4. What does government spend on?
The government spends on securing and providing goods and services to citizens. It spends on law and order, internal security and defence, staff salaries, subsidies and all other expenses relating to governance.
5. Does the government earn as much as it spends?
Not necessarily. In India, the government has mostly spent more than what it earned. Therefore, it often has had a deficit in its Budget— the ‘fiscal deficit’. In 2008-09, the fiscal deficit rose sharply to Rs. 3,31,000 crore as expenditure surged on the back of pay revision for its employees, waiver of loans for farmers and stimuli to revive the economy.
6. How is this ‘fiscal deficit’ bridged?
Just as when you fall short of money and borrow from friends, relatives and banks, so does the government except that it’s a lot easier for the government to borrow. In today’s context, a large part of the deficit is met through market-borrowing programmes, which involves selling interest earning government securities to banks and other financial institutions.
Individuals can also buy such securities. The government also borrows from multilateral agencies like the World Bank and foreign governments. It also taps the money you deposit in your provident fund and small savings schemes, like Kisan Vikas Patra.
7. Is the Budget just a statement of accounts?
No The Budget is a two-part document. In the first part, the finance minister often outlines the government’s economic policies, future course and expectations about the broader economy. The second part is a statement of accounts, which includes changes in taxes, fees, allocation of resources.
8. Why should you care?
Any chance in income-tax policies affects the money you carry home every month. Changes in indirect taxes affect the price you pay for goods and services. Government spending affects the quality of your life.
For example, government spending on public transport and roads can make your daily commutation easier and quicker. Finally, the policies it adopts affect economic growth, which, in turn, affects your job prospects and the economic environment.