question_answer

Define government budget. Explain the objectives of the government budget.

Answer:

Government Budget is a statement of the estimates of the government's expected receipts and government's expected expenditure during the financial year or fiscal year which runs from 1st April to 31st March.             Following are the objectives of government budget (any three): (i) Re-distribution of Income and Wealth Government through fiscal tools of taxation and transfer payments, brings fair distribution of income. Equitable distribution of income and wealth is a way to bring social justice. For this purpose, progressive tax structure is followed in India, in which burden of tax increases with increase in income. It is also known as distribution function. (ii) Re-allocation of Resources The government of a country, through its budgetary policy, directs the allocation of resources in a manner such that there is a balance between the goals of profit maximisation and social welfare, e.g. there should be production of necessity goods as well as comfort and luxury goods. (iii) Economic Growth The growth rate of a country depends on the rate of savings and investment. Therefore, the role that is assigned to budgetary policy in this regard is to create conditions which are conducive for increase in savings and investment. (iv) Generation of Employment Government needs to promote labour intensive technology, public works programmes like construction of roads, dams, canals, bridges, etc to promote employment generation in the economy. Several programmes are initiated through budget to reduce the problem of poverty and 'unemployment. (v) Economic Stability Government tries to establish economic stability by its budgetary policies. Economic stability refers to a situation without fluctuations in price levels and stability of exchange rate in an economy. Economic stability is achieved by protecting the economy from harmful effects of various trade cycles and its phases, i.e. boom, recession, depression and recovery. (vi) Management of Public Enterprises Public sector enterprises are owned and governed by the government and through its budgetary policy it tries to manage the expenditure and revenue of public sector undertakings.