Q.Discuss the objectives of Budget.
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Start your 14-day free trial to unlock the full solution →A budget aims at reallocation of resources, redistribution of income, economic stability, growth and management of public enterprises.
This 8-mark item is a public-finance topic in CHSE Odisha +2 Business Economics (aligned with the NCERT/CBSE curriculum).
A government budget is an annual statement of the estimated receipts and expenditure of the government. Beyond mere accounting, it is a powerful tool of economic policy, pursuing the following objectives:
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Reallocation of resources. Through its tax and expenditure policy the government channels resources into socially desirable lines. It encourages production of useful goods (tax concessions, subsidies) and discourages harmful goods (heavy taxes on tobacco, liquor), and provides public goods (defence, roads) that the market under-provides.
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Redistribution of income and wealth (equity). To reduce inequality, the budget taxes the rich more heavily (progressive taxation) and spends on the poor through subsidies, free services, and welfare schemes, raising the real income of weaker sections.
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Economic stability. The budget is used to control business cycles — a surplus/deficit budget to curb inflation or fight deflation respectively — so as to keep prices and employment stable.
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Economic growth. By raising public saving and investment in infrastructure, education, health and capital formation, and by giving incentives to private investment, the budget promotes a higher rate of growth, especially important for a developing economy.
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