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Budget
It
is a statement of the financial plan of the government. It shows the income & expenditure of the government during a financial year, which runs generally from 1stApril to 31st March
Revenue Receipts
These are the incomes which are received by the government from all sources in its ordinary course of governance. These receipts do not create a liability or lead to a reduction in assets. Revenue receipts are further classified as tax revenue and non-tax revenue. Tax Revenue :
Tax revenue consists of the income received from different taxes and other duties levied by the government. It is a major source of public revenue. Every citizen, by law is bound to pay them and non-payment is punishable.
Taxes are of two types, viz., Direct Taxes and Indirect Taxes.
Direct taxes are those taxes which have to be paid by the person on whom they are levied. Its burden can not be shifted to some one else. E.g. Income tax, property tax, corporation tax, estate duty, etc. are direct taxes. There is no direct benefit to the tax payer. Indirect taxes are those taxes which are levied on commodities and services and affect the income of a person through their consumption expenditure. Here the burden can be shifted to some other person. E.g. Custom duties, sales tax, services tax, excise duties, etc. are indirect taxes.
Non-Tax Revenue :Fees : The government provides variety of services for which fees have to be paid. E.g. fees paid for registration of property, births, deaths, etc. Fines and penalties : Fines and penalties are imposed by the government for not following (violating) the rules and regulations. Profits from public sector enterprises : Many enterprises are owned and managed by the government. The profits receives from them is an important source of non-tax revenue. For example 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 to the government. Gifts and grants : Gifts and grants are received by the government when there are natural calamities like earthquake, floods, famines, etc. Citizens of the country, foreign governments and international organizations like the UNICEF, UNESCO, etc. donate during times of natural calamities.
Revenue Expenditure
expenditure is the expenditure incurred for the routine, usual and normal day to day running of government departments and provision of various services to citizens. It includes both development and nondevelopment expenditure of the Central government. Usually expenditures that do not result in the creations of assets are considered revenue expenditure.
Revenue
Expenditure on agricultural and industrial development, scientific research, education, health and social services. Expenditure on defense and civil administration. Expenditure on exports and external affairs. Grants given to State governments even if some of them may be used for creation of assets. Payment of interest on loans taken in the previous year. Expenditure on subsidies.
Capital Budget
This
part of the budget includes receipts & expenditure on capital account projected for the next financial year. budget consists of capital receipts & Capital expenditure
Capital
Capital Receipts
Receipts
which create a liability or result in a reduction in assets are called capital receipts. They are obtained by the government by raising funds through borrowings, recovery of loans and disposing of assets.
Capital Expenditure
Any
projected expenditure which is incurred for creating asset with a long life is capital expenditure. Thus, expenditure on land, machines, equipment, irrigation projects, oil exploration and expenditure by way of investment in long term physical or financial assets are capital expenditure.
Revenue Deficit
The
revenue deficit is defined as the difference between the government revenue expenditure and government revenue receipts. In fact, revenue receipt is not enough to meet revenue expenditure
Budgetary Deficit
The
budgetary deficit refers to the difference between government total expenditure (revenue expenditure and capital expenditure) and total receipts (revenue receipts and capital receipts).
Fiscal Deficit
The
fiscal deficit is defined as the difference between the government total expenditure and the government total non-debt receipt. It is also defined as the combination of budgetary deficit and government debt receipt, i.e. borrowing from both internal and external sources, and other liabilities
Example showing Calculation of Budget Deficit and Fiscal Deficit. In Crores. 1. Revenue Receipts 3,50,200 2. Capital Receipts of which 1,63, 144 a) Loan recoveries + other receipts 12,000 b) Borrowings & Other liabilities 1,51,144 3. Total Receipts (1 +2) 5,14,344 4. Revenue Expenditure 1,14,982 5. Capital Expenditure 67,832 6. Total Expenditure (4+5) 5,14,344 7. Budgetary Deficit (3-6) NIL 8. Fiscal Deficit [1+2(a) - 6 = 7 + 2 (b)] 1,51,144
Fiscal Policy
Fiscal
policy is that part of government policy which is concerned with raising revenue through taxation and other means and deciding about the level and pattern of expenditure. It operates through the budget. The budget is an estimate of government expenditure and revenue for the coming financial year , presented to Parliament by the Finance Minister.
Development by effective Mobilization of Resources Efficient allocation of financial resources Reduction in equalities of income and wealth Employment generation
Balanced Reducing
payment
Capital
Increasing
Development Foreign
exchange earnings