Types of Budgets

Budget refers to the annual financial statement presented by the Government of India, outlining its estimated revenue and expenditure for the upcoming fiscal year. It is a comprehensive document that reflects the government’s financial plans and priorities for the country’s economic development and welfare initiatives.

The three main types of budgets are balanced, surplus, and deficit budgets. These are categorized based on the relationship between the government’s estimated revenue and expenditure for a given financial year.

1. Balanced Budget:

A balanced budget occurs when the government’s estimated revenue equals its estimated expenditure. This implies that the government is not borrowing money to finance its operations and is living within its means. A balanced budget is considered a sign of financial stability and prudence.

2. Surplus Budget:

A surplus budget arises when the government’s estimated revenue exceeds its estimated expenditure. This means that the government is generating more revenue than it is spending. A surplus budget can be used to reduce debt, invest in infrastructure, or provide tax cuts.

3. Deficit Budget:

A deficit budget occurs when the government’s estimated expenditure exceeds its estimated revenue. This implies that the government is borrowing money to finance its operations. A deficit budget can be necessary to stimulate the economy during a recession or to fund large infrastructure projects. However, excessive deficit spending can lead to increased debt levels and financial instability.

The choice of budget type depends on various factors, including the current economic conditions, the government’s fiscal goals, and the overall economic outlook. Governments may use a combination of balanced, surplus, and deficit budgets over time to achieve their economic objectives

 

MCQs on Budget 1.Question: Which committee recommended the merger of the Railway Budget with the General Budget in India? A) Rakesh Mohan Committee B) Yashwant Sinha Committee C) Bibek Debroy Committee D) Vijay Kelkar Committee Answer: C) Bibek Debroy Committee Question: The ‘Zero-Based Budgeting’ approach implies: A) Incremental changes to the previous year’s budget. B) Preparing a budget from scratch without considering past budgets. C) Adjusting the budget according to variations in revenue. D) Creating a master budget integrating various budget types. Answer: B) Preparing a budget from scratch without considering past budgets. Question: The fiscal deficit is calculated as: A) Total government spending minus total government revenues. B) Total government revenues minus total government spending. C) Total government borrowing minus total government revenues. D) Total government borrowing minus total government spending. Answer: B) Total government spending minus total government revenues. Question: Which type of budget focuses on operational expenses for a specific period? A) Capital Budget B) Master Budget C) Operational Budget D) Financial Budget Answer: C) Operational Budget Question: The Goods and Services Tax (GST) is an example of: A) Direct Tax B) Indirect Tax C) Progressive Tax D) Regressive Tax Answer: B) Indirect Tax