Government Finance | Economy for UPSC 2024 (Pre & Mains) PDF Download

 Page 1


 
Government 
Finance 
(Economy) 
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our YouTube channel for entire GS Course  FREE  of cost 
Also Available: Prelims Crash Course || Prelims T est Series 
Page 2


 
Government 
Finance 
(Economy) 
Visit our website www.sleepyclasses.com or  
our YouTube channel for entire GS Course  FREE  of cost 
Also Available: Prelims Crash Course || Prelims T est Series 
1. Why do we Budget? 1 .................................................................................
2. Any Constitutional Obligation? 1 ..........................................................
3. Components of a Budget 1 .......................................................................
Primarily can be divided into: 1 ..................................................................................
Or can be said to be consisting of: 1 ..........................................................................
4. Annual Financial Statement 1 .................................................................
5. Demand for Grants 2 ..................................................................................
6. Expenditure & Receipts 2 .........................................................................
Basics 2 ..............................................................................................................................
7. De?cits 2 ..........................................................................................................
Fiscal De?cit: 2 ................................................................................................................
Revenue De?cit: 3 ...........................................................................................................
Effective Revenue De?cit: 3 .........................................................................................
Primary De?cit: 3 ............................................................................................................
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T able of Contents
Page 3


 
Government 
Finance 
(Economy) 
Visit our website www.sleepyclasses.com or  
our YouTube channel for entire GS Course  FREE  of cost 
Also Available: Prelims Crash Course || Prelims T est Series 
1. Why do we Budget? 1 .................................................................................
2. Any Constitutional Obligation? 1 ..........................................................
3. Components of a Budget 1 .......................................................................
Primarily can be divided into: 1 ..................................................................................
Or can be said to be consisting of: 1 ..........................................................................
4. Annual Financial Statement 1 .................................................................
5. Demand for Grants 2 ..................................................................................
6. Expenditure & Receipts 2 .........................................................................
Basics 2 ..............................................................................................................................
7. De?cits 2 ..........................................................................................................
Fiscal De?cit: 2 ................................................................................................................
Revenue De?cit: 3 ...........................................................................................................
Effective Revenue De?cit: 3 .........................................................................................
Primary De?cit: 3 ............................................................................................................
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T able of Contents
The more common name or Simpler Name of Govt. Finance is Budgeting. 
1. Why do we Budget? 
•
Governments have certain social, political and economic responsibilities.  
• In a diverse country like India, it is extremely important for the government to allocate resources 
wisely.  
• Budgeting helps in: 
?Uplifting underprivileged sections of the society 
?Facilitating ?nancial inclusion 
?Mitigating regional disparity 
?Upgrading defence capabilities 
?Providing proper educational facilities 
• Therefore, a well-planned budget is of utmost importance for any government to ensure economic 
stability and growth.  
2. Any Constitutional Obligation? 
• Yes. 
?Article 112 – Annual Financial Statement 
?Article 113 – Demand for Grants 
?Article 110(a) – Finance Bill 
3. Components of a Budget 
Primarily can be divided into: 
•
Revenue Budget 
• Capital Budget 
Or can be said to be consisting of: 
•
Receipts 
• Expenditures 
4. Annual Financial Statement 
• The Annual Financial Statement (AFS), the document as provided under Article 112, showsthe 
receipts and expenditure of the Government of India.  
• For the coming year it shows estimated ?gures in relation to estimates for the year that is about to 
end. 
• Whereas it also shows actual expenditure for the year that was last year. 
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 1
Page 4


 
Government 
Finance 
(Economy) 
Visit our website www.sleepyclasses.com or  
our YouTube channel for entire GS Course  FREE  of cost 
Also Available: Prelims Crash Course || Prelims T est Series 
1. Why do we Budget? 1 .................................................................................
2. Any Constitutional Obligation? 1 ..........................................................
3. Components of a Budget 1 .......................................................................
Primarily can be divided into: 1 ..................................................................................
Or can be said to be consisting of: 1 ..........................................................................
4. Annual Financial Statement 1 .................................................................
5. Demand for Grants 2 ..................................................................................
6. Expenditure & Receipts 2 .........................................................................
Basics 2 ..............................................................................................................................
7. De?cits 2 ..........................................................................................................
Fiscal De?cit: 2 ................................................................................................................
Revenue De?cit: 3 ...........................................................................................................
Effective Revenue De?cit: 3 .........................................................................................
Primary De?cit: 3 ............................................................................................................
www.YouTube.com/SleepyClasses 
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T able of Contents
The more common name or Simpler Name of Govt. Finance is Budgeting. 
1. Why do we Budget? 
•
Governments have certain social, political and economic responsibilities.  
• In a diverse country like India, it is extremely important for the government to allocate resources 
wisely.  
• Budgeting helps in: 
?Uplifting underprivileged sections of the society 
?Facilitating ?nancial inclusion 
?Mitigating regional disparity 
?Upgrading defence capabilities 
?Providing proper educational facilities 
• Therefore, a well-planned budget is of utmost importance for any government to ensure economic 
stability and growth.  
2. Any Constitutional Obligation? 
• Yes. 
?Article 112 – Annual Financial Statement 
?Article 113 – Demand for Grants 
?Article 110(a) – Finance Bill 
3. Components of a Budget 
Primarily can be divided into: 
•
Revenue Budget 
• Capital Budget 
Or can be said to be consisting of: 
•
Receipts 
• Expenditures 
4. Annual Financial Statement 
• The Annual Financial Statement (AFS), the document as provided under Article 112, showsthe 
receipts and expenditure of the Government of India.  
• For the coming year it shows estimated ?gures in relation to estimates for the year that is about to 
end. 
• Whereas it also shows actual expenditure for the year that was last year. 
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 1
• In an Annual Financial Statement, the receipts and disbursements are shown under three parts in 
which Government Accounts are kept. These are: 
?The Consolidated Fund of India 
?The Contingency Fund of India  
?The Public Account of India 
• The Annual Financial Statement distinguishes the expenditure on revenue account from the 
expenditure on other accounts, as is mandated in the Constitution of India.  
• The Revenue and the Capital sections together, therefore make the Union Budget.  
•
The estimates of receipts and expenditure included in the Annual Financial Statement are for 
expenditure net of refunds and recoveries.  
• The Union Government Finance Accounts also re?ect expenditure in a similar manner. 
5. Demand for Grants 
•
Article 113: Expenditure from CFI included in AFS be voted by the Lok Sabha in the form of Demands 
for Grants. 
•
Each demand gives separately the total of: 
?Voted Expenditure 
?Charged Expenditure 
•
Also, 
?Revenue Expenditure 
?Capital Expenditure 
6. Expenditure & Receipts 
Basics 
Revenue Account 
• T ax Receipts 
•
Non-T ax Receipts 
T ax Receipts 
•
Direct T ax 
• Indirect T ax 
7. De?cits 
Fiscal De?cit: 
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Page 5


