INTRODUCTION

The Union Budget of India, also referred to as the Annual

Financial Statement in Article 112 of the Constitution of
India,[1] is the annual budget of the Republic of India set
by Ministry of Finance for the following financial year,
with the revenues to be gathered by Department of
Revenue to identify planned government spending and
expected government revenue and the expenditures
gathered by Department of Expenditure of the public
sector, to forecast economic conditions in compliance
with government policy.
The Government presents it on the first day of February
so that it can be materialised before the beginning of
new financial year in April. Until 2016 it was presented
on the last working day of February by the Finance
Minister in Parliament. The budget division of the
Department of economic affairs (DEA) in the finance
ministry is the nodal body responsible for producing the
budget.[2]
The budget reflects the government's policy priorities,
development aspirations, and commitment to various
sectors.
Key points of interaction between the government budget
and the Indian economy include:
• Resource Allocation: The budget determines how
financial resources are distributed among various
sectors such as infrastructure, education, healthcare,
agriculture, defense, and more. The allocation decisions
have a direct impact on sectoral growth and overall
economic development.
• Economic Growth: The budget can act as a catalyst for
economic growth by investing in critical infrastructure
projects, promoting industries, and encouraging
entrepreneurship. Capital expenditure in areas like
transportation, energy, and technology can stimulate
economic activity and job creation.
• Inflation Management: The budget's fiscal policy
measures can influence inflationary pressures in the
economy. If the government spends more than it
collects in revenue (running a deficit), it could lead to
higher money supply and potential inflation.
Conversely, prudent fiscal management can contribute
to price stability.
• Social Welfare: The budget plays a vital role in
addressing social inequalities and improving the living
standards of marginalized populations. Allocation to
 social welfare schemes, poverty alleviation programs,
and healthcare initiatives directly impacts the well-
being of citizens.
• Investor Confidence: A well-structured budget with a
focus on fiscal discipline, transparent policies, and
growth-oriented measures can enhance investor
confidence. Foreign and domestic investors are more
likely to invest in a stable economic environment.
• Monetary Policy Coordination: The government
budget and monetary policy (controlled by the central
bank) are intertwined. Coordination between the two is
essential to ensure macroeconomic stability and avoid
conflicting policy actions.
• Revenue Generation: The budget's revenue
component is largely derived from taxes, duties, and
other sources. Changes in tax policies can influence
consumer behavior, business decisions, and overall
economic activity.
• Infrastructure Development: Investment in
infrastructure, including transportation, energy, and
communication networks, has a multiplier effect on
economic growth. Adequate funding in this area can
improve productivity and connectivity.
• Public Debt Management: The budget outlines
borrowing requirements, which can impact the level of
public debt. Prudent management of debt ensures that
it remains sustainable and does not hinder future
economic prospects.
 • Long-Term Vision: The budget can reflect the
government's commitment to long-term goals such as
sustainable development, environmental protection,
and technology advancement.

THE OBJECTIVE OF THE STUDY

The objectives of this project “government
budget and economy” is to understand various
concepts such as:
• Government budget
• Classification of receipts
• Classification of expenditure
• Measures of government deficit
Presentation and analysis of the data

