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Indian Economy / Budget

Components of Government Budget in India

    The Governments at different levels prepare their budgets (like the Union Budget, the State Budgets, etc.), which contain the estimates of the anticipated revenue and the proposed expenditure. The components of Government budget or the basic framework of each government budget is almost similar for the Governments at different levels but the sources of revenue and the items of expenditure are different for each budget.

    • Each budget will have a Receipt side and an Expenditure side. The Receipt side will have Revenue Receipts and Capital Receipts and the Expenditure side will have Plan Expenditure and Non-plan Expenditure.
    • Here is the framework of the budget -

        Receipt Expenditure
        1. Revenue Receipts
        (a) Tax Revenue
        (b) Non Tax Revenue (Royalty from Mining, Forestry, UPSC applications)
        4. Non–Plan Expenditure (Non-Development Expenditure)
        (a) Revenue Account
        (b) Interest Payments
        (c) Capital Account (Purchase of machinery, etc.)
        2. Capital Receipts
        (a) Recovery of Loans
        (b) Others Capital Receipts (Disinvestment, Selling of Assets, etc.)
        (c) Borrowings
        5. Plan Expenditure
        (a) Revenue Account
        (b) Capital Account
        3. Total Receipts (TR) ( 1+2 ) 6. Total Expenditure (TE) ( 4+5 )

      • 7. Revenue Deficit (RD) = Revenue Expenditure - Revenue Receipt ( 4a+5a-1 )
      • 8. Budget Deficit (BD) = TE - TR ( 6-3 ) = 0 (Because of Deficit Finance)
      • 9. Fiscal Deficit (FD) = TE - ( TR - Borrowings )
      • 10. Primary Deficit = FD - Interest Payments
    • Generally, all the above 4 Deficits are worked out as a percentage of GDP at current prices.
    • For reducing the Revenue Deficit, Government should either increase the tax base or decrease the unproductive expenditure.