Wednesday, 24 February 2016

Why and How the concept of Government Budget originated?

The word ‘Budget’ originated from the French word ‘Bougetts’ which means a small bag. In 1733 for the first time the British Finance Minister Sir Robert Walpole presented the budget in the British Parliament. In India, the first budget was presented by James Wilson on 18th February 1860 during the British period. Till 1920 there was only one budget at the central level; in 1921, the Railway budget was introduced which was separated from the general budget. Since then every year, two budgets are presented in India at the central level. Also, every unit of Indian Union presents its own budget separately. By convention, the Indian budget is presented on the last working day of February every year.

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So, what do we mean by a government budget? A government budget is an annual statement showing item-wise estimates of receipts and expenditures during a fiscal year. All levels of government including the central, state or local self-government presents its own annual budget. The ‘Union Budget’ is the annual financial statement of the Central government. 1st of April to 31st of March is usually taken as the financial year. The Union budget presents the receipts and the expenditures of the government for three consecutive years; giving the details of preceding year, revised estimates of the current year and also for the ensuing year.

For the proper functioning of an Economy, the budgetary operations is an important part. It is the role of the government to collect money through taxation policies, borrowing and other various measures; the spending of these monetary funds influences the economy in various ways like savings and investments, income distribution, allocation of resources. The budget is presented every year in order to make changes in the pattern and level of its expenditure, taxation and borrowing schemes. There are various objectives of the government budget which are as follows:
  • Economic growth: In order to attain proper economic growth and development it is the role of the government to facilitate the growth. The growth rate of the country depends on the rate of savings and investment.
  • Proper Allocation of resources: The government tries to allocate resources in an even manner so as to achieve the goal of economic growth.
  • Generation of Employment: The government needs to promote public work facilities,         increase the labor absorbing technology and undertake various employment projects.
  • Economic stability and equality: To achieve a stable and equal economy the government highly focuses on the annual budget through various taxation and fiscal measures so that the economy attains stability.
  • Management of public enterprises: The government establishes public enterprises keeping in view the social interest especially in the form of natural monopolies.

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Thus, we see that the government budget plays such an important role in the functioning of an economy and without it the economy can be in an unstable state. It acts as an important instrument to implement the policies of the government.

During the times of depression the government adopts deficit budgeting; under this, the government increases its spending and cuts down its taxation. In times of inflation, the government adopts surplus budgeting policy to establish a stable economy. Hence, the government tries to control business fluctuations through these budgetary techniques.

Article by Anisha Dutta
She is a content evangelist who believes that the Science of today is the Technology of tomorrow. 
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