Presentation and analysis of data

• Government budget

The government budget of India is a comprehensive financial

plan that outlines the government's revenue and expenditure
for a specific fiscal year. It serves as a blueprint for the
allocation of resources, funding of public programs, and
management of the country's economy. The Indian budget is
presented annually by the Finance Minister to the Parliament,
typically in the month of February.
The Indian government budget is classified into three
categories: the revenue budget, the capital budget, and the
fiscal deficit. The revenue budget accounts for the
government's revenue receipts and expenditure that do not
result in the creation of assets. It includes regular expenses
like salaries, pensions, subsidies, and interest payments. The
capital budget, on the other hand, pertains to capital receipts
and expenditure that lead to the creation of assets. This
includes investments in infrastructure, industries, and
development projects. The fiscal deficit represents the excess
of total expenditure over total revenue, excluding
borrowings. It indicates the government's borrowing
requirement to meet its expenditure commitments.
One of the crucial components of the Indian budget is tax
revenue. The government collects taxes in various forms,
including direct taxes like income tax and corporate tax, and
indirect taxes like Goods and Services Tax (GST), excise
duties, and customs duties. Tax revenue constitutes a
significant portion of the revenue budget and plays a vital role
in funding government programs and services.
Expenditure in the Indian budget is allocated across sectors
such as education, healthcare, defense, agriculture,
infrastructure, and social welfare. The allocation reflects the
government's priorities and policies for the fiscal year.
Subsidies, aimed at supporting various sectors and
marginalized communities, also form a substantial portion of
expenditure. Additionally, the government allocates funds for
centrally sponsored schemes, which are shared with state
governments to implement projects for development and
social welfare.
The Indian budget also outlines the government's strategies
for economic growth and development. It often includes
policy measures to boost economic activity, attract
investments, promote exports, and create job opportunities.
The budget is a critical tool for managing inflation, controlling
public debt, and achieving a sustainable fiscal deficit.
To ensure transparency and accountability, the budget
undergoes a thorough review process in the Parliament. The
Finance Minister presents the budget in two parts: the
General Budget and the Railway Budget. However, since
2017, both budgets have been merged into a single Union
Budget to streamline the process. The budget presentation is
accompanied by detailed documents, including the Annual
Financial Statement, Expenditure Budget, Revenue Budget,
and Demand for Grants, providing comprehensive
information on government finances.
The budget presentation is followed by a general discussion
in both houses of Parliament. Members of Parliament have
the opportunity to scrutinize the budget, propose changes,
and raise concerns. This process promotes transparency and
parliamentary oversight over government spending
decisions.
In recent years, the Indian budget has aimed to address
various challenges, including inclusive growth, job creation,
infrastructure development, and fiscal consolidation. The
budget also reflects the government's commitment to
digitalization and the promotion of a digital economy.
In conclusion, the government budget of India serves as a vital
tool for fiscal planning, resource allocation, and economic
management. It outlines revenue sources, expenditure
priorities, and policy measures to achieve economic growth
and development while ensuring fiscal discipline. The budget
presentation and parliamentary discussions facilitate
transparency, accountability, and public participation in the
governance process.

• Classification receipts

In order of importance, the classification of

revenues and expenditures follows the
approaches to the dual budget and reflects, to an
extent, the features pertaining co the current and
capital budgets. Revenues are first divided into
two categories-tax revenues reflecting the
compulsory nature of the levy, and non-tax
revenues that are in the form of charges for
services provided.

What are Receipts?

A receipt is a written acknowledgement of the transfer of something valuable
from one party to another. In addition to the receipts that are normally given
to customers by vendors and service providers, receipts are also given in
business-to-business entities as well as stock market transactions. However,
receipts are classified into two types. They are:

• Revenue receipts
• Capital receipts

The UN System of National Accounts classified

revenues inco direct and indirect taxes, property
income, fees, and related categories. Direct taxes
are levied on individuals and others by public
authorities on income from property,
employment, or any other source and paid by
individuals and ochers. Indirect taxes are
assessed on producers in respect of the
production, sale, or use of goods and services that
are charged to the expenses of production
Revenue Receipts
Revenue receipts are those receipts that do not lead to a claim on the
government. They are hence termed non-redeemable. They are classified
into tax and non-tax revenues. Tax revenues, a vital component of revenue
receipts, have been bifurcated into direct taxes (personal income tax) and
enterprises (corporation tax), indirect taxes like customs duties (taxes
imposed on commodities imported into and exported out of India), excise
taxes (duties levied on commodities manufactured within the nation), and
service taxes.

Other direct taxes such as gift tax, wealth tax, and estate duty (now
eradicated) have never brought a large amount of revenue, hence they are
known as paper taxes.

Capital Receipts
The government also gets money in terms of loans or from the sale of its
assets. Loans must be given back to the agencies from which they have
borrowed. Hence, they establish liability. The sale of government assets, such
as the sale of shares in Public Sector Undertakings (PSUs) that is known as
Public Sector Undertakings disinvestment, minimises the total amount of
financial assets of the government.

Likewise, when the government sells an asset, it is understood that its

earnings from that asset will vanish in the future. Hence, these receipts can be
debt establishing or non-debt establishing. All the receipts of the government
that establish liability or minimise financial assets are known as capital
receipts. When the government takes loans, it means that these loans will
have to be given back and interest will have to be financed on these loans in
the future.

• Classification of expenditure
The purposes of expenditure classification have
grown over the years and have generally kept
pace with the growth and increasing complexity
of public expenditures. Moving from
accountability to management and to planning,
classifications were improved for several
reasons. The need for uniformity in the structures
and better synchronization with other
classifications, on one hand, and the introduction
of program budgeting, on the other, have
contributed to major changes in the classification
of expenditures. Expenditures were originally
classified in terms of organizations and the
objects of expenditure, i.e., the goods and services
bought by appropriated funds. Their primary
purpose was to provide a basis for fund requests
and for controlling operations.

Expenditure definition
Expenditure is referred to as the act of spending time, energy or money on
something. In economics, it means money spent on purchasing any goods or
services.

There are two categories of expenditures which are:

1. Revenue Expenditures
 2. Capital Expenditures

Revenue Expenditures
Revenue expenditures are the expenditures incurred for the basis other than
the creation of physical or financial assets of the central government. These
are associated with the expenses incurred for the normal operations of the
government divisions and various services, interest payments on debt
sustained by the government, and grants given to state governments and
other parties (even though some of the endowments might be meant for the
creation of assets).

Non-plan expenditure, the more significant component of revenue

expenditure, covers a broad degree of general, economic, and social services
of the government. The main objects of a non-plan expenditure are interest
payments, defence services, subsidies, salaries, and pensions.

Capital Expenditures
There are the expenditures of the government that result in the creation of
physical or financial assets, or depletion in financial liabilities. This
incorporates expenditure on the investment of building, land, equipment,
machinery, investment in shares, and loans and advances by the central
government to state and union territory governments, Public Sector
Undertakings (PSUs), and other parties.

Capital expenditure is also classified as plan and non-plan in the budget

documents. A plan capital expenditure, like its revenue equivalent, is
associated with central plan and central assistance for state and union
territory plans. A non-plan capital expenditure covers different general, social,
and economic services furnished by the government.

• Measures of government deficit

What is a government deficit?

A deficit is a sum through which the expenditures in a budget exceed the income. It
plays a vital role concerning the pecuniary stability of an economy.
A government Deficit is the amount of money in the set budget by which the
government expenditure exceeds the government income amount.
It has proved to be a bridge between the income and expenditure of the government
such as capital income and capital expenditures.
It helps improve the financial health of the system.
“Net lending” means that the government has a surplus, and has come up with
financial resources for other sectors, while “net borrowing” means that the
government has a deficit, and requires financial means from other sectors.
To minimize the deficit the government may reduce a few expenses and may increase
the search for initiating revenue.

Components of Budget Deficit

The two major components of the budget deficit can be understood as

Revenues
• The bulk of revenue comes from corporate taxes and income tax for the
government which is greater than half of the tax revenues.
• For various companies and NGOs, revenues come from the sale of goods and
services.
Expenses
• Government expenses include spending on healthcare, infrastructure, defense,
pensions, and other items that contribute to the health of the overall economy.
• Non-governmental organizations can include the sum that is spent on a daily
basis for the growth of the company and its employees.
Measures of Government Deficit
There are few measures that fathom the government deficit, and they have their own
understanding of the economy. They are

Revenue Deficit
• A revenue deficit comes into play when the said net income is less than the
estimated net income.
• It happens when the legal and said amount of revenue and the actual amount of
expenditures do not comply with the budgeted revenue and expenditures.
 • So the excess of estimated government expenditure over receipts during a fiscal
year in the revenue account is a revenue deficit.
Fiscal deficit
• The difference between total revenue and total expenditure of the
government is termed a fiscal deficit.
• It signifies the total borrowings needed by the government and when the total
revenue is calculated the borrowings are not taken into consideration.
• The excess amount of the total government expenditure over receipts from tax
and non-tax sources except the borrowings, during a fiscal year in both current
and capital accounts, is a fiscal deficit.
Primary deficit
• A primary deficit is known as the difference between the current year’s fiscal
deficit and the interest payment on the previous borrowings.
• It indicates the sum of borrowing which is needed by the government without
an interest component.
• The primary deficit can be calculated by recouping interest payments for the
borrowings from the present year’s fiscal deficit.
Advantages of Government Deficit

Advantages of Government Deficit

• Increased Economic Growth - It is said to be one of the plus points of deficit
spending.
• When a government spends in excess, it can afford to buy infrastructure for the
country which turns in the employment of labor and the workforce.
• As more money flows into the country, the overall economy rises and it
becomes useful during emergencies.
• It can help attract jobs, increase business setups and startups, private
investment ventures, and the nation’s economy building.
• Controlled Deficit spending leads to a budget deficit.
• A budget deficit allows the government bodies to have thorough research
before making any unnecessary investments in order to generate assets.
Drawbacks of the Budget Deficit

Drawbacks of the Budget Deficit

• One of the major threats of a budget deficit is inflation.
 • In India, the budget deficit is met by borrowing from the central bank or the
international financial institutions which increases the money supply in the
economy resulting in inflation.
• The Government will have no savings during a deficit period which becomes
extremely problematic during emergencies.
• There remains no solution to go for and this results in too much borrowing
from other nations/governments at a high-interest rate.
• Excessive debt continues to pile up and the government is left with no other
option except to increase taxes there is an unusual increase in the prices, which
leads to high inflation.

CONCLUSION
The government budget of India holds a central position in the nation's fiscal
management, economic growth, and social development. It stands as a
comprehensive financial roadmap that outlines the government's revenue and
expenditure plans for a specific fiscal year. The Indian budget serves as a blueprint
for resource allocation, funding of public programs, and the overall economic
management of the country. This critical financial document is presented annually
by the Finance Minister to the Parliament, usually in the month of February,
marking a significant event on the nation's economic calendar.

The Indian government budget is structured into three primary categories: the
revenue budget, the capital budget, and the fiscal deficit. Each category plays a
distinct role in shaping the country's financial landscape. The revenue budget
accounts for the government's day-to-day operational expenses, as well as its
revenue receipts. This includes regular outlays such as salaries, pensions,
subsidies, and interest payments. On the other hand, the capital budget deals
with capital receipts and expenditures that lead to the creation of assets.
Investments in infrastructure, industries, and development projects fall under this
category. Lastly, the fiscal deficit represents the shortfall between the
government's total expenditures and its total revenue, excluding borrowings. It
indicates the extent to which the government needs to borrow to meet its
spending commitments.

At the core of the Indian budget are the revenue sources, primarily generated
through taxation. Tax revenue constitutes a significant portion of the revenue
budget and is derived from various sources. Direct taxes, including income tax and
corporate tax, contribute a substantial share. Indirect taxes such as the Goods and
Services Tax (GST), customs duties, and excise duties also contribute significantly.
These revenues are vital for funding government programs, public services, and
welfare initiatives that cater to the needs of citizens.

Expenditure in the Indian budget is allocated across diverse sectors, reflecting the
government's priorities and policies for the fiscal year. These sectors encompass
education, healthcare, defense, agriculture, infrastructure, and social welfare. The
allocation of funds in each sector reflects the government's vision for equitable
growth and development. Subsidies, aimed at supporting vulnerable sections of
society and specific sectors, constitute a substantial portion of expenditure. The
government also allocates funds for centrally sponsored schemes, which are
implemented in partnership with state governments to drive development and
social welfare initiatives.

The Indian budget is not just about financial numbers; it is also a reflection of the
government's strategies for economic growth and development. It often
incorporates policy measures aimed at stimulating economic activity, attracting
investments, promoting exports, and generating job opportunities. The budget is
a crucial tool for managing inflation, controlling public debt, and achieving a
sustainable fiscal deficit. It outlines the government's fiscal discipline and
commitment to maintaining macroeconomic stability.

