Especially helpful at times of recession, a deficit budget helps generate additional demand and boost the rate of economic growth. This type of budget is best suited for developing economies, such as India. Such a budget can be implemented at times of inflation to reduce aggregate demand.Ī government budget is said to be a deficit budget if the estimated government expenditure exceeds the expected government revenue in a particular financial year. A surplus budget denotes the financial affluence of a country. This means that the government’s earnings from taxes levied are greater than the amount the government spends on public welfare. Theoretically, it’s easy to balance the estimated expenditure and anticipated revenues but when it comes to practical implementation, such balance is hard to achieve.Ī government budget is said to be a surplus budget if the expected government revenues exceed the estimated government expenditure in a particular financial year. Though an ideal approach to achieve a balanced economy and maintain fiscal discipline, a balanced budget does not ensure financial stability at times of economic depression or deflation. Advocated by many classical economists, this type of budget is based on the principle of “living within means.” They believed the government’s expenditure should not exceed their revenue. Mentioned below are brief explanations of these three types of budgets:Ī government budget is said to be a balanced budget if the estimated government expenditure is equal to expected government receipts in a particular financial year. Depending on the feasibility of these estimates, budgets are of three types - balanced budget, surplus budget and deficit budget. A government budget is an annual financial statement which outlines the estimated government expenditure and expected government receipts or revenues for the forthcoming fiscal year.
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