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GOVERNMENT BUDGET

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 RECEIPTS

CAPITAL RECEIPTS

1.) Borrowings 

Borrowings done by the government create Liability for it.



2.) Disinvestment

When government receives money by selling shares then it
reduces Government assets.



3.) Recovery of loans

When the government lends Money, it creates asset for the
government but when loan is repaid, it leads to Decrease in
assets.



4.) Small Savings
Small savings by General Public Create a Liability, as the
Government is Bound to Repay.

REVENUE RECEIPTS

Tax Revenue -
Tax is a compulsory payment made to the government
without reference to any direct benefit in Return.

Tax Revenue is the sum total of Receipts from taxes and
other duties imposed by the government.



1. Direct Tax Revenue

2. Indirect Tax Revenue



1.) Direct Tax

The taxes in which the liability and incidence to pay the tax
is on the same person.

*This tax is Progressive in Nature, ex.- Income tax.



2.) Indirect tax

The taxes in which the liability to pay the tax is on one

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person and the Burden to pay the tax falls on the other
person.

*This tax is Proportional in Nature, ex.- Sales Tax.



A Tax is a Direct Tax if Burden cannot be shifted and an
indirect tax if its burden can be shifted.

Non Tax Revenue -

These may include other than tax:-



1.) Profits

Profits earned by government companies/enterprises is a form of
non tax revenue. 



2.) Dividends

Dividends received by Government investment 



3.) Interest Received

Interest Received by government of India on Loans Given.



4.) Fees,Fines and Penalties

These are charges imposed by the Government on law breakers.



5.) Special assessment

It refers to collection of funds by the government over the
properties whose value has increased due to government
projects.



6.) Gifts and grants

The government receives gifts and grants from other foreign
Governments.

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 TYPES OF BUDGET

The Difference between Government Receipts and Expenditure

may be Positive (Surplus) or Negative (Deficit). Hence, there
arise three types of Budgets:-



1.) Balanced Budget : Government Budget is said to be a
Balanced Budget if estimated Government Receipts Are equal to
the estimated Expenditure.



2.) Surplus Budget : If estimated Government Receipts are more
than estimated Government Expenditure, then the Budget is
termed as ‘Surplus Budget’.



3.) Deficit Budget : If estimated Government Receipts are less
than the estimated Government Expenditure,Then the budget is
termed as ‘Deficit Budget’.

BUDGET DEFICIT

Budget Deficit is defined as the excess of total estimated

expenditure over total estimated revenue.

Deficit= Total Expenditure-Total Receipts

(Capital Expenditure + Revenue Expenditure)-(Capital Receipts
+ Revenue Receipts).




1.REVENUE DEFICIT

It is defined as the excess of revenue expenditure over revenue
receipts during a fiscal year.

Revenue deficit = Revenue Expenditure - Revenue Receipts



Remedies for Revenue Deficit-:

1.) Progressive taxation

2.) Decrease in Expenditure and Wasteful Expenses


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Implications of Revenue Deficit:-

1.) Revenue Deficit leads to Capital Receipts as Government
may either sell the assets or Increase its borrowings.

2.) Warning signal to decrease Expenditure

3.) Increase in Borrowings leads to a Debt Spiral, given the
increase in Interest Payments.

4.) Increase in Inflation as Borrowed funds are used to fund
Consumption expenditure





2.) FISCAL DEFICIT

It 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

[ Borrowings = Fiscal Deficit ]



Fiscal Deficit is an indicator of How far the Government is
spending beyond its means.



Remedies for Fiscal Deficit:-

1.) Internal and External Borrowings

2.) Deficit Financing - Printing of New Currency Notes.



Implications of Fiscal Deficit :-

1.) Increase in Borrowings leads to a Debt Spiral, given the
increase in Interest Payments.

2.) Increase in Inflation as Borrowed funds are used to fund
Consumption expenditure.

3.) Foreign Dependence as Foreign borrowings would Iead to
Dependence on other countries.

4.) Hampers the future growth of an economy.



3. )PRIMARY DEFICIT

Primary Deficit Refers to Difference between Fiscal Deficit of
the Current year and Interest payment on the previous
borrowings.

Primary Deficit = Fiscal Deficit (Borrowings) - Interest
Payments




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*Primary Deficit shows the Borrowing requirements of the
current Government



Implication of Primary Deficit:-

It indicates about the proportion of Borrowing, required to
meet expenses other than Interest Payments. A low or zero
primary Deficit indicates that interest commitments have
forced the government To Borrow.

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