The budget presentation process involves transparency and accountability to

ensure effective governance. The Finance Minister presents the budget in two
parts: the General Budget and the Railway Budget. However, since 2017, these
budgets have been merged into a single Union Budget to streamline the process.
The budget presentation includes detailed documents such as the Annual
Financial Statement, Expenditure Budget, Revenue Budget, and Demand for
Grants. These documents provide comprehensive information on the
government's financial activities, enabling lawmakers and the public to gain
insights into the allocation of resources.

Once presented, the budget undergoes rigorous scrutiny and discussion in both
houses of Parliament. Members of Parliament have the opportunity to analyze
the budget, propose amendments, and raise concerns. This process facilitates
transparency, parliamentary oversight, and public participation in shaping
government spending decisions.

In recent years, Indian budgets have aimed to address multifaceted challenges,

including fostering inclusive growth, job creation, infrastructure development,
and fiscal consolidation. Moreover, the budget reflects the government's
commitment to digitalization and the promotion of a digital economy, aligning
with the nation's aspirations for technological advancement and innovation.

In conclusion, the government budget of India is a paramount instrument for

fiscal planning, efficient resource allocation, and strategic economic management.
It delineates revenue sources, expenditure priorities, and policy measures to drive
economic growth, development, and social progress. The budget presentation
and subsequent parliamentary discussions foster transparency, accountability,
and public involvement in the governance process. While the government deficit
has both advantages and drawbacks, the overall framework of the Indian budget
empowers the nation to navigate economic challenges, implement effective
policies, and promote sustainable development. Through prudent financial
management and robust budgetary practices, India continues its journey toward
economic prosperity and social well-being.

Suggestions
Today, with the use of technology and the overall ongoing
transparency in data from the government, a lot of critical
numbers can be broadly estimated even before the Budget is
presented. Also, the government doesn’t wait for the annual
Budget to announce critical policy initiatives and rather
implements them all through the year.

The first suggestion is regarding Dispute Resolution Mechanism

(DRM). We are a growing economy with scarce capital. Every
resource, particularly capital, is very important for us and our
endeavour should be to utilise it to its fullest. At times, when a
project gets stuck in dispute, resolution of the same takes
inordinate time through our legal system. This not only puts
significant strain on project execution, but also delays the project
leading to cost escalation and sometimes making the project
unviable. To speedily dispose of such disputes, the government
should consider expanding the present Vivad se Vishwas (VsV)
scheme, which is today meant to resolve tax disputes, and
enhance its scope to cover all kinds of commercial disputes.

Apart from making a huge difference to project execution and

costs, this will also reduce the load of our judiciary and enable it to
take up other important matters more expeditiously.

The third expectation from the Budget is a greater focus on

innovation, without which no economy today can progress. At
present, our share of new patents filed annually is less than 1%.
China accounts for approximately half of the world’s total patents.
Innovation is an investment for the future and not focussing on it
today would be like not educating your child. There is a need to
make a serious commitment to innovation, not only financially but
also in terms of creating an entire ecosystem of ..
partnerships with industry, academia, and government.

The fourth point is regarding privatisation. A lot has been written

about it over time and the current government has done brilliantly
on privatisation by selling Air India last year. This was nothing
short of a miracle. It would be useful for the Hon. Finance Minister
to pull out the chapter on privatisation from the economic survey
of 2020 wherein a clear strategy and roadmap was indicated for
privatisation. We can follow the Singapore model of transferring
all our Public Sector Undertakings ( psu)
from govt to a new entity like NIIF, which can manage this
investment professionally. The improvement in the efficiency of
our public sector can significantly add to the efficiency of our
country.

QUESTIONAIRE

Question 1: What is the main purpose of the government budget of India?

