Meaning and Definitions of Government Budget

The word "budget" is believed to have originated from the French word "bougette." Its literal meaning is "a small leather bag." 

It is believed that the practice of calling the statement of income and expenditure a budget started when Robert Walpole, the British Chancellor of the Exchequer, first took a document of income and expenditure in a leather bag to the parliament for approval.

A government budget refers to the statement of all income and expenditure presented by the government of any country for the upcoming fiscal year. Every year, the government collects revenue from various sources. 

The revenue collected in this way is spent by the government on administrative and development works. The budget is a document that details the expenses and income to be incurred by the government in each fiscal year. In this sense, the budget is also called the government's financial plan for the coming year.

Generally, the budget includes the actual details of the income and expenditure of the previous fiscal year, the revised estimates of the income and expenditure of the current fiscal year, and the proposed estimates of the income and expenditure of the coming year.

According to Professor Dimock (1933), "A budget is a financial plan summarizing the anticipated revenues and expenditures of the government for a specific period, usually one year."

In the words of Philip Taylor (1948), "A government budget is the master financial plan of a government, setting out its expected receipts and expenditures for a given fiscal year."

According to Rene Stourm (1917), "The budget is a document containing an estimate of government revenues and expenditures for a given period, usually one year."

According to Prof. Bastable (1892), "A public budget is a statement of the estimated receipts and expenditures of the government over a given period."

In the words of Hugh Dalton (1922), "A budget is a financial statement of the government’s proposed expenditures and expected revenues for a particular year, and the ways of financing any deficit."

Thus, a government budget is a statement of the government's estimated income and proposed expenditure for the upcoming fiscal year.

In Nepal, the fiscal year starts on the 1st of Shrawan and ends at the end of Ashadh. The term government can refer to the central, provincial, or local government.

Types of Budget (Kinds of Budget)

There are various types of government budgets. Based on the assumptions about the budget, the types of the budget can be mentioned as follows:

(a) Balanced Budget

If the estimated income and proposed expenditure of the government in the government budget are equal to each other, such a government budget is called a balanced budget. This type of budget cannot control economic fluctuations in the economy, so its importance is less in the present time.

(b) Unbalanced Budget

If the estimated income and proposed expenditure of the government in the government budget are not equal to each other, such a budget is called an unbalanced budget. This budget can be a deficit budget or a surplus budget. 

If the expenditure is shown more than the government income in the budget, such a budget is called a deficit budget. 

Similarly, if the income is shown more than the expenditure in the budget, such a budget is called a surplus budget.

It is appropriate for the government to formulate a deficit budget in times of economic recession, while it is appropriate to formulate a surplus budget to control inflation or rising price levels. In the present time, the use of an unbalanced budget is effective in controlling the fluctuations in the economy.

Components of the Budget

The government budget includes items such as the actual details of income and expenditure of the previous fiscal year, the revised estimates of income and expenditure of the current fiscal year, and the estimated details of income and expenditure of the coming fiscal year, as well as proposals for new taxes and tax rates for the coming fiscal year.

The components of the government budget include a review of economic progress, the objectives of the budget, estimates of government expenditure, revenue proposals, and sources for financing deficits. 

A brief introduction to these major components of the budget is presented below.

(a) Review of Economic Progress

Although the government presents the budget for the upcoming fiscal year, it includes a review of past expenditures and income. The budget attempts to rectify past shortcomings. This includes a review of items such as revenue collection, foreign aid, expenditure, foreign trade, balance of payments, and price levels.

(b) Objectives of the Budget

The objectives of the budget are determined based on the country's political, economic, and social conditions and available resources.

(c) Estimate of Government Expenditure

The government estimates expenditures according to its objectives and includes them in the budget. The main objective of every government is to maintain peace and security in the country and enhance the welfare of the people. The government estimates expenditures under current expenditure and capital expenditure headings. Current expenditure refers to the government's regular expenses, while capital expenditure refers to expenses incurred in the production of productive goods.

(d) Revenue Proposal

The government specifies in the budget the sources and amounts of funds to be used to cover the expenses for the upcoming fiscal year. In particular, the sources for covering government expenses can be categorized under tax revenue and non-tax revenue headings. 

Tax revenue includes direct taxes such as income tax, profit tax, and property tax, and indirect taxes such as customs duty, excise duty, and value-added tax. Non-tax revenue includes the price of goods produced and sold by public institutions, fines, royalties, foreign grants, etc.

(e) Sources for Financing Deficits

A situation where government expenditure exceeds income in the government budget is called a deficit. The budget should specify the sources and amounts to cover the deficit. Government debt is a major source of financing deficits. 

Government debt can be foreign or domestic. If this does not cover the deficit, it is covered from the state's consolidated fund or by issuing new notes.

Budget Formulation Process in Nepal (Process of Budget Formulation in Nepal)

In any country, the budget formulation process occurs in various stages. The budget may not be formulated in the same way in all countries of the world. 

The budget formulation process of any country may differ due to its governance system, type of economy, nature of parliament, fiscal year, etc. 

Generally, Nepal's budget formulation process or stages can be covered under the following headings:

1. Estimate of Income and Expenditure: