Government Bua et is?

an
annual statement,showing item wise
estimates of receipts and
expenditure during fiscal year i.e.
financial year. Tne receipts and
expenditure, shown in the budget, are
not the actual figure, but the
estimated values the coming
for fiscal year.
CTIVES OF GOVER
 Components Of
Budgets
Components of budget refers to structure of the budget. Two
main components of Budget are:
Revenue Budget: It deals with the revenue aspect of the
government budget. It explains how revenue is
generated or collected by the government and how it is
allocated among various expenditure heads. Revenue
budget has two parts:
L Revenue Receipts
ii. Revenue Expenditures

Capital Budget: it deals with the capital aspect of the

government budget and it consists of:
Capital Receipts
ri.1!. enditures
 Budget Receipts
Budget Receipts refer to the estimated money receipts of the
government from all sources during a given fiscal year. Budget
receipts may be further classified as:
,. Revenue Receipts
ii. Capital Receipts

Borrowing
s
Revenue receipts refer to those receipts which
neither create any liability nor cause any
reduction in the assets of the government. They are
regular and recurring in nature and
government receives them in its normal course of
activities.
A receipts Is revenue receipt, if it satisfies the
following two essential conditions:
□ The receipts must not create a liability for the
government.
o The receipts must not cause decrease in the
assets.
Capital receipts refer to those receipts which
either create a liability or cause a reduction
in the assets of the government. They are non-
recurring and non-routine in nature. A receipt
is a capital receipt if it satisfies any one of
the two conditions:
The receipt must create a liability for the
government
The receipts must cause a decrease in
the assets
Budget expenditure refers to the
estimated expenditure of the
government during a given fiscal
year. The budget expenditure can be
broadly categorised as:
Revenue Expenditure
Capital Expenditure
Revenue Expenditure refers to the expenditure which
neither creates any asset nor causes any reduction in any
liability of the government. It is recurring in nature.
It is normal functioning of the
incurred on
salaries, pensions,
government.
interests,
LJ Examples: Payment
An expenditure is a revenue expenditure, if
of etc.
it satisfies the following two essential condition:
a) The expenditure must not create an
asset of the overnment.
diture must not cause decrease
in an
 capita\ Expenditure
Capital expenditure refers to the expenditure which either
creates an asset or causes a reduction in the liabilities of the
government. It is non-recurring in nature.
It adds to capital stock of the economy and increases its
productivity through expenditure on long period
development programmes.
Examples: Loan to states and Union Territories, etc.
An expenditure is a capital expenditure. if it satisfies any
one of the following two conditions:
1. The expenditure must create an asset for the
government.
e expenditure must cause a decrease in the
liabilities.
There are three types of budgets:
o Balanced Budget: Government budget is said
to be balanced budget if estimated government
receipts are equal to the estimated government
expenditure.
Surplus Budget: If estimated government receipts are
more than the estimated government expenditure, then
the budget is termed as "Surplus Budget".
o Deficit Budget: If estimated government
receipts are less than the estimated government
end,,iture, then the budget is termed as "Deficit
Measures Of Government
Deficit deficit is defined as the excess of total
Budgetary
estimated over total estimated revenue. When the
government spends more than it
collects, then incurs a budgetary
it
With reference deficit.budget
to of
government, budgetary Indian can be
deficit
types: of 3
1) Revenue
Deficit
2> FiscaIDeficit
Deficit
. ---

r
Revenue Deficit is concerned with the
and receipts
revenue expenditures the
of
government. It refers to excess of revenue
expenditure over revenue receipts during the
given fiscal year.
Revenue Deficit = Revenue Expenditure -
Revenue Receipts
It signifies that government's own revenue
is insufficient to meet
the expenditures on ormal functioning
rtH nts andof provisions for government
various
 Fiscal
Fiscal deficit presents a more comprehensive view of
Deficit
budgetary imbalances. Fiscal Deficit refers to the
excess of total expenditure over total receipts
(excluding borrowings) during the given fiscal year.
Fiscal Deficit= Total Expenditure - Total Receipts
excluding borrowings
Sources Of Financial Fiscal Deficit:
Government has to look out for different options to
finance the fiscal deficit. The main two sources are:
, Borrowin9s: Fiscal Deficit can be met by borrowings
from the internal sources or external sources.
Deficit Financing: Government may borrow from RBI
against its securities to meet the fiscal deficit. RBI
issues new currenc'i for this purpose. This process is
known as deficit financing.
*�{ .
'I. e
Primary deficit refers to difference between fiscal deficit of
the current year and interest payments on the previous
borrowings.
Primary Deficit = Fiscal Deficit - Interest Payments

Im lications Of Prima Deficit:

It indicates, how much of the government borrowings
are going to meet expenses other than the interest
payments. The difference between fiscal deficit and
primary deficit shows the amount of interest payments on
the borrowings made in past. So, a low or zero
• deficit indicates that interest commitments
for overnment to borrow.