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Questions
Explain the major components of government budget.
Explain briefly various components of the budget.
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Solution
1. Revenue budget: This includes revenue receipts and revenue expenditure.
- 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.
- 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.
- 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. - Capital expenditure: Spending on creation of assets or reduction of liabilities. Examples: Infrastructure development (roads, bridges), loans to states, repayment of borrowings.
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