If receipts are equal to expenditure, the budget is said to balanced one.
If receipts are higher than the expenditure the budget is said to be surplus one, and
If receipts are lower then the expenditure, the budget is said to be deficit one.
The estimates included in the budget are simply estimates; the actual may not conform to the original estimates. The budget must, however, estimate revenues and expenditures as accurately as possible. Accuracy becomes essential if equilibrium established in the estimates is to be maintained to the end and realised in actual.
The Budget comprises data for three years;
a) Actual Figures for the Preceding Year;
b) Budget estimates for the Current Year;
c) Revised estimates for the Current Year, and
d) Budget estimates for the Following Year.
What is Budget Deficit and Fiscal Deficit?
Budget deficit = Total Receipt - Total Expenditure.
a) the difference between total expenditure and total revenue receipts and capital receipts but excluding borrowings and other liabilities, or
b) it is the Sum of Budget deficit plus Borrowings and other Liabilities.
Budget deficit is the difference between total receipts and total expenditure. If borrowings and other liabilities are added to budget deficit, we get Fiscal deficits. Since budget does not show the true pictures of government liabilities and hence a true picture of the financial health of the economy, the practice of showing budget deficit is not in use, Budgets now show fiscal deficits to show the overall shortfalls in the public revenues, Over the years fiscal deficits have grown rapidly and have become the cause of concern. To meet the challenge, many reforms have been carried out but still the problem of high fiscal deficit remains.
Example showing Calculation of Budget Deficit and Fiscal Deficit.
1. Revenue Receipts 3,50,200
2. Capital Receipts of which 1,63, 144
a) Loan recoveries + other receipts 12,000
b) Borrowings & Other liabilities 1,51,144
3. Total Receipts (1 +2) 5,14,344
4. Revenue Expenditure 1,14,982
5. Capital Expenditure 67,832
6. Total Expenditure (4+5) 5,14,344
7. Budgetary Deficit (3-6) NIL
8. Fiscal Deficit [1+2(a) - 6 = 7 + 2 (b)] 1,50,144
Budget Deficit: $5,14,344 Crores - $5,14,344 Crores = Nil