Some of the important objectives of government budget are as follows:
Reallocation of Resources
Reducing inequalities in income and wealth
Economic Stability
Management of Public Enterprises
Economic Growth and
Reducing regional disparities.
Government prepares the budget for fulfilling certain objectives. These objectives are the direct outcome of government’* economic, social and political policies.
The various objectives of government budget are:
1. Reallocation of Resources :
Through the budgetary policy, Government aims to reallocate resources in accordance with the economic (profit maximisation) and social (public ***) priorities of the country.
2. Reducing inequalities in income and wealth :
Economic inequality is an inherent part of every economic system. Government aims to reduce such inequalities of income and wealth, through its budgetary policy. Government aims to influence distribution of income by imposing taxes on the rich and spending more on the *** of the poor. It will reduce income of the rich and raise standard of living of the poor, thus reducing inequalities in the distribution of income.
3. Economic Stability :
Government budget is used to prevent business fluctuations of inflation or deflation to achieve the objective of economic stability. The government aims to control the different phases of business fluctuations through its budgetary policy. Policies of surplus budget during inflation and deficit budget during deflation helps to maintain stability of prices in the economy.
4. Management of Public Enterprises :
There are large numbers of public sector industries (especially natural monopolies), which are established and managed for social *** of the public. Budget is prepared with the objective of making various provisions for managing such enterprises and providing that financial help.
5. Economic Growth :
The growth rate of a country depends on rate of saving and investment. For this purpose, budgetary policy aims to mobilise sufficient resources for investment in the public sector. Therefore, the government makes various provisions in the budget to raise overall rate of savings and investments in the economy.
6. Reducing regional disparities:
The government budget aims to reduce regional disparities through its taxation and expenditure policy for encouraging setting up of production units in economically backward regions.