A) To determine the salaries of government officials.
B) To outline the allocation of resources and manage the country's economy.
C) To provide funding for public programs.
D) To calculate the total population of the country.
Question 2: When is the Indian budget typically presented to the Parliament?
A) In the month of April.
B) In the month of March.
C) In the month of February.
D) In the month of January.
Question 3: Which of the following is NOT a category of the Indian government budget?
A) The revenue budget.
B) The capital budget.
C) The expenditure budget.
D) The fiscal deficit.
Question 4: Which component of the Indian budget is responsible for creating assets? A)
Revenue budget.
B) Capital budget.
C) Fiscal deficit.
D) Expenditure budget.
QUESTION 5:
How are receipts classified based on their nature?
A) Direct and indirect receipts.
B) Financial and non-financial receipts.
C) Business and personal receipts.
D) Revenue and capital receipts.
Question 6: What are "capital receipts" in the context of the government's finances?
A) Revenues generated from taxes and duties.
B) Receipts from the sale of government assets and loans borrowed.
C) Receipts from the sale of goods and services.
D) Receipts from non-tax sources.
Question 7: Why are direct taxes like income tax considered a significant component of
revenue receipts?
A) They are collected from businesses only.
B) They are paid by individuals and corporations directly.
C) They are associated with the sale of assets.
D) They are classified as capital receipts.

Question 8: Why does the government taking loans result in the establishment of liability?
A) The loans are non-redeemable and do not have to be paid back.
B) The loans are a form of revenue for the government.
C) The government is obligated to repay the loans along with interest.
D) The loans lead to the creation of financial assets for the government.

Question 9: What is the primary meaning of "expenditure" in economics?

A) The act of using energy or time on an activity.
B) The act of earning money from goods or services.
C) The act of saving money for future use.
D) The act of spending money on purchasing goods or services.
Question 10: Which two categories of expenditures are mentioned in the paragraph?
A) Personal and Business Expenditures.
B) Direct and Indirect Expenditures.
C) Current and Capital Expenditures.
D) Essential and Non-essential Expenditures.
Question 11: What is the main distinction between revenue expenditures and capital
expenditures?
A) Revenue expenditures are associated with normal operations, while capital
expenditures lead to the creation of assets.
B) Revenue expenditures lead to the creation of assets, while capital expenditures are
associated with normal operations.
C) Revenue expenditures are only related to interest payments, while capital expenditures
cover various government services.
D) Capital expenditures are only associated with grants to state governments, while
revenue expenditures cover various services.
Question 12: What is the key characteristic of capital expenditures in the context of the
government budget?
A) They cover expenses related to interest payments and subsidies.
B) They result in the depletion of financial assets.
C) They only involve the creation of physical assets.
D) They are classified as plan and non-plan in the budget documents.

Question 13: What is a government deficit in financial terms? A) The excess of government
income over expenditures. B) The excess of government expenditures over income. C) The
total government revenue collected during a fiscal year. D) The total government
borrowings from international institutions.
Question 14: What is the significance of a primary deficit in the context of government
finances? A) It represents the total government revenue. B) It indicates the excess of
estimated government expenditures. C) It signifies the borrowing needed by the
government without interest. D) It reflects the difference between revenue and capital
accounts.
Question 15: What is one of the advantages of a government deficit, according to the
paragraph? A) Reduced economic growth due to controlled spending. B) Decreased job
opportunities and business growth. C) Increased money supply leading to inflation. D)
Enhanced economic growth and infrastructure development.
Question 16: What is one of the drawbacks of a budget deficit, as mentioned in the
paragraph? A) Reduced money supply leading to economic stagnation. B) Limited
borrowing from international financial institutions. C) Increased savings for the
government during a deficit period. D) Excessive borrowing leading to high inflation and
debt accumulation.

Methodology

The methodology employed in this project is predominantly

secondary in nature, given that the data has been sourced from
various secondary sources. These sources encompass a wide range
of references including Wikipedia, books, and articles from
reputable newspapers. Some of the data have been collected from
the Indian government websites. Secondary data collection involves
the utilization of existing information that has been previously
gathered by others. In this context, the project relies on established
and well-documented sources to acquire relevant data.

BIBLOGRAPHY

Introduction-
https://en.wikipedia.org/wiki/Union_budget_of_India

Presentation and analysis of data- government budgeting and

expenditure controls-by A.premchad

Suggestions - Union Budget 2023: 5 ideas for Nirmala Sitharaman that can make us
happier by sunil sanghai in econmoic times