### Class-notes prepared and uploaded by-Dr Adidur Rahman Dept. of Pol. Science, HAAC h For 4th sem. (Honours), paper-4026, Public Policy &Administration in India

# TOPIC: Significance of Budget: Budget as tool of Socio-Economic Policy

The budget is central to administration. The scope and nature of the entire governmental operation is determined by the allocation of appropriations to the various big programmes such as education, communication, defence etc. In this way, budget today has become one of the primary tools of financial as well as developmental administration. Budget is considered not only a primary tool of financial administration but also a master financial plan of the government. It has now become a very powerful instrument of social and economic policy. It plays a vital role in the economy of a state. The primary objectives of policies and plans in the budget are the rapid economic growth and social justice. General objectives of a Government budget impacts the society at three levels-

- a. promotes aggregate fiscal discipline through controlled expenditure, given the quantum of a. promotes aggregate fiscal discipline through controlled expenditure, given the quantum of revenues;
- b. of the country are allocated on the basis of social priorities, and b. of the country are allocated on the basis of social priorities, and
- c. contains effective and efficient programmes for delivery of goods and services to achieve its c. contains effective and efficient programmes for delivery of goods and services to achieve its targets and goals.

The following points would obviously reveal that the budget has become an instrument of social and economic policy:

- 1. Economic growth:
- i. of the prime objectives of budget is to promote rapid and balanced economic growth so i. of the prime objectives of budget is to promote rapid and balanced economic growth so as to improve living standard of the people.
- ii. growth implies a sustained increase in real GDP of the economy, i.e., a sustained ii. growth implies a sustained increase in real GDP of the economy, i.e., a sustained increase in volume of goods and services. People's welfare is the main guide of such economic growth and budget is used as a means for promotion of welfare objectives.
- 2. Economic stability:
- i. budget is used to prevent business fluctuations of inflation or deflation to i. budget is used to prevent business fluctuations of inflation or deflation to achieve the objective of economic stability.
- ii. Government aims to control the different phases of business fluctuations through its ii. Government aims to control the different phases of business fluctuations through its budgetary policy.
- iii. of surplus budget during inflation and deficit budget during deflation helps to iii. of surplus budget during inflation and deficit budget during deflation helps to maintain economic stability.
- 3. 3. Price control
- i. budget can bring prices level under control through taxes, subsidies and i. budget can bring prices level under control through taxes, subsidies and expenditure.
- ii. there is inflation as there is rise in prices, government can reduce its expenditure. ii. there is inflation as there is rise in prices, government can reduce its expenditure.
- iii. when there is depression, Government can reduce or cut taxes and grant subsidies iii. when there is depression, Government can reduce or cut taxes and grant subsidies to control prices.
- 4. Savings and investment:
- i. growth rate of a country depends on rate of saving and investment. For this purpose, i. growth rate of a country depends on rate of saving and investment. For this purpose, budgetary policy aims to mobilize sufficient resources for investment in the public sector.
- ii. policies of a Government endeavor to mobilize enough resources for investments ii. policies of a Government endeavor to mobilize enough resources for investments in the public sector.
- iii. Government makes various provisions in the budget to raise overall rate of savings and iii. Government makes various provisions in the budget to raise overall rate of savings and investments in the economy.