Government Budget and Deficits — Part 1: The Budget and its Components: visual lesson, ISC Class 12 Economics

Lesson

The Budget and its Components

Part 1 — what a budget is, the Union and State budgets, and the four heads every item falls under.

In this lesson you will

Explain the meaning of a government budget and distinguish the Union budget from State budgets
Classify budgets as balanced, surplus or deficit
Classify receipts and expenditure as revenue or capital, using the liability and asset tests

Part 1 at a glance

Concept

What is a government budget?

A government budget is the annual statement of estimated receipts and expenditure of a government for the coming financial year (1 April to 31 March).

Table of features of a government budget: it is annual, it shows estimates, it needs the approval of the legislature, and it shows how any gap will be financed
Feature	What it means
Annual	Covers one financial year, 1 April to 31 March
Estimates	Figures are forecasts made before the year begins
Approved by the legislature	No tax collected or money spent without approval
Shows the gap	States how any shortfall will be financed

Compare

Union and State budgets

Union budget

Prepared by the Union government
Presented in Parliament
Covers defence, railways and other Union subjects

State budget

Prepared by each State government
Presented in the State legislature
Covers police, State roads and other State subjects

Table comparing the Union budget and a State budget: who prepares it, where it is presented, its constitutional name and the subjects it covers
	Union budget	State budget
Prepared by	Union government	Each State government
Presented in	Parliament	State legislature
Constitution calls it	Annual financial statement (Article 112)	Annual financial statement (Article 202)
Covers	Union subjects such as defence and railways	State subjects such as police and State roads

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