The government budget is an annual fiscal statement depicting the revenues and expenditures for a financial year that is often moved by the legislature, sanctioned by the Chief Executive or President, and given by the Finance Minister to the country. The budget is also known as the Annual Financial Statement of the nation.In terms of Article 112 (1) of the Constitution of India, a statement of estimated receipts and expenditure of the Government of India is presented to the Parliament every year. Article 112(2) provides that the estimate of expenditure embodied in this annual financial Budget, shall show separately. This Annual Financial Statement comprises the main budget document of the government.
Whilst the budget document relates to the receipts and expenditures of the government for a particular fiscal year, the effect of it will be there in the following years.
•There is an obligation to have two accounts that are associated with the current financial year and are incorporated in the revenue account which is also known as revenue budget.
• Those that concern the assets and liabilities of the government into the capital account are known as the capital budget.
• In order to comprehend the accounts, it is significant to understand the aims of the government budget.
The two basic elements of any budget are the revenues and expenses. In the case of the government, revenues are derived primarily from taxes. Government expenses include spending on current goods and services, which economists call government consumption; government investment expenditures such as infrastructure investment or research expenditure; and transfer payments like unemployment or retirement benefits.The government may need to correct fluctuations in income and employment.
The overall level of employment and prices in the economy depends upon the
level of aggregate demand which depends on the spending decisions of millions
of private economic agents apart from the government. These decisions, in turn,
depend on many factors such as income and credit availability. In any period,
the level of demand may not be sufficient for full utilisation of labour and other
resources of the economy. Since wages and prices do not fall below a level,
employment cannot be brought back to the earlier level automatically. The
government needs to intervene to raise the aggregate demand. On the other hand, there may be times when demand exceeds available output under conditions of high employment and thus may give rise to inflation. In such situations, restrictive conditions may be needed to reduce demand.