Government Budget and the Economy


Macroeconomics-

Government Budget and the Economy

DEFINITION: The government budget is an annual financial statement of the estimated receipts and  estimated expenditures of the government over the fiscal year which runs from April 1st  to March 31st.

Budget (Govt.) Receipts
•         Revenue Receipts are those estimated receipts of the government during the fiscal year which does not create liabilities nor  Reduces the  assets of the government.
•          
•          
•         Tax Receipts
•         Direct tax liability to pay and burden of tax falls on the same person
•         1.Income tax    
•         2.Corporate tax
•         3.Wealth tax
•         4.Gift tax
•         5. Estate duty
•         6.Expenditure tax
•         Indirect tax liability to pay and burden of tax falls on different persons.
•         1.Sales tax
•         2.Custom duty
•         3. Excise duty
•         4.Service tax
•         5.Entertainment tax
•         Non-tax Receipts
•         1. Fees, License and Permit.
•         2. Fines and Penalties.
•         3.Fees & fines
•         4.Gifts and grants
•         5. Income from public Enterprises.
•         6. Escheat.
•         Capital Receipts
are those estimated receipts of the government  during the fiscal year which  creates liabilities  and affects the  assets of the government.
•         1. Borrowings and Other Liabilities.
•          2. Recovery of loans
                         3. Other Receipts (Disinvestment)

Budgetary Expenditure:
     It refers to the estimated expenditure of the government on its `development and non-development` programmes or on its `Plan and Non-Plan programmes` during the fiscal year. It may be classified into three ways:

i) Revenue Expenditure and Capital Expenditure:
 Revenue Expenditure:
It refers to the estimated expenditure of the government in a fiscal year which does not affect assets and liabilities status of the government. For example: Old age pension, salaries and scholarships etc.
Capital Expenditure:
It refers to the estimated expenditure of the government in a fiscal year which affects assets and liabilities status of the government. For example: purchase of shares of MNC`s constructions of dams and steel plants

ii) Development Expenditure and Non-development Expenditure:
Development Expenditure:
Development Expenditure is incurred on economic and social development of the country. It relates to growth and development projects of the country. For example- Expenditure on development of Communication, transportation, agriculture etc.
Non-development Expenditure:
Non-development Expenditure is the expenditure on general services of the government which do not usually promote economic development. For example-expenditure on administration, defense and justice etc.

iii) Plan Expenditure and Non-plan Expenditure:
Plan Expenditure:
Plan Expenditure is the expenditure to be incurred during the year in accordance with the central plan of the country. For example-Planned expenditure on health, education and law and order etc.
Non-plan Expenditure:
Non-plan Expenditure refers to all such government expenditures which are Non-planned. For example- expenditure as a relief to the earthquake victims etc. 

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