Meaning of the Government Budget

A very important part of the economic activities in an economy is the management of

finances by the government. Raising of revenue and incurring expenditure by the
government are two major aspects of the fiscal system. The statements relating to revenue
and expenditure of the government are integrated in a document called budget.

Government in every country is required to undertake various economic, social and other
activities. It also likes to pursue various policies to achieve certain objectives like
economic development, reduction of inequalities of income and wealth, etc.
The government has to incur expenditure in performing these activities and in persuing
its policies for instance, the government has to incur expenditure in maintaining law and
order and in undertaking various developmental activities. As such, the government has
to raise the necessary revenue to finance these expenditures. It raises its revenue through
various sources like taxes and public borrowings. Accordingly the government has to
draw a financial plan corresponding to various activities it wants to undertake during the
coming year. Such a financial plan is known as the budget of the government.
Thus, the budget of the government is an annual financial statement describing in details
the estimated receipts and proposed expenditures and disbursements of the government
under various heads for the financial or fiscal year. It is a description of the fiscal
policies- taxation and public expenditures policies-of the government and the financial
plan corresponding to these policies.

While the budget gives the budget estimates for the coming financial year, it also gives
the actual financial accounts for the previous year and the revised estimates of the current
year.

Constitutional Obligation
As in other democratic countries, government budget is a constitutional obligation in
India. Under article 112 of the constitution a statement of estimated receipts and
expenditures of the central government has to be prepared for every financial/fiscal year
and has to be placed before the parliament. This annual financial statement is titled
‘Budget of the Central Government’. The budget is presented in the Lok sabha on such a
day as the president of India may direct. However by convention the budget is presented
on the last working day of February. Simultaneously, a copy of the budget is laid on the
table of Rajya Sabha. Besides giving estimates for the coming year, the presentation of
the budget offers an opportunity to the government to review its financial and economic
policies and programmes.The budget is discussed in both the houses of the parliament
and the voting on the demand for grants is taken.