Current Affairs PDF

Economics: Indian Budget System

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Budget is the document of income and expenditure of the government.

Income of the government

Income of the government is divided into two types:
(1) Revenue  receipts  and (2) Capital  receipts

Revenue Receipts  :  It consist of both tax – revenue and non – tax revenue

  • The tax revenue includes revenue form direct and indirect taxes.
  • The non-tax revenue receipts include revenue from currency, Coinage and mint,interest receipts, dividends, profits, revenue from general services (such as police, jails, supplies and disposal, and public works), revenue from social and community services (such as education,health, housing, broadcasting and so on) and revenue from other services (such as agriculture and allied services, industry and mines, transport and communications).

Capital Receipt : Capital account receipts include market loans, borrowings from Reserve Bank of India and others through the sale of treasury bills and loans from foreign governments and others to the central government.

Expenditure  of the government:

Expenditure  of the government is divided into two types:
Revenue Expenditure : An expenditure which neither create assets not remove liabilities is called revenue expenditure. e.g, salaries of employees, subsidies, pension etc. or Any expenditure from revenue receipt.

Capital Expenditure : It include expenditure on acquisition of various physical assets like land, buildings, machinery and equipment, investments in shares and debentures and loans to state governments and other bodies. Or any expenditure from the capital recepits

Different Types of Deficit :

  • Budget Deficit =Or Total expenditure – Total Income., here total expenditure = revenue expenditure + capital expenditure and total income = revenue receipt +  capital receipt
  • Fiscal Deficit = Budget Deficit + Borrowing.(because in budget deficit, borrowing is considered as a part of income in revenue receipts, but in reality it is liability to return. So when we calculate fiscal deficit we consider borrowing as a deficit for India)
  • Revenue Deficit = Revenue Expenditure – Revenue Receipt.
  • Capital Deficit = Capital Expenditure – Capital Receipt.