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Government Budget |
👉 Government Budget
It is an annual statement, showing item wise estimates of receipts and expenditures during a fiscal year, which usually runs from April 1 to March 31.
👉 Objectives of Government Budget
1. Reallocation of Resources
2. Reducing inequalities in income and wealth
3. Economic Stability
4. Management of public enterprises
5. Economic growth
6. Reducing regional disparities
👉 Revenue Receipts
They are those receipts that neither create any liability nor reduce any asset of the government.
Main Sources
1. Tax Revenue = It refers to the sum total of receipts from taxes and other duties imposed by the government. It can be further classified as :
(i) Direct Taxes = It refer to taxes that are imposed on property and income of individuals and companies and are paid directly by them to the government.
(ii) Indirect Taxes = It refer to those taxes which affect the income and property of persons through their consumption expenditure.
2. Non-Tax Revenue = It refers to the receipts of the government from all sources other than those of tax receipts. Main sources of non-tax revenue are interest, profits and dividends, fees, fines and penalties, etc.
👉 Capital Receipts
They are those receipts that either create a liability (like Borrowings) or reduce an asset (like Disinvestment of a PSU) of the government. Main sources of capital receipts are borrowings, recovery of loans and other receipts like disinvestment and small savings.
👉 Revenue Expenditure
It refers to the expenditure that neither creates any asset nor reduces any liability of the government.
👉 Capital Expenditure
It refers to the expenditure that either creates an asset (like construction of school building) or reduces a liability (like repayment of loan) of the government.
👉 Revenue Deficit
It refers to the excess of revenue expenditure over revenue receipts.
👉 Fiscal Deficit
It refers to the excess of total expenditure over total receipts (excluding borrowings) during the given fiscal year.
👉 Primary Deficit
It refers to the difference between fiscal deficit of the current year and interest payments on the previous borrowings.
👉 Multiple Choice Questions (MCQs)
Que 1. Borrowing in government budget is :
(a) Revenue deficit (b) Fiscal deficit
(c) Primary deficit (d) Deficit in taxes
Ans. (b) Fiscal Deficit
Que 2. Primary deficit in a government budget is :
(a) Revenue expenditure - Revenue receipts (b) Total expenditure - Total receipts
(c) Revenue deficit - Interest payments
(d) Fiscal deficit - Interest payments
Ans. (d) Fiscal deficit - Interest payments
Que 3. Direct tax is called direct because it is collected directly from :
(a) The producers on goods produced
(b) The sellers on goods sold
(c) The buyers of goods
(d) The income earners
Ans. The income earners
Que 4. Primary deficit in a government budget equals :
(a) Interest payments
(b) Interest payments less borrowings
(c) Borrowings less interest payments
(d) None of the above
Ans. Borrowing less interest payments
Que 5. Which one of these is a revenue expenditure ?
(a) Purchase of shares (b) Loans advanced
(c) Subsidies (d) Expenditure on acquisition of land
Ans. (c) Subsidies
Que 6. Which of the following is a source of capital receipt ?
(a) Foreign Donations (b) Dividends
(c) Dis-investments (d) Indirect taxes
Ans. (c) Dis-investments
Que 7. Which of the following is not a revenue receipt ?
(a) Recovery of loans (b) Foreign grants
(c) Profits of public enterprises
(d) Corporate tax
Ans. (a) Recovery of loans
Que 8. Fiscal deficit equals :
(a) Interest payments (b) Borrowings
(c) Interest payments less borrowing
(d) Borrowings less interest payments
Ans. (b) Borrowings
Que 9. Dis-investment by government means:
(a) Selling of its fixed capital assets
(b) Selling of shares of public enterprises held by it.
(c) Selling of its buildings
(d) All the above
Ans. (b) Selling of shares of public enterprises held by it.
Que 10. Which of the following sources of receipts in government budget increases its liabilities ?
(a) Direct taxes (b) Recovery of loans
(c) Borrowings (d) Dividend from public sector undertakings
Ans. (c) Borrowings
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