Union Budget and National Budget | Definition of Budget, types of Budget

Economics

Budget

The word ‘budget’ is said to have its origin from the French word “Bougett”which refers to ‘a small leather bag’.The budget is an annual financial statement which shows the estimated income and expenditure of the Government for the
forthcoming financial year.

Definitions:

“It is a document containing a preliminary approved plan of public revenue and expenditure”.
-Reney Stourn.
“The budget has come to mean the
financial arrangements of a given period,with the usual implication that they have been submitted to the legislature for approval”.
– Bastabale

Union Budget and State Budget:

India is a federal economy, hence public budget is divided into two layers of the Government. According to the Indian
Constitution, the Central Government has to submit annual financial statement,i.e., Union Budget under Article 112 to the Parliament and each State Government has to submit the same for the State in theLegislative Assembly under Article 202.

Types of Budget:

Revenue and Capital Budget:

On the basis of expenditure on revenue account and other accounts, a budget can be presented in two ways:
i) Revenue Budget:

It consists of revenue receipts and revenue expenditure.Moreover, the revenue receipts can be categorised into tax revenue and non-tax revenue. Revenue expenditure can also be categorised into plan revenue expenditure and non-plan revenue expenditure.

ii) Capital Budget:

It consists of capital receipts and capital expenditure. In this case, the main sources of capital receipts are loans, advances etc. On the other side capital expenditure can be categorised into plan capital expenditure and non- plan capital expenditure.

iii) Supplementary Budget:

During the time of war emergencies and natural calamities like tsunami, flood etc, the expenditures allotted in the budget provisions are not always enough. Under these circumstances, a supplementary budget can be presented by the Government to tackle these unforeseen
events.

iv) Vote – on – Account:

Under Article 116 of the Indian Constitution, the budget can be presented in the middle of the year. The reason may be political in nature. The existing Government may or may not continue for the year, on account of the fact that elections are due, then the Government places a ‘lame duck budget’. This is also called ‘Vote-on-account Budget’.The vote on account budget is a special provision by which the Government gets permission from the parliament to incur expenditures on necessary items till the budget is finally passed in the Parliament.The legal permission of both the Houses of the parliament for the withdrawal of money from the Consolidated Fund of
India to meet the requisite expenses till the budget is finally approved is known as vote-on – account budget. This type of budget is generally sanctioned for not more than two months.

v) Zero Base Budget:

The Government of India presented Zero-Base-Budgeting(ZBB first) in 1987-88. It involves fresh evaluation of expenditure in the Government budget, assuming it as a new item. The review has been made to provide justification or otherwise for the project as a whole in the light of the socio-economic objectives which have been already set up for this project and as well as in view of the priorities of the society.

vi) Performance Budget:

When the outcome of any activity is taken as the base of any budget, such budget is known as ‘Performance Budget’. For the first time in the world, the performance budget was made in USA. The Administrative Reforms Commission was set up in 1949 in America under Sir Hooper. This commission recommended making of a ‘Performance Budget’ in USA. In the Performance Budget, it is the compulsion of the government to tell ‘what is done’,‘how much done’ for the betterment of the people. In India, the Performance Budget is also known as ‘Outcome Budget’.

vii) Balanced Budget Vs Unbalanced Budget:

A. Balanced Budget

Balanced budget is a situation, in which estimated revenue of the government during the year is equal to its anticipated expenditure. B.

Unbalanced Budget

The budget in which Revenue & Expenditure are not equal to each other is known as Unbalanced Budget.
Unbalanced budget is of two types:
1. Surplus Budget
2. Deficit Budget

1. Surplus Budget

The budget is a surplus budget when
the estimated revenues of the year are greater than anticipated expenditures.

2. Deficit Budget

Deficit budget is one where the estimated government expenditure is more than expected revenue.

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