The term 'budget' generally refers to a financial estimate for a certain period, encompassing anticipated expenditures and revenues. In a governmental context, a budget (often called the Annual Financial Statement) provides a detailed plan of the anticipated revenue and expenditure for a specific fiscal year.
This financial blueprint is typically overseen by the finance minister of a country and approved by the Chief Executive or the President of the respective nation.
For more detailed information, you can also refer to Union Budget 2022.
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In the context of IAS Prelims, understanding the objectives of a government budget is crucial. The budget, presented in the Lok Sabha, is prepared for the fiscal year that starts on 1st April and ends on 31st March of the next year. The primary objectives are:
A significant part of the UPSC syllabus involves understanding the strategies used to design and execute a budget. A well-planned budget provides a framework for future expenditures and resource allocation, considering the socio-economic conditions and expected expenditures. Some of the key considerations while formulating the budget include:
Providing tax concessions and allowances to motivate manufacturers to invest.
Ensuring fair distribution of taxes between the rich and the poor to reduce wealth disparity.
Aiming for economic stability by designing the budget to counter economic imbalances, such as implementing a deficit budget during deflation and a surplus budget during inflation.
Encouraging investment in public sectors by ensuring availability of resources.
Focusing on underdeveloped regions to reduce economic inequality and increase production of goods and services.
Estimating cash flow to prepare for potential economic crises.
Planning for possible scenarios that the country might encounter, with a realistic and specific approach.
The components of a government budget, a key area of study for UPSC 2023, are divided into two categories: capital and revenue budgets.
Capital budget- This includes all the government's assets and liabilities. It can be further divided into:
Capital Receipts: This includes all incoming cash flows, whether from debt or non-debt sources.
Capital Expenditure: This covers expenditures on machinery, equipment, health services, and education.
Revenue Budget- This includes all expenditures that are met through revenue and details about the revenue receipts. All sources of government revenue are included under the revenue budget.
As a part of IAS study, it is essential to have a deep understanding of this topic and stay updated with the latest changes, as the government budget changes annually.
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A government budget, often termed as an Annual Financial Statement of a nation, gives an estimate about how much expenditure and revenue is planned for a particular financial year.
Who presides over the government budget?
This kind of fiscal statement is presided over by the country’s finance minister. It is permitted or sanctioned by the Chief Executive or the President of the said nation.
What are the main objectives of a government budget?
The main objectives include designing and implementing a budget, motivating manufacturers to invest, minimizing the gap between elite and underprivileged, bringing economic stability, preparing proper resources for public sector investment, aiming at underdeveloped regions, preparing for any money-related economic crisis, and planning for possible future scenarios.
What are the components of a government budget?
The components of a government budget can be classified into two categories: capital and revenue budgets. The capital budget comprises all the assets and liabilities under the government. The revenue budget comprises all the expenditure met through the revenue and about the revenue receipts.