All questions of Public Finance in India for BPSC (Bihar) Exam

Revenue deficit is the difference between revenue expenditure and revenue receipts.... why it's incorrect?

Deficit Budget vs Surplus Budget:

Deficit Budget:
- A deficit budget refers to a situation where the government's proposed expenditures for a particular year exceed its receipts or revenues.
- In other words, the government plans to spend more money than it expects to collect in the form of taxes, fees, and other sources of revenue.
- This results in a budget deficit, which is the amount by which the government's expenditures exceed its receipts.
- A deficit budget implies that the government will need to borrow money or use other means to finance its spending.

Surplus Budget:
- On the other hand, a surplus budget occurs when the government's proposed expenditures are lower than its receipts.
- In this case, the government plans to spend less money than it expects to collect in revenues.
- As a result, there is a budget surplus, which is the amount by which the government's receipts exceed its expenditures.
- A surplus budget allows the government to either save the excess funds or use them to pay off existing debts.

Correct Statements:
- Statement 1: When the budgetary proposals of a government for a particular year propose higher expenditures than the receipts, it is known as a deficit budget. This statement is correct as it accurately defines a deficit budget.
- Statement 2: If the budget proposes lesser expenditures than the receipts, then it is a surplus budget. This statement is also correct as it accurately defines a surplus budget.

Conclusion:
- Both statements 1 and 2 are correct, as they correctly describe the concepts of deficit and surplus budgets. A deficit budget occurs when expenditures exceed receipts, while a surplus budget occurs when expenditures are lower than receipts.

Explanation:

The given statements are as follows:

1. All expenditures of productive nature consumptive kind are developmental.
2. Expenditures which do not involve any production are non-developmental.

Let's analyze each statement individually:

Statement 1: All expenditures of productive nature consumptive kind are developmental.

This statement implies that any expenditure that involves production and consumption is considered to be developmental. In other words, if the expenditure is directed towards creating or enhancing productive capacity, and it also involves the consumption of goods or services, then it is considered to be developmental.

For example, if a government invests in building infrastructure such as roads, bridges, schools, hospitals, etc., and also utilizes goods and services in the process of construction, then this expenditure can be categorized as developmental because it contributes to the long-term growth and development of the economy.

Statement 2: Expenditures which do not involve any production are non-developmental.

This statement suggests that any expenditure that does not involve any production is considered to be non-developmental. In other words, if the expenditure is merely for consumption purposes without any productive outcome, then it is not considered to contribute to development.

For example, if a government spends a significant amount of money on luxury items, entertainment, or other non-productive activities without any tangible benefits in terms of economic growth or development, then this expenditure can be categorized as non-developmental.

Conclusion:

Based on the analysis of the given statements, we can conclude that both statements are correct. Expenditures that involve both production and consumption are considered to be developmental, while expenditures that do not involve any production are considered to be non-developmental.

The revenue expenditure of the government refers to the expenses incurred by the government in its day-to-day operations and the provision of public goods and services. It does not result in the creation of assets or reduction in liabilities. Let us analyze the given options to identify the revenue expenditure of the government:

1. Ayushman Bharat Yojana: Ayushman Bharat Yojana is a flagship health insurance scheme launched by the Government of India. Under this scheme, eligible individuals are provided with health insurance coverage for hospitalization expenses. The government bears the cost of the insurance premium, making it a revenue expenditure. Therefore, option 1 is correct.

2. Purchasing of S-400 defence system from Russia: The purchase of the S-400 defence system from Russia involves the acquisition of a capital asset, which is a long-term investment for the government. It is a capital expenditure rather than a revenue expenditure. Therefore, option 2 is incorrect.

3. Building Railway Infrastructure: Building railway infrastructure involves the construction of railways, tracks, stations, and other related infrastructure. This is a capital expenditure as it leads to the creation of a long-term asset for the government. Therefore, option 3 is incorrect.

Based on the above analysis, the correct option is A: 1 and 2 Only. The Ayushman Bharat Yojana involves revenue expenditure as the government incurs expenses in providing health insurance coverage. However, the purchase of the S-400 defence system and building railway infrastructure are capital expenditures as they involve the acquisition of long-term assets.

In conclusion, revenue expenditure refers to the day-to-day expenses of the government, and the Ayushman Bharat Yojana falls under this category. On the other hand, purchasing the S-400 defence system and building railway infrastructure are capital expenditures as they involve the acquisition of long-term assets.

The idea of zero-base budgeting (ZBB) first came to the privately owned organisation of the USA by the 1960s.

Fiscal policy is also defined as changes in government expenditures and taxes that are designed to achieve macroeconomic policy goals (such as growth, employment, investment, etc.).