question_answer

Briefly discuss about the impact of budget.

or

Categorise the following government receipts into revenue and capital receipts. Give reasons for your answer.

 

(i) Receipts from sale of shares of public sector undertaking.

(ii) Borrowings from public.

(iii) Profits of public sector undertaking.

(iv) Income tax received by government.

 

Answer:

Government budget is a statement of estimates of the government's expected receipts and government's expected expenditure during the financial year or fiscal year which runs from 1 st April to 31 st March. In India, Article 112 of the Constitution requires the Central Government to prepare 'Annual Financial Statement' for the country as a whole. This is called 'Budget of the Central Government'. Article 202 of the Constitution requires every State Government to prepare 'Annual Financial Statement' for the concerned state. This is called 'Budget of the State Government'.                                           Budget impacts an economy at three levels: (i) It brings aggregate fiscal discipline level, i.e. budget tries to maintain an ideal balance between revenues and expenditures of the government. (ii) It brings better allocation of resources, i.e. government, through its budget, will allocate resources to those areas where it is socially desirable. (iii) Through budget, government can effectively and efficiently plan and implement its social welfare         programmes.                                                                          (i) Receipts from Sale of Shares of Public Sector Undertaking It Is a capital receipt because it results in a reduction of assets. (ii) Borrowings from Public It is a capital receipt because borrowings create a liability. (iii) Profits of Public Sector Undertaking It is a revenue receipt because it neither creates a liability nor reduces any asset. (iv) Income Tax Received by the Government It is a revenue receipt as it neither creates a liability nor reduces any asset.