UNIT - 4 PUBLIC FINANCE AND BUDGET
I. Fill in the blanks with suitable answers.
1. The government manages the public finance through _____ policy. (fiscal )
2. When the government‟s revenue is more than its expendi ture, it is called ___________ budget (surplus)
3. The person who presents the Central Government Budget in the Lok Sabha is _____________. (the finance minister)
4. GST came into effect from ______________.(1st July 2017)
II. Answer the following questions in one sentence each:
1. What is the meaning of Public Finance?
Public finance deals with how a Government raises revenues to meet its expenditure
2. When does the financial year starts in India?
In India, the financial year starts from April 1 and ends on 31 March
3. What is Budget?
The statement of estimated income and expenditure of a year prepared by the government is called budget.
4.Who presents the Central budget in the Lok Sabha ?
the finance minister presents the Central budget in the Lok Sabha
5. Mention three types of Budget.
surplus, deficit and balanced budgets
6. What is surplus budget?
If the budget shows excess revenue as compared to expenditure, it is called as surplus budget.
7. What is deficit budget?
If the expenditure is more than the revenue, it is called as deficit budget.
8. What is balanced budget?
If both income and expenditure are equal, it is called as balanced budget.
9. What is Public Expenditure?
The expenditure incurred by public authorities like central, state and local governments to satisfy the collective social wants of the people is known as public expenditure
10. what is Public revenue?
Public revenue is the income mobilized by the government for purposes of financing the government‟s activities
11. What is Revenue Receipts?
The revenue generated by the government through taxes and non-tax sources is called revenue receipts.
12.What is direct taxes?
When the tax is paid by an individual on whom it is levied, it is called direct tax.
13. What is indirect taxes
If the burden of tax imposed by the government is transferable to others, it is called Indirect Tax
14. Give examples for direct taxes.
The important direct taxes are: personal income tax, corporate tax, wealth tax, stamp duty etc
15. Give examples for indirect taxes
The main forms of indirect taxes are central excise duty, value added tax (VAT), import-export taxes and service tax etc
16. When has goods and service tax (GST) been introduced?
1st July 2017
17. What is Capital Revenue?
Capital revenue refers to those receipts which either create a liability or cause a reduction in the assets of the government
18. What is internal debt?
The loan obtained from citizens of the country, banks, financial institutions and industries is called internal debt.
19. What is foreign or external debt?
The loan obtained from foreign governments, foreign financial institutions and international financial institutions is called foreign or external debt.
20. What is the fiscal deficit?
The excess of government‟s expenditure over its revenue receipts and non-debt capital receipts is the fiscal deficit
21. How Fiscal Deficit is calculated?
Fiscal deficit = (Revenue receipts + Non-debt Capital Receipts) – Total Expenditure
22. What is the Revenue deficit?
Revenue deficit is excess of total revenue expenditure of the government over its total revenue receipts
23. How Revenue Deficit is calculated?
Revenue Deficit = Revenue receipt – Revenue Expenditure
24. What is Primary deficit?
Primary deficit is defined as fiscal deficit of current year minus interest payments on previous borrowings
25. How Primary deficit is calculated?
Primary Deficit = Fiscal Deficit – Interest Payment
26. What is Budget deficit?
Budget deficit is the overall gap between revenue and expenditure during a given year
27. How Budget deficit is calculated?
Budget Deficit = Total Revenue – Total Expenditure
III. Answer the following questions:
1. Explain the reasons for increase in public expenditure.
In the 20th century the role and scope of the governments has expanded and public expenditure also increased.
Public expenditure has to create and maintain conditions conducive to economic development.
It has to improve the climate for investment.
It should provide incentives to save, invest and innovate.
It should also help in acceleration of economic growth and ensure economic stability
2. What types of taxes are imposed by the government?
Direct Taxes Direct Taxes
3. What is the per cent expenditure on interest payments in 201718 budget?
24.36%
4. Explain the aspects of non-tax revenue of the central government.
profit earned by the Reserve Bank of India;
profit generated by the Indian Railways;
revenue generated by the Departments of Post and Telecommunications;
revenue generated by the public sector industries;
revenue generated by the coins and mints;
Various types of fees and penalties; etc.
5. What is deficit? Mention the types of deficits.
Financing the budgetary deficit through loans from RBI and creation of new money is called deficit. The types of deficits are
Fiscal Deficit
Revenue deficit
Primary deficit
Budget deficit
6. Explain the Importance of Public Finance.
The government usually spends the revenue collected through taxes or the money raised through borrowings for development activities.
This increases the growth rate of the economy and benefits everyone.
Similarly, by spending more during recession and controlling expenditure during inflation, the government tries to regulate the economic activities.
Since all these are part of the annual budget prepared by the government, the study of public finance also helps in analysis and evaluation of budgets
7. What are the goals of public expenditure?
promote faster economic development.
promote industry, trade and commerce.
promote agricultural and rural development
promote balanced regional growth
build socio-economic overheads e.g., roadways, railways, dams, power etc.
promote full – employment, and
maximize social welfare.
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