Government Budget and the Economy | Class 12 Economics Notes
By ConceptScroll Team · Published on 17 July 2026 · 2 min read
Government Budget and the Economy – this guide gives you a concise, exam-ready overview of Government Budget and the Economy from Class 12 Economics, written by ConceptScroll editors and reviewed against the latest NCERT textbook.
5.2 BALANCED, SURPLUS AND DEFICIT BUDGET
A government budget can be classified based on the relationship between its revenue receipts and expenditure:
1. Balanced Budget: When government expenditure equals revenue receipts. This means the government finances all its spending through its current revenues without borrowing.
2. Surplus Budget: When revenue receipts exceed expenditure. The government has excess funds which can be used to reduce debt or increase savings.
3. Deficit Budget: When expenditure exceeds revenue receipts. This is the most common scenario where the government needs to borrow or find other means to finance the deficit.
The deficit has several measures:
- Revenue Deficit: The excess of revenue expenditure over revenue receipts. It indicates that the government is borrowing not only for investment but also for consumption.
- Fiscal Deficit: The difference between total expenditure and total receipts excluding borrowings. It represents the total borrowing requirement of the government.
- Primary Deficit: Fiscal deficit minus interest payments. It shows the current fiscal imbalance excluding past debt interest obligations.
These deficits have important implications for economic stability, growth, and debt sustainability.
📊 Diagram: Table on page 6 (20×2) showing Central Government receipts and expenditures as percentage of GDP.
🔗 Connection: Leads to detailed discussion of fiscal policy and multipliers in Box 5.1.
Table on page 6 (20×2)
| (As per cent of GDP) | |
|---|---|
| 1. Revenue Receipts (a+b) | 9.2 |
| (a) Tax revenue (net of states' share) | 7.9 |
| (b) Non-tax revenue | 1.4 |
| 2. Revenue Expenditure of which | 11.8 |
| (a) Interest payments | 3.6 |
| (b) Major subsidies | 1.4 |
| (c) Defence expenditure | 1.0 |
| 3. Revenue Deficit (2–1) | 2.6 |
| 4. Capital Receipts (a+b+c) of which | 5.8 |
| (a) Recovery of loans | 0.1 |
| (b) Other receipts (mainly PSU¹ disinvestment) | 0.1 |
| (c) Borrowings and other liabilities | 5.6 |
| 5. Capital Expenditure | 3.2 |
| 6. Non-debt Receipts [1+4(a)+4(b)] | 9.4 |
| 7. Total Expenditure [2+5=7(a)+7(b)] | 1.5 |
| (a) Plan expenditure | – |
| (b) Non-plan expenditure | – |
| 8. Fiscal deficit [7-1-4(a)-4(b)] | 5.6 |
| 9. Primary Deficit [8-2(a)] | 2.0 |
Frequently asked questions
Which among the following is not an objective of the government budget?
Management of commercial banks
What to produce means:
both the first option and the second option
Which of the following explains the meaning of surplus budget?
Total expenditure
Which of the following is not a phase of returns to scale?
Negative returns
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- बाज़ार संतुलन | Class 12 Economics Notes
Clear NCERT-aligned notes on बाज़ार संतुलन for Class 12 Economics.
- बाज़ार संतुलन | Class 12 Economics Notes
Clear NCERT-aligned notes on बाज़ार संतुलन for Class 12 Economics.
- बाज़ार संतुलन | Class 12 Economics Notes
Clear NCERT-aligned notes on बाज़ार संतुलन for Class 12 Economics.