Q.What is budget ? Discuss the objectives of budget.
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Start your 14-day free trial to unlock the full solution →A budget is the annual financial statement of the government's estimated income and expenditure. Its objectives are reallocation of resources, redistribution of income, economic stability, management of public sector, growth and employment.
Meaning of budget: A government budget is an annual financial statement showing the government's estimated receipts (income) and estimated expenditure for a financial year (in India, 1 April to 31 March). It is presented to and sanctioned by the legislature, and is broadly divided into the revenue budget (revenue receipts and revenue expenditure) and the capital budget (capital receipts and capital expenditure). It is not merely an accounting statement but an important instrument of government economic policy.
Objectives of the budget:
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Reallocation of resources — through its taxation and expenditure policy, the government directs resources into channels that are socially desirable. It encourages production of useful goods (through subsidies/tax concessions) and discourages harmful goods (through heavy taxes), correcting the market's allocation in the public interest.
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Redistribution of income (reducing inequality) — the budget aims to reduce inequalities in income and wealth by taxing the rich more heavily (progressive taxation) and spending on the poor through subsidies, welfare schemes, and public services, thereby promoting social justice.
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Economic stability — the government uses the budget to control fluctuations (inflation and deflation). During inflation it adopts a surplus budget (reducing demand), and during depression/deflation it adopts a deficit budget (raising demand), to keep prices and output stable.
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Management of public enterprises / public sector — the budget provides funds for setting up and running public-sector undertakings that supply essential goods and services and develop infrastructure, especially where private enterprise is inadequate.
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