Budget & Fiscal Deficits Video Lecture | Business Economics for CA Foundation

now first and foremost who makes the
budget of a country the government of
India makes the budget I'm sure you must
all be aware of the glamour these days
that is associated with budget come the
end of MA and come the month of March by
the end of March the Finance Minister
gives a budget for the financial year
for the coming financial year which is
starts from 1st April suppose 2015 to
31st March 2016 so the budget is
declared for a financial year and but it
talks about your estimated receipts from
where we are going to get money and
where we are going to spend it so budget
talks about estimated or expected
receipts and expected expenditures of
the government it is prepared by the
Ministry of Finance for a particular
financial year budget is not given for a
calendar year starting from January and
ending in December it is given for a
financial year starting from April and
ending in March budget talks about
expected receipts and expected
expenditure so one thing that is clear
is that it is not that whatever the way
it has been projected it will come out
as that it may come out as a surplus
because expected receipts may fall down
their expectations or the expected
expenditure may go up more than expected
so they can be a surplus budget or a
deficit budget now what do we mean by a
surplus budget we have a surplus budget
when our receipts are more than an
expenditure but generally in our country
we face a problem of budget deficit that
is our receipts are less and our
expenditures are more now what do we
mean by the term budget deficit budget
deficit
this when our total expenditure is more
than our total receipts then we have a
budget deficit or expenditure is more
than the receipt
the total expenditure both capital and
revenue is more than the total received
capital and revenue receipt both when we
talk about receipt we take into
consideration both the capital and the
revenue receipts revenue receipts are
the revenue that are generated through
direct taxes indirect taxes license fees
registration fees all different types of
fines aids grants and capital receipts
we mean borrowings and recovery of all
loans we have taken this into
consideration while we are talking about
budget deficit so budget deficit is not
giving us a true picture of the economy
why because in that portion the earnings
we have included the borrowings also how
can borrowings be earnings it is a
liability which you have to repay in
future so we should not include those
borrowings so physical deficit is
calculated then out of the total
expenditure and total receipts we do not
include the boring part of the capital
receipts we take into consideration
total expenditure both capital and
revenue but we take into the total
receipts when we talk off we talk of
revenue receipts and we talk about the
loans that have been repaid but we do
not take into consideration the boards
so the physical deficit gives us a more
comprehensive measure of the deficit
like the government pays for the
shortfall that it faces for its lesser
income and more expenditure it can also
be calculated if from the budget in the
budget deficit you had the borrowings
and other liabilities if you add them to
budget
then also you can calculate the physical
deficit so there are two ways in which
you can arrive at the physical deficit
if in budget deficits you add the
borrowings you arrive at the physical
deficit or while calculating budget
deficit of you do not consider the
borrowing portion then you can arrive at
the physical deficit now the physical
policy the government Follette
formulates the physical policy through
its public debt public expenditure and
Taxation it is the policy that is
formulated by the government to
influence the economy so physical policy
is also very important you are often
asked a question that who formally is
the physical policy so we need to
remember that physical policy is
formulated by the government and
monetary policy is formulated by the
central bank of a country in our case
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