI and other financial institutions through the
sale of Treasury bills
Loans and aids received from foreign countries and different international organizations
like the International Monetary fund (IMF), World Bank, etc.
Receipts from small saving schemes like the National saving scheme, Provident fund,
etc.
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It adds to capital stock of the economy and increase its
productivity through expenditure on long period like metro
project or building a flyover.
The expenditure must create an asset for the government, for
ex.: - school building construction is capital expenditure as it
leads to creation of assets. However, any amount paid as
salaries to teachers is not a capital expenditure.
Examples: loan to states and union territories, construction of
building, road, flyovers, etc
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COMPARSION CHART
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PLAN AND NON-PLAN EXPENDITURE
1. PLAN EXPENDITURE:
Any expenditure that is incurred on programs which are detailed under
the current (Five Year) Plan of the Centre or centre’s advances to state
for their plans is called plan expenditure. Provision of such
expenditure in the budget is called Plan Expenditure.
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2. NON-PLAN EXPENDITURE
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DEVLOPMENTAL AND NON-DEVELOPMENTAL
EXPENDITURE
1. DEVELOPMENTAL EXPENDITURE
Developmental expenditure refers to the expenditure of the government which
helps in economic development by increasing production and real income of
the country. Some people call it productive expenditure because it helps in
increasing production and productivity of the economy.
Developmental expenditure on revenue is divided into developmental
expenditure on revenue account and developmental expenditure on capital
account.
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Developmental Non-Developmental
Expenditure Expenditure
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MEASURES OF GOVERNMENT
BUDGET DEFICIT
1. Revenue Deficit
2. Fiscal Deficit
3. Primary Deficit
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REVENUE DEFICIT
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FISCAL DEFICIT
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2. Inflation:
Government mainly borrows from Reserve Bank of India (RBI) to meet its fiscal
deficit. RBI prints new currency to meet the deficit requirements. It increases the
money supply in the economy and creates inflationary pressure.
3. Foreign Dependence:
Government also borrows from rest of the world, which raises its dependence on
other countries.
1. Borrowings:
Fiscal deficit can be met by borrowings from the internal sources
(public, commercial banks etc.) or the external sources (foreign
governments, international organizations etc.).
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PRIMARY DEFICIT
Primary deficit refers to the difference between the current
year's fiscal deficit and interest payment on previous
borrowings. It indicates the borrowing requirements of the
government, excluding interest. It also shows how much of the
government’s expenses, other than interest payment, can be
met through borrowings.
Primary deficit can be calculated by finding the difference
between current year’s fiscal deficit and interest payment on
the borrowings for the previous year.
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