Which of the following functions of government budget is associated with distribution of income?

I. Allocation function

II. Redistribution function

Correct Answer Only II

Key Points:Budget deficit:

• The budgetary deficit is the difference between all receipts and expenditures on both the revenue and capital accounts of the government.
• Budget Deficit = Total Receipts - Total Expenditure
• If the revenue expenditure of the government exceeds revenue receipts, it results in a revenue account deficit.
• Similarly, if the government's capital disbursements exceed capital receipts, it leads to a capital account deficit.
• The budgetary deficit is usually expressed as a percentage of GDP.

​Revenue Deficit: 

• When the revenue expenditure of the government exceeds its revenue receipts, it is called a revenue deficit.
• Revenue Deficit = Revenue Expenditure - Revenue Receipts.
• Only those transactions, which have a bearing on the current income and expenditure of the government, are included in the revenue deficit.
   

​​Fiscal Deficit:

• It is the difference between the total expenditure of the government and the total receipts of the government, excluding borrowings.
• Gross Fiscal Deficit = Total Expenditure – (Revenue Receipts + Non-Debt Created Capital Receipts)
   

​Primary Deficit:

• The purpose of measuring the primary deficit is to draw attention to current fiscal imbalances.
• Primary deficit is calculated to get an estimate of the amount of borrowing required due to excess of current expenditure over revenue. It is only the difference between fiscal deficit and interest payment.
• Gross Primary Deficit = Gross Fiscal Deficit - Net Interest Liabilities
• The Union Budget of India is also known as the Financial Statement in Article 112.
   

Components of Government Budget: