Budget is an Instrument of ___________

By K Balaji|Updated : January 20th, 2023

Budget is an instrument of fiscal policy of the government. A budget is an annual financial statement that describes the anticipated expenditure, expected income, and other transactions for the forthcoming fiscal year. Article 112 of the Indian constitution refers to the Union Budget of India as Annual Financial Statement. The budget is also considered a political instrument.

Budget and Fiscal Policy

The budget is presented by the Finance Minister of India on the first day of February. The nodal body responsible for producing the budget is the Department of Economic Affairs (DEA) in the finance ministry. The components of the budget are expenditure, receipts, and deficit indicators.

Expenditure

The expenditure can be classified as Capital Expenditure and Revenue Expenditure.

  • Capital Expenditure: The expenditure that leads to the creation of new assets, like the construction of a new school, hospital, etc., is referred to as capital expenditure.
  • Revenue Expenditure: The expenditure that reduces liabilities or does not add to assets is known as revenue expenditure. Salaries, Wages, Subsidies, etc., fall under the category of revenue expenditure.

Receipts

There are three components under receipts. They are revenue receipts, non-debt capital receipts, and debt-creating capital receipts.

  • Revenue receipts: The receipts that comprise revenue from taxes and non-taxes sources and are not related to the increase in liabilities are called revenue receipts.
  • Non-debt receipts: The capital receipts that do not generate additional liabilities like recovery of loans, income from disinvestment, etc., are known as Non-debt receipts.
  • Debt-creating capital receipts: The receipts that require higher liabilities and future payment commitments of the government are referred to as Debt-creating capital receipts.

Summary:

Budget is an Instrument of ___________

A budget is an instrument of the Government that describes the annual estimated revenue and expenses along with the fiscal policy. It is a part of the government's fiscal policy. It is presented in the parliament in February and consists of various expenditures, receipts and indicators of deficit in the economy. A budget is an extremely important instrument for the government for policy implementation.

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