 
Government 
Finance 
(Economy) 
Visit our website www.sleepyclasses.com or  
our YouTube channel for entire GS Course  FREE  of cost 
Also Available: Prelims Crash Course || Prelims T est Series 
1. Why do we Budget? 1 .................................................................................
2. Any Constitutional Obligation? 1 ..........................................................
3. Components of a Budget 1 .......................................................................
Primarily can be divided into: 1 ..................................................................................
Or can be said to be consisting of: 1 ..........................................................................
4. Annual Financial Statement 1 .................................................................
5. Demand for Grants 2 ..................................................................................
6. Expenditure & Receipts 2 .........................................................................
Basics 2 ..............................................................................................................................
7. De?cits 2 ..........................................................................................................
Fiscal De?cit: 2 ................................................................................................................
Revenue De?cit: 3 ...........................................................................................................
Effective Revenue De?cit: 3 .........................................................................................
Primary De?cit: 3 ............................................................................................................
www.YouTube.com/SleepyClasses 
www.SleepyClasses.com 
T able of Contents
The more common name or Simpler Name of Govt. Finance is Budgeting. 
1. Why do we Budget? 
•
Governments have certain social, political and economic responsibilities.  
• In a diverse country like India, it is extremely important for the government to allocate resources 
wisely.  
• Budgeting helps in: 
?Uplifting underprivileged sections of the society 
?Facilitating ?nancial inclusion 
?Mitigating regional disparity 
?Upgrading defence capabilities 
?Providing proper educational facilities 
• Therefore, a well-planned budget is of utmost importance for any government to ensure economic 
stability and growth.  
2. Any Constitutional Obligation? 
• Yes. 
?Article 112 – Annual Financial Statement 
?Article 113 – Demand for Grants 
?Article 110(a) – Finance Bill 
3. Components of a Budget 
Primarily can be divided into: 
•
Revenue Budget 
• Capital Budget 
Or can be said to be consisting of: 
•
Receipts 
• Expenditures 
4. Annual Financial Statement 
• The Annual Financial Statement (AFS), the document as provided under Article 112, showsthe 
receipts and expenditure of the Government of India.  
• For the coming year it shows estimated ?gures in relation to estimates for the year that is about to 
end. 
• Whereas it also shows actual expenditure for the year that was last year. 
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 1
• In an Annual Financial Statement, the receipts and disbursements are shown under three parts in 
which Government Accounts are kept. These are: 
?The Consolidated Fund of India 
?The Contingency Fund of India  
?The Public Account of India 
• The Annual Financial Statement distinguishes the expenditure on revenue account from the 
expenditure on other accounts, as is mandated in the Constitution of India.  
• The Revenue and the Capital sections together, therefore make the Union Budget.  
•
The estimates of receipts and expenditure included in the Annual Financial Statement are for 
expenditure net of refunds and recoveries.  
• The Union Government Finance Accounts also re?ect expenditure in a similar manner. 
5. Demand for Grants 
•
Article 113: Expenditure from CFI included in AFS be voted by the Lok Sabha in the form of Demands 
for Grants. 
•
Each demand gives separately the total of: 
?Voted Expenditure 
?Charged Expenditure 
•
Also, 
?Revenue Expenditure 
?Capital Expenditure 
6. Expenditure & Receipts 
Basics 
Revenue Account 
• T ax Receipts 
•
Non-T ax Receipts 
T ax Receipts 
•
Direct T ax 
• Indirect T ax 
7. De?cits 
Fiscal De?cit: 
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 2
• It is the difference between the Revenue Receipts plus Non-debt Capital Receipts (NDCR) and the 
total expenditure.  
• FD is re?ective of the total borrowing requirements of Government.  
Revenue De?cit: 
•
It refers to the excess of revenue expenditure over revenue receipts. 
Effective Revenue De?cit: 
• It is the difference between Revenue De?cit and Grants for Creation of Capital Assets. 
Primary De?cit: 
• It is measured as Fiscal De?cit less interest payments. 
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