Explain how government budget can be used to influence distribution of income?

Government budget is that policy of government, which is related to taxation and subsidies. The government uses these fiscal instruments to improve the distribution of income and wealth in the economy. Government imposes high rates of tax on the richer sections of society. This will bring down disposable income of the rich. The amount collected in form of tax is used to provide social infrastructure in the form of schools and hospitals for the underprivileged sections of society.

The government can also ask the richer sections of society to give up their share of subsidies, voluntarily. The scheme ‘Pehal’ launched by the government is a step in this direction in which the financially able people of the society are requested to give up their LPG subsidy.