PPT - Budget and Fiscal Deficit in India CA Foundation Notes | EduRev

Economics for CA CPT

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CA Foundation : PPT - Budget and Fiscal Deficit in India CA Foundation Notes | EduRev

 Page 1


CPT Section C General Economics Chapter 6 Unit 6 
Manish Dua 
Page 2


CPT Section C General Economics Chapter 6 Unit 6 
Manish Dua 
The Government of India, every year prepares budget, which 
shows the expected receipts and expenditures of the government 
in the coming financial year. 
Receipts of the government come from taxes (both direct and 
indirect), profits from various financial institutions, government 
commercial undertakings, interest from loans given to other 
governments, local bodies, etc. 
And expenditure of the government are on developmental projects 
such as construction of roads, railways, production of energy and 
non–developmental expenditure on a large number of activities 
such as defence subsidies, police, law and order, etc. activities.  
Page 3


CPT Section C General Economics Chapter 6 Unit 6 
Manish Dua 
The Government of India, every year prepares budget, which 
shows the expected receipts and expenditures of the government 
in the coming financial year. 
Receipts of the government come from taxes (both direct and 
indirect), profits from various financial institutions, government 
commercial undertakings, interest from loans given to other 
governments, local bodies, etc. 
And expenditure of the government are on developmental projects 
such as construction of roads, railways, production of energy and 
non–developmental expenditure on a large number of activities 
such as defence subsidies, police, law and order, etc. activities.  
If receipts are equal to expenditure, the budget is said to 
be balanced one. 
If receipts are higher than the expenditure, the budget 
is said to be surplus one  
And if receipts are lower then the expenditure, the budget 
is said to be deficit one. 
Page 4


CPT Section C General Economics Chapter 6 Unit 6 
Manish Dua 
The Government of India, every year prepares budget, which 
shows the expected receipts and expenditures of the government 
in the coming financial year. 
Receipts of the government come from taxes (both direct and 
indirect), profits from various financial institutions, government 
commercial undertakings, interest from loans given to other 
governments, local bodies, etc. 
And expenditure of the government are on developmental projects 
such as construction of roads, railways, production of energy and 
non–developmental expenditure on a large number of activities 
such as defence subsidies, police, law and order, etc. activities.  
If receipts are equal to expenditure, the budget is said to 
be balanced one. 
If receipts are higher than the expenditure, the budget 
is said to be surplus one  
And if receipts are lower then the expenditure, the budget 
is said to be deficit one. 
Budget deficit is thus the difference between total 
receipts and total expenditure. 
If borrowings and other liabilities are added to the 
budget deficit, we get fiscal deficit. 
Fiscal deficit, thus measures that part of government 
expenditure, which is financed by borrowings. 
If we subtract interest payments from Fiscal deficit then 
we will get Primary deficit. 
Page 5


CPT Section C General Economics Chapter 6 Unit 6 
Manish Dua 
The Government of India, every year prepares budget, which 
shows the expected receipts and expenditures of the government 
in the coming financial year. 
Receipts of the government come from taxes (both direct and 
indirect), profits from various financial institutions, government 
commercial undertakings, interest from loans given to other 
governments, local bodies, etc. 
And expenditure of the government are on developmental projects 
such as construction of roads, railways, production of energy and 
non–developmental expenditure on a large number of activities 
such as defence subsidies, police, law and order, etc. activities.  
If receipts are equal to expenditure, the budget is said to 
be balanced one. 
If receipts are higher than the expenditure, the budget 
is said to be surplus one  
And if receipts are lower then the expenditure, the budget 
is said to be deficit one. 
Budget deficit is thus the difference between total 
receipts and total expenditure. 
If borrowings and other liabilities are added to the 
budget deficit, we get fiscal deficit. 
Fiscal deficit, thus measures that part of government 
expenditure, which is financed by borrowings. 
If we subtract interest payments from Fiscal deficit then 
we will get Primary deficit. 
Fiscal deficit in India have grown rapidly. 
In the fifteen years period 1975-90 fiscal deficit of the Central 
Government rose alarmingly from 4.1 per cent of GDP to 7.9 % GDP. 
To restore fiscal discipline, the Fiscal Responsibility and Budget 
Management (FRBM) Bill was introduced in 2000 and FRBM Act was 
passed in 2003.  
The Act aims at reducing gross fiscal deficit by 0.5 per cent of the GDP 
in each financial year (beginning on April 1, 2000). 
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