Unit-4 Government budget and the economy| Part 3| Macroeconomics Class XII | CBSE

Part 3

Hello everyone i hope you all are doing fine and are safe at home welcome back to my channel economic zone by deeksha abuja this video will cover the last part of unit 4 government budget and the economy to watch part 1 and part 2 you can see the description box and if you really like the videos do like and subscribe the channel topic which will be covered

In this video are types of budget balanced surplus and deficit budget and second measures of government deficit that is revenue deficit fiscal deficit and primary deficit and we will also talk about whether budgetary deficit is good for the economy or not so let’s start so let’s talk about the types of budget the very first type of budget is balanced budget so

What do you mean by balance budget the picture itself is telling the both sides of the balance is equal so in budget deficit we can say that the budget is balanced when the government estimated receipts government casa receipts is equal to the estimated expenditure of the government that means neither of the receipts nor the expenditure is more so the next type

Is surplus budget surplus means when we are having more income than expenditure so you can see in the picture that the revenue or you we can say reserved is having more weightage as compared to the expenditure right so you can say that the government estimated receipts is more than estimated expenditure this situation is known as surplus budget and it is really

Like rarely possible in any of the country next we have is deficit budget so what is deficit budget when the expenditure side is more than the revenue or you can say recepts so it can be said that deficit budget means when the government estimated receipts is less than estimated expenditure or in other words you can say that estimated government expenditure is

More than estimated recepts it this might happen in all the developing economies where the government has to provide all kind of expenditures such as subsidies to the poor people in a developing country like india expenditure is always more than receipts to make the country grow so the next topic we will do is measures of government deficit there are three

Measures first is revenue deficit second is fiscal deficit and third is primary deficit so why we are starting only deficit and why we are not studying the surplus part because deficit is usually present in all the countries all the developing economies because all the developing economies have the expenditure more than their recepts thereby deficit becomes

The major topic to study so let’s start the first type of deficit is revenue deficit so let us know what do you mean by the revenue deficit revenue deficit means when the government’s estimated revenue expenditure is more than revenue receipts the formula says revenue deficit means the excess of revenue expenditure over revenue so let us know what does this

Mean and what it implies for the government revenue expenditure is more than revenue ships this is known as revenue deficit that means the government is unable to fulfill the basic expenditure reoccurring expenditure of its own for example we can say that government is unable to fulfill the basic expenditures such as subsidies payment to uh government employees

Etc and the revenue receipts the tax and non-tax receipts is unable to fulfill the revenue expenditure of a government so it is not a good condition for the government so the next type of deficit we have is fiscal deficit fiscal means related to government government’s deficit so let us know the formula and definition and then we will understand that what does

It implies fiscal deficit means the total estimated expenditure of the government minus total estimated receipts other than borings so in this formula why we are excluding borings because borings is nothing but fiscal deficit first we will calculate how much more the expenditure is as compared to receipts we get let’s say expenditure is 1 lakh and receipts are

80 000 so we are lack of 20 000 so how the government will bring this 20 000 this will be fiscal deficit so to cover this fiscal deficit then the government will borrow so this kind of capital receipt borings is a nothing but fiscal deficit of the government i hope it is clear to you so let’s do the third so the third kind of deficit is primary deficit so let

Us understand what does it mean it can be defined as the difference between fiscal deficit of the current year and interest payments so what does it imply actually primary decision will tell you the initial borings that is to be calculated by the difference between fiscal deficit and interest payments so let’s say for example fiscal deficit in this current year

Is 2 lakh and and invest payment is 20 000 so the main deficit accept and trust payment will be 2 lakh minus 20 000 that means 1 lakh 80 000 will be the primary deficit which the government has taken as actual borrowings so the question arises when the primary deficit is zero or low what does this mean is it good for the government or is it bad for the government

Let us see the formula first of all what does it imply primary deficit zero means fiscal deficit is equals to interest payments so when primary division is zero that means the fiscal deficit and interest payment are equal that means there is no borrowings left to be paid only the interest payments are left to be paid and the government is borrowing only for the

Interest payments so the government is forced to borrow only to pay the interest payment and is caring about the future generation of the economy so it can be said that a zero primary deficit is a good indicator for the government as the government is caring about the future generation so after understanding all types of budget and the measures of budgetary deficit

There’s a need to ask one question that says is budgetary deficit bad for the economy i can give you one answer for this a fiscal deficit of three to four percent is okay and can be fine in an economy and that is in the developing economy because in any developing country like india expenditure will always be greater than recepts because they need to develop the

Economy in many ways so again i repeat that three to four percent fiscal deficit is okay but if the fiscal deficit will increase a limit let’s say more than five percent then it will be trouble for the economy that is if the fiscal deficit will become more than five percent of the gdp let’s say seven percent or six percent then it will be bad for the economy so

This is it for today the chapter is over in this part three so thank you for watching keep watching the channel and subscribe it thank you

Transcribed from video
Unit-4 Government budget and the economy| Part 3| Macroeconomics Class XII | CBSE By Economics Zone by Diksha Ahuja