OBJECTIVES OF BUDGET

OBJECTIVES OF BUDGET

Government budget is a statement of expected receipts and expenditure of the government during a fiscal year. Main objectives of government budget are:

(A)Redistribution of income and wealth: It is one of the most important objective of the government budget. The government imposes heavy taxation on a high income groups redistribute it among the people of weaker section in the society. The government can provide subsidies and other amenities to people whose income levels are low. These increase their disposable income and this reduces the inequalities.

(B)Reallocation of Resources: Reallocation of resources in the manner such that there is a balance between the goals of profit maximization and social welfare. Government uses budgetary policy to allocate resources. This is done by imposing higher rate of taxation on goods whose production is to be discouraged and subsidies provided on goods whose production is to be promoted.

There are some goods and services in which the private sector shows little interest due to huge investment required and lower profits, like sanitation, roads, parks etc. Government can under take the production of these goods and services. Alternatively, it can encourage private sector by giving tax concession and subsidies.

(C)Economic Growth: Another purpose of the government budget today is to study the generation of savings, investment, consumption and capital formation to assess the trend of growth in the economy to improve the standard of living of the people.

(D)Managing Public Enterprises: In the budget government can make various provision to manage public sector enterprises and also provides them financial help.

(E)Economic Stability: The government of the country is always committed to save the economy from business cycles. Government budget is a tool to prevent economy from inflation or deflation and to maintain economic stability. The overall level of employment and prices in the economy depends upon the level of aggregate demand during the time of deflation, deficit budgetary policy are used to maintain stability in economy.

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