11/11/22, 8:49 PM Components Of Budget - Indian Economy Notes

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Components Of Budget - Indian Economy Notes

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Sunil Kumar D Jul 9, 2022

A government budget is a declaration of the government's expected receipts and expenditures for a fiscal year.
The two major components of the budget are Revenue Budget and Capital Budget. In India, the government
delivers its budget to the Lok Sabha at the start of each year, outlining expected receipts and expenses for the
coming fiscal year. The fiscal year begins on April 1st and ends on March 31st of the following year.
Budgeting is an important aspect of the economy and will benefit UPSC Mains GS III candidates. The definition
of the government budget, its components, and its organization are examined in the following sections.

Table of Contents

1. Government Budget
2. planned
3. Components Of Budget
4. Elements Of Government Budget
5. Impact Of Government Budget
6. Importance of Government Budget
7. Conclusion
8. FAQs
9. MCQs

What Is The Government Budget?

The government budget is an annual financial statement reflecting income and expenditures for a fiscal
year that is frequently initiated by the legislature, sanctioned by the Chief Executive or President, and
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11/11/22, 8:49 PM Components Of Budget - Indian Economy Notes

presented to the country by the Finance Minister.

The term "government budget" refers to an annual financial document that outlines the government's
estimated spending and revenue generation for the fiscal year.
The government presents it to the Lok Sabha at the start of each fiscal year to provide an estimate of its
expenditures and receipts for the coming year.
The Government Budget has a constitutional status under Article 112 of the Indian constitution.

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Revenue Budget Revenue Expenditure

Capital Budget Capital Expenditure

Capital Receipts Revenue Receipts

How is it planned?
A government's budget is prepared by estimating its expected expenditures and taking measures to
raise funds to cover them.
Taxation, interest on loans to states, penalties, and fees, as well as dividends from public sector firms, are
the main sources of revenue for a country's government.
As a result, the government spends on –
1. Staff pay, security, and defense
2. Providing citizens with products and services
3. Maintaining law and order
These expenditures and revenues are taken into account when creating a budget. The Indian constitution
requires that the budget for the following fiscal year be presented to Parliament.

Components Of Budget

The government budget and its components can be divided into two parts –

1. Capital budget

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11/11/22, 8:49 PM Components Of Budget - Indian Economy Notes

2. Revenue budget

Capital Budget
The Capital Budget covers non-recurring transactions through capital expenditures and incomes through
the sale of assets.
These refer to receipts that reduce assets for a government and increase financial liabilities.
Government capital expenditure, on the other hand, aids in the creation of assets and the reduction of
liabilities.
As a result, the capital budget is an account of the government's liabilities and assets, which represent a
change in total capital.
Examples: Market borrowings by the government from the public, Borrowings from the RBI, Borrowings
from commercial banks or financial institutions through the sale of T-BILLS, loans received from foreign
governments or international financial institutions, post office savings, post office saving certificates, and
PSU’s Disinvestment.

*Click here to read more about Capital Budget.

Revenue Budget

A revenue budget is a statement of the government's anticipated revenue receipts and expenditures for
a fiscal year. The revenue budget is for revenue items that are recurring and non-redeemable.
This budget relates to revenue receipts and expenses incurred as a result of these receipts. The revenue
received by a government includes both tax and non-tax revenue.
Examples of revenue budget items: Salaries of employees, Interest payments on past debts, grants given
to state governments, etc.

*Click here to read more about Revenue Budget.

Elements Of Government Budget

The Government’s Budget is divided into two parts:

Budget receipts
This term refers to the government's estimated receipts from all sources over a fiscal year. There are two
types of it.
Capital inflows
Revenue receipts​

Budget expenditures
This refers to the government's estimated spending on various developmental and non-developmental
programs over the course of a fiscal year. There are two types of it.
Investing in capital
Revenue Expenditure

Impact Of Government Budget

The impact of the government budget on society is threefold:

Resource allocation based on public welfare and social priorities

Micro-managing expenditures help to establish fiscal discipline
Introduced excellent programs to ensure that products and services are distributed efficiently to each one.

Importance of Government Budget

It establishes a foundation for policy development.

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Budgeting is a tool for putting policies into action.

A budget is a tool for legal oversight.
It's a tool for holding people accountable.
It is a management tool.
It is a measure of economic policy

Conclusion
The government has several policies Explore Examsas part of its overall responsibility of performing its functions to
to execute
achieve social and economic growthTest goals. It must spend vast sums of money on defense, administration, and
Series Search for Government Ex Register
development, as well as welfare projects and other relief activities, to carry out these policies. As a result, it's
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critical to identify all feasible sources of funding to create enough cash to cover the rising costs.
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Indian Economics Notes Fiscal System

Fiscal Policy Financial Stability and Development Council

Government Budgeting Fiscal Stimulus

FRBM Act NRI Bonds

Budgetary Reforms Masala Bonds

Objectives of Government Budget Types of Budget

FAQs
Question: How does the annual budget help in income redistribution? ➕

Question: What is the government budget? ➕

Question: What are the components of the government budget? ➕

MCQs
Question: Who presents the Budget in Parliament?

(a) Prime Minister

(b) Finance Minister

(c) Home Minister

(d) President of India

Answer: (b) See the Explanation ➕

Question: One of the other two components of government revenue in the budget are

(a) Expenditure receipts

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11/11/22, 8:49 PM Components Of Budget - Indian Economy Notes

(b) Revenue Expenditure

(c) Capital receipts

(d) Budget receipts

Answer: (c) See the Explanation ➕

Other Relevant Links

Indian Polity Notes Indian Economy Notes

Art and Culture Notes Governance Notes

Ancient India History Notes Medieval India History Notes

Modern India History Notes Geography Notes

Science And Technology Notes Environment And Ecology Notes

Post Independence Notes Society Notes

Internal Security Notes Ethics Notes

Disaster Management Notes World History

International Relations Social Justice Notes

CSAT Notes Government Scheme Notes

*The article might have information for the previous academic years, please refer the official
website of the exam.

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