Budgetary policy refers to government attempts to run a budget in equilibrium or in surplus. The aim is to reduce the public debt. It is not the same as a fiscal policy, which deals with the fiscal stimulus to the economy, the repartition of taxes and the generosity of allowances.

Budgetary policy refers to au policy of receipts and payments which is made by the government of the country for achieving the twin objectives stability with Growth....

Budgetary Policy

Budgetary policy refers to the government's use of fiscal measures to influence the economy's overall performance. It involves the decisions and actions taken by the government regarding its revenue and expenditure to achieve specific economic objectives. The budgetary policy aims to promote economic growth, stabilize prices, reduce unemployment, and maintain a stable macroeconomic environment.

Components of Budgetary Policy

Budgetary policy encompasses two main components:

1. Revenue Policy: This involves the government's decisions regarding the collection of revenue through taxation and other sources. The revenue policy determines the level and structure of taxes, such as income tax, corporate tax, sales tax, excise duties, and customs duties. It also includes non-tax revenue sources like fees, fines, and dividends. The government uses revenue policy to generate funds for public expenditure and promote economic growth.

2. Expenditure Policy: This refers to the government's decisions regarding the allocation of funds for various sectors and programs. It includes both current expenditure (e.g., salaries, subsidies, pensions) and capital expenditure (e.g., infrastructure development, public investments). Expenditure policy is crucial in determining the government's priorities and addressing societal needs. It plays a significant role in influencing economic activity and promoting equitable development.

Objectives of Budgetary Policy

The budgetary policy aims to achieve several objectives, including:

1. Economic Growth: The government utilizes budgetary policy to stimulate economic growth by increasing public investment, providing incentives for private sector expansion, and promoting entrepreneurial activities. It allocates funds to productive sectors, such as infrastructure, education, healthcare, and research and development, to enhance economic productivity and competitiveness.

2. Price Stability: Budgetary policy helps maintain price stability by controlling inflation and deflation. The government can adjust taxes and spending to manage aggregate demand in the economy, thereby influencing prices. For instance, during periods of high inflation, the government may reduce expenditure or increase taxes to curtail excessive demand and stabilize prices.

3. Employment: Budgetary policy plays a crucial role in reducing unemployment by creating job opportunities through public investment and expenditure. The government can allocate funds to labor-intensive sectors, implement employment generation schemes, and provide subsidies to businesses to encourage employment growth.

4. Income Distribution: Budgetary policy also aims to promote income redistribution and reduce income disparities. The government can achieve this by implementing progressive taxation, providing social welfare programs, and allocating resources to sectors that benefit marginalized communities.

Implementation of Budgetary Policy

The implementation of budgetary policy involves the following steps:

1. Budget Formulation: The government prepares a budget proposal that outlines its revenue and expenditure plans for the upcoming fiscal year. This process involves consultations with various stakeholders, assessment of economic conditions, and consideration of policy priorities.

2. Budget Approval: The budget proposal is presented to the parliament or legislative body for approval. It undergoes scrutiny, debate, and amendments before final approval.

3. Budget Execution: After approval, the government implements the budget by collecting revenue, making expenditures, and monitoring its implementation. Government agencies and departments are responsible for executing the budget within the allocated limits.

4. Budget Evaluation: Periodic evaluation of the budget's impact is