Budget 2020: Finance Minister Nirmala Sitharaman is all set to present the Union Budget today. All eyes are on the minister and expectations are high from this year’s Union Budget. While the Union Budget is in focus today – did you know that there are different types of budgets?
Budget is a financial plan that takes into account estimated revenue and expenses over a certain period of time, often a year. It is re-evaluated periodically. There are three kinds of budget — balanced budget, surplus budget or a deficit budget.
Here’s what they mean:
1. Balanced budget: A balanced budget is when the estimated expenditure to be incurred by the government is equal to the estimated revenues. Many economists believe that the government’s expenditure should not exceed their revenue. While it is considered to be the ideal kind of budget by economists, attaining it is a tricky affair. Additionally, a balanced budget does not ensure economic stability during times of depression or deflation. Moreover, this kind of budget restricts the government from spending on public welfare and is not the best option for developing nations.
2. Surplus budget: When the expected government revenues exceed the estimated government expenditure, then that budget is called a surplus budget. This kind of a budget is a pointer to the wealth of a country. A surplus budget basically means that the government revenues including taxes are higher than the amount it spends on public welfare.
3. Deficit budget: If the estimated expenditure exceeds the expected government revenue, then it is said to be a deficit budget. The government incurs most of the excessive expenditure to improve employment resulting in a boost in demand. The government expends through public borrowings or from its reserve surplus. This kind of budget, where the government spends more than it receives is helpful for developing nations. However, this kind of budget could also lead to excessive expenditures by the government or can lead to accumulation of debts.