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Government Budget Objectives and Notes

The document discusses key terms related to government budgets including: - Revenue and capital receipts and expenditures which determine deficits like revenue and fiscal deficits. - Fiscal deficit is the excess of total expenditure over total receipts excluding borrowings. - Primary deficit is fiscal deficit less interest payments. - Budgets can be balanced, in surplus, or in deficit.

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Shivam Mutkule
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344 views

Government Budget Objectives and Notes

The document discusses key terms related to government budgets including: - Revenue and capital receipts and expenditures which determine deficits like revenue and fiscal deficits. - Fiscal deficit is the excess of total expenditure over total receipts excluding borrowings. - Primary deficit is fiscal deficit less interest payments. - Budgets can be balanced, in surplus, or in deficit.

Uploaded by

Shivam Mutkule
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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5.

Government Budget
Govt. Budget: - The term budget has been derived from the French word 'Bougett' which
refers to 'a small bag'. A govt. budget is an annual statement of estimated receipts &
expenditure of the govt. during a financial year.
Revenue receipts: -It refers to those money receipts which do not create any liability & do
not reduce assets. These are non – redeemable receipts of the govt.
Revenue deficit: - it refers to the excess of revenue expenditure over revenue receipts.
Fiscal deficit: - it refers to the excess of total expenditure over the sum of revenue receipts
and capital receipts excluding borrowings.
Primary deficit: - it is defined as fiscal deficit less interest payments.
Zero primary deficit means that the government has to resort to borrowings only to make
interest payments of previous years.
Balanced budget: - it refers to the budget when the public receipts are equal to the public
expenditure.
Surplus budget: -Surplus budget is the one in which public receipts exceeds the public
expenditure.
Deficit budget: -Deficit budget is the one in which the govt. expenditure exceeds its receipts.

MCQs
1 Which of the following are the objectives of government budget?
a) Redistribution of income and wealth b) Economic stability c) Both (a) and (b)
d) None of these

2 Which of the following is a non-tax receipt?


a) Gift tax b) Sales tax c) Gifts and grants d) Excise duty

3 Which one of the following is indirect tax?


a) Wealth tax b) Excise duty c) Income tax d) None of these

4 Which of the following are capital receipts of the government?


a) Recovery of loans b) Borrowings c) Disinvestment d) All of these

5 Fiscal deficit =
a) Total expenditure - total receipts other than borrowing
b) Revenue expenditure- revenue receipts
c) Capital expenditure- capital receipts
d) Revenue expenditure+ capital expenditure- revenue receipts

1 Comment on the following statement true or false, with reason


1. Construction of school building is revenue expenditure of the government.
Gift tax is capital receipt.
2. Dividends on investment made by government is a revenue receipt.
3. Receipt from sale of shares of public sector undertaking.
Ans.
1. False, it is a capital expenditure because it creates asset for the government.
2. False, Gifts tax is revenue receipts, because it neither creates liability nor leads to
reduction in asset of government
3. True, Dividends on investment made by government is a revenue receipts, as it
does
not add to liability. Receipt from sale of shares of a public sectors undertaking is a
capital receipt, as it causes reduction in assets of government.
2 Write down under which heading will the following comes and why.
1. Borrowing from public.
2. Profit of public sector undertaking.
3. Income tax received by government.
ANS
1. Borrowing from public is a capital receipt, as it creates liability for the
government.
2. Profit of public sector undertaking is revenue receipts, because it neither creates
liability nor leads to reduction in asset of government.
3. Income tax received by government is revenue receipt, because it neither creates
liability nor leads to reduction in asset of government.

2
Fill in the Blanks
1 .______________is the difference between government total expenditure and its total
receipts excluding borrowings.
Ans.Fiscal deficit.
2 .______________is tax which is imposed on the property and income of persons and paid
directly by the consumer to the government.
Ans.Direct Tax.

3 .______________refers to those which neither creates liability or reduces assets.


Ans.Revenue Receipts.

4 . _______________is the deficit which is sum total of primary deficit and interest
payments.
Ans. Fiscal Deficit.

5 Gross fiscal deficit=__________ + borrowing from RBI +___________.


Ans - Net borrowing from home and Borrowing from abroad
6 Borrowing is a capital receipt because it_____________.(answer creates a liability)

7 If primary deficit is rs 3500 and interest payment is 500, than fiscal deficit
is...... 4000/2900

7 Government budget is an itemized statement of government receipts and government


expenditure in a financial year.
8 Government through public sector undertakings try to generate employment
opportunities.

10 Income tax in India is direct tax as well as progressive tax.


11 Disinvestment is a non-debt creating capital receipt.
12 Component of government budget are.......And.......... ( Revenue budget and capital
budget)

13 Interest on loans received is categorised as a revenue receipt, because this receipt neither
creates a liability nor leads to any reduction in............. (Assets)

Match the following


QUESTION ANSWER
1. Purchase of metro coaches from Japan A. capital expenditure

2. Dividend received by government from a B. revenue receipts


company
3. Sale of 40% shares of a PSU to a private C. capital receipts
company
4. Pension paid to retired Government D. revenue expenditure
employees
5. Government increases taxes on super E. reducing inequalities in income and
rich people wealth

6. government increases its own F economic stability


expenditure during deflation to increase
aggregate demand
7. fiscal deficit G. total expenditure - total receipts
excluding borrowings

8. Primary deficit H. fiscal deficit - interest payment

9. Revenue deficit I. ) revenue expenditure - revenue receipts

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