a) “Fiscal deficit is necessarily inflationary in nature”. Do you agree? Support your

answer for valid reasons.

b) Elaborate ‘Economic Growth’ as an objective of the government budget.

The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It indicates the total borrowings needed by the government.

When the money that the Government had borrowed was used to increase production, then the inflation could be avoided.

Example: When borrowed money is used to build an irrigation system for farmers, then this would boost the agricultural production and would meet the demand for economy and henceforth control inflation.

But when government is spending money on unproductive programmes which do not increase economic productivity, then that paves the way for inflation.

Example: any scheme launched by the government but due to corruption or middlemen the programmes of the schemes are not implemented well and not reached to the beneficiaries. This would impact the economy and raises inflation.

b)

A government budget is an annual financial statement showing item wise estimates of expected revenue and anticipated expenditure during a fiscal year.

Objectives of the budget are:

1. Economic growth

2. Reduction of poverty and unemployment.

3. Reduction of inequalities.

4. Reallocation of resources

5. Economic stability

6. Management of public enterprises.

Economic Growth is one of the primary aims of the budget.

It is focused on promoting rapid and balanced economic growth so as to improve the living standard of the people.Economic growth means a sustained increase in the volume of goods and services.