Question

Explain the major components of government budget.

Explain briefly various components of the budget.

Answer 1

1. Revenue budget: This includes revenue receipts and revenue expenditure.

1. Revenue receipts: These are the regular earnings of the government that do not create any liability or reduce any asset. They are of two types:
   • Tax revenue: Income from taxes like income tax, GST, customs, etc.
   • Non-Tax revenue: Interest, dividends from public sector units, fines, fees, etc.
2. Revenue expenditure: These are expenses for the day-to-day functioning of the government, which do not create assets.
   Examples: Salaries, pensions, interest payments, subsidies, defense expenses, etc.

2. Capital budget: This includes capital receipts and capital expenditure.

1. Capital receipts: Receipts that either create a liability (e.g., borrowing) or reduce an asset (e.g., disinvestment).
   Examples: Borrowings, loan recoveries, sale of public assets.
2. Capital expenditure: Spending on creation of assets or reduction of liabilities. Examples: Infrastructure development (roads, bridges), loans to states, repayment of borrowings.