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Budget and Its Types

Published on Tuesday, September 13, 2016

Introduction –

  • It is a statement of estimated receipts and expenditure of the government of India for the following financial year – 1st April to 31st March 

Financial Year/Terms –

  • Starts from 1st April and Ends Up on 31st March 

Union Budget –

A. Revenue Account –

1. Revenue Receipt – i. Tax Receipt – What government gets from direct and indirect tax .
ii. Non Tax Receipt – What government gets from interests , fees , fines royalty dividends of PSUs , grants .

2. Revenue Expenditure – i. Development Expenses – On repairs of existing assets
ii. Non Development Expenses – On law and order defence , salaries subsidies .

B. Capital Account – 

i. Capital Receipts – Loan and borrowings , proceed from disinvestment sale of government assets , recovery of loans .
ii. Capital Expenditure – Repayment of loans , loans given to state government & UTs , expense on creation of Infrastructure
  • Total Receipt = Revenue Receipts + Capital Receipts 
  • Total Expense = Revenue Expense + Capital Expense 

Some Important Types of Budget –

1. Zero Based Budgeting – Here a department / Ministry prepares its budget every year on the assumption that they was no budget in the past . Hence each item in the budget is allocated on the merits rather than with reference to the allocation made in the previous years . The concept was advocated by Peter Fieri and was put in Practice by Jimmy Carter of USA

2. Outcome Budgeting – 
It is a system of performance budgeting by Ministries handling development programmes . It Comprises scheme /project –wise outlays for all central ministries department and organisations . It was first made in 2005 -06

3. Gender Budgeting – 
Its objective is to mainstream gender perspective in all sectoral policies and programmes , in-order to create enabling environment for gender justice and empowerment of women . First introduced in Australia in 1984 . Gender Budgeting was first introduced in India 2005 -2006

Deficit –

  • Budget Deficit = Total Expense – Total Receipt 
  • Revenue Deficit = Revenue Expense – Revenue Receipt 
  • Fiscal Deficit = Total Expense – Revenue Receipt + Non –debt creating Capital Receipt 
  • Primary Deficit = Fiscal Deficit – Interest Payments 
[This Deficit projects current state of account of the government by excluding interest payments as these payments are on past loans ]
  • Monetised Deficit – Net Addition of RBI credit to the government in the total borrowings of the government . 
[ It shows how much government has borrowed from the RBI and as a result fresh currency due to which there was been monetization of the economy ]

Smart Facts –

  • J According to Chakrawarty Committee , 1985 Budget Deficit is mis-lending and recommended the projection of Fiscal Deficit . Since 1997 Budget Deficit is not being Projected .

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