What is Government Budgeting?

By : Neha Dhyani

Updated : May 9, 2022, 10:09

A budget is an estimate designed to consider the expenditures and the income spent in a particular financial period. Government Budgeting refers to an Annual Financial Statement moved by the legislature, sanctioned by the President, and given by the country's finance minister. It refers to -

  • Approximations of revenue and capital earnings.
  • Measures to raise the income.
  • Estimates of expenditures and spending.
  • Detailed explanation related to any deficit or surplus in a particular financial year which spans from 1st April to 31st March.
  • The economic strategies, financial policies, tax proposals, and introduction of new schemes and policies of the coming year.

The Stages of Government Budgeting

The different stages of Government Budgeting are:

  1. Presentation of the budget followed by a general discussion for the same.
  2. Analysis and inquiry by different Departmental Committees.
  3. Voting on Demands for Grants.
  4. Passing of appropriation and Finance Bills.

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Government Budgeting Main Objectives

Government Budgeting emphasizes rationalization and distribution of resources keeping in view the social and economic conditions of the country. The government aspires to seep into economic equality by imposing taxes on the elite class and spending the money on the welfare of the poor, which reduces inequalities in income and wealth.

The rate of investments and savings are a great deciding factor for the economic progress of a country. Government Budgeting focuses on preparing adequate investments in the public sector and improving the rate of the overall reserves.

Government Budgeting emphasizes bringing fiscal stability to the country by controlling business fluctuations and introducing policies like Deficit Budget during deflation and surplus budget during inflation, thus creating financial stability and equilibrium. Encourage public sector industries for social welfare, impart financial help through different provisions, and reduce regional inequalities by promoting underdeveloped regions.

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Components of Government Budgeting

The various components of Government Budgeting are -

Revenue Budget consists of Revenue Receipts (the government's income through taxes like excise duty, income tax, sales tax, etc. and non-tax income including dividend income and interest receipts, etc., and Revenue Expenditure (including salaries, interest payments, administrative expenses, etc.). Neither of them has any direct impact on the assets and liabilities of the government.

Capital Budget comprising of Capital Receipts indicating a decrease in asset or increase in liability, money raised from the selling of any asset, disinvestments of shares, money received as borrowing or repayment of loans by states, and Capital expenditure used to create assets and reduce liability consisting of long-term investments on creating assets such as roads or hospitals and repayment of state loans.

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FAQs on Government Budgeting

Q1. What do you mean by Government Budgeting?

Ans: Government Budgeting refers to an Annual Financial Statement moved by the legislature, sanctioned by the President, and given by the country's finance minister.

Q2. What are the different types of Government Budgeting?

Ans: The three types of Government Budgeting are balanced budget, surplus budget, and deficit budget.

Q3. What are the objectives of Government Budgeting?

Ans: the main objective of Government Budgeting is to create economic equality by reallocating resources and encouraging social and economic stability in the country.

Q4. What are the functions of Government Budgeting?

Ans: The main function of Government Budgeting is to redistribute wealth and proper integration of revenue and expenditure to ensure financial stability both during inflation and deflation.

Q5. What are the five Government Budgeting methods?

Ans: The five Government Budgeting methods are:

  • Incremental budgeting
  • Zero-based budgeting
  • Rolling (continuous) budgeting
  • Activity-based budgeting (ABB)
  • Performance-based budgeting (PBB)