Public Finance and Budget 10th Notes KSEEB Social Science
→ The management of income, expenditure and debt of an individual is called as Personal Finance’.
→ The Scientific study of the management of income and expenditure of the Government is Public Finance’.
→ Public Finance is concerned with the income and expenditure of public authorities and with the adjustment of one to the others’.
→ The objectives of fiscal policy are to achieve economic growth, maintain economic (price) stability, and achieve a fair distribution of income
→ The study of public finance helps in the analysis and evaluation of a country’s Budget’.
→ The statement of estimated income and expenditure of a year prepared by the Government is called Budget’.
→ Budgets are of three types. : 1. Surplus Budget, 2. Deficit Budget and 3. Balanced Budget.
→ A budget which shows surplus revenue as compared to expenditure is called as ‘Surplus Budget’.
→ A budget which has expenditure more than the revenue is a Deficit Budget’.
→ A budget in which income and expenditure are equal is called a Balanced Budget’.
→ The expenditure incurred by public * authorities like central, state and local Governments to satisfy the collective social wants of the people is Public Expenditure’.
→ The goals of public expenditure are:
- Promote faster economic development
- Promote industry, trade and commerce.
- Promote agricultural and rural development
- Promote balanced regional growth
- Build socio-economic overheads e.g., roadways, railways, dams, power etc.
- Promote full-employment, and
- Maximize social welfare.
→ ‘Public Revenue’ is the income mobilized by the Government for purposes of financing Governments activities.
→ Taxes and non-tax services from the public revenue.
→ The ‘Revenue’ of the ‘Central Government’ is classified as
- Revenue Receipts
- Capital Receipts.
→ Tax can be described as a compulsory payment of citizens to the Government without expecting any direct benefit in return.
→ Taxes are the major sources of revenue for the Government.
→ The tax paid by an individual on whom it is levied its ‘Direct Tax’ ex: Income tax, Stamp duty etc.,
→ If the burden of tax imposed by the Government is transferable to others, it is Indirect Tax’.
→ The main forms of indirect tax are – Central excise duty, Value Added Tax (VAT), Import-Export Taxes and Service Tax.
→ A single ‘Goods and Service Tax’ (GST) was introduced on 1st July 2017.
→ The ‘Non-Tax Revenue’ of the Government are
- Profit earned by the Reserve Bank of India; ‘
- Profit generated by the Indian Railway”
- Revenue generated by the Departments of Post and Telecommunications’
- Revenue generated by the public sector industries;
- Revenue generated by the coins and mints.
- Various types of fees and penalties; etc.
→ Capital Revenue refers to those receipts which either create a liability or cause a reduction of assets of the Government.
→ When a Government borrows money from internal or external sources, it is called “Public Debt’.
→ Loans obtained from citizens of the country, banks, financial institutions and industries is “Internal Debt’.
→ Loans obtained from foreign Governments and financial institutions and international financial institutions by Government is “External Debt’.
→ Financing the budgetary deficit through loans from RBI and creation of new money is Deficit Financing’.
→ The excess of Governments expenditure over its revenue receipts and non-debt receipts of ‘Fiscal Deficit’.
→ Fiscal Deficit = (Revenue receipts + Non debt capital receipts) – Total expenditure.
→ The fiscal deficit of current year minus interest payments on previous borrowings is ‘Primary Deficit’.
→ ‘Revenue Deficit is the excess of total revenue expenditure of the Government over its total revenue receipts.
Revenue Deficit = Revenue receipt – Revenue expenditure.
→ High amount of budget deficit increases inflation.
→ ‘Fiscal Responsibility and Budget Management Act’ (FRBMA) was enacted in 2003 to check financial indiscipline on the part of the Government.
→ DALTON: Baron Edward Hugh Dalton, Economist and – British Labour Party who served as Chancellor exchequer from 1945-47.
→ PROGRESSIVE TAXATION: High tax on luxury goods and services low tax on goods and services used by common man
→ VAT Value added Tax
→ FRBMA: Fiscal Responsibility and Budget Management of 2003.