Balanced and Unbalanced Budgets

Balanced Budgeting

A Balanced Budget is that budget in which Government receipts are equal to Government expenditure.

Merits of the Balanced Budget

• The Government does not indulge in wasteful expenditure.
• Interference in economic functioning of the system is totally avoided by the government generally.
• Financial stability is ensured with balanced budget.
• However, balanced budget is not an achievement of the government when economy is in a state of depression for at that time, government is expected to increase its expenditure with a view to increasing aggregate demand.

Demerits of a Balanced Budget

• Balanced budget does not offer any solution to the problem of unemployment during depression.
• Balanced budget is not helpful to the growth and development programmes of the less developed countries.

Unbalanced Budgeting

An unbalanced budget is that budget in which receipts and expenditure of the government are not equal. In this, two cases concerning surplus Budget and Deficit Budget arise. In Surplus Budget, Government receipts are greater than Government expenditures. While in the case of Deficit Budget, Government expenditures are greater than Government receipts.

Merits of a Deficit Budget

• It helps in addressing the problem of unemployment during depressions.
• It is conducive for growth and development in less developed countries
• It works towards social welfare of the people.

Demerits of Deficit Budget

• It shows wasteful expenditure by the government.
• It shows less revenue realization in comparison with the expenditure.
• It increases debt burden of the government.