Modern states are welfare states and their functions have increased manifold quantitatively and qualitatively. Besides performing conventional and traditional functions that a police state used to perform, they have to perform many other functions such as providing social and economic services to the society such as education, health care and medical facilities, transport facilities, facilities of water supply and electricity supply etc.
Besides, they have to attend to various social and economic problems such as problem of eradication of poverty, unemployment and income inequalities and raising the level of economic development.
Budget is a fiscal tool in the hands of the government which is effectively used for the accomplishment of various socio-economic objectives. Budget, these days, is not merely a statement of government receipts and expenditure, but it has got a functional role to play.
In the present day scenario the role of ‘budget in the economy of the country has tremendously increased. The pattern and nature of public receipts and public expenditure are suitably designed keeping into view the situation that is to be tackled.
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Accordingly, a government has to be very particular in choosing the taxes that are to be levied and the items on which expenditure is to be incurred. This problem is very important and serious particularly for an underdeveloped country like India.
The important objectives that are sought to be achieved through a budget in an economy are discussed below:
1. Allocation of resources:
Keeping into view the socio-economic and other objectives which a government wants to achieve, resources are allocated through budget. In India, the most important activity is to accelerate the rate of economic development and for that resources are allocated on a large scale.
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2. Redistributive activities:
A developing economy like India is generally the victim of many social and economic problems which need to be solved as early as possible. The important problems are the problem of poverty, unemployment, income inequalities, illiteracy etc. In India, serious efforts are being made to solve these problems. For this the government redistributes income and wealth to reduce inequalities, by incurring expenditures on social security and giving subsidies for public work etc.
3. Economic stability:
Inflation and deflation both are not good from economic point of view, Therefore, whenever a country suffers from inflation or deflation, besides other corrective measures, appropriate budgetary steps are taken to remedy the situation.
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When a country suffers from the bout of depression, cyclical unemployment is created on a very large scale. Economic activities get depressed. In such a situation government has to adopt various fiscal measures to improve the health of the economy.
4. Management of public enterprises:
To curb monopolies in heavy, basic and key sectors owned and managed by private enterprises, government establishes and operates such units in the public sector, this is necessary to avoid distortion of priorities of the government and society.
Conclusion:
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It is not only desirable but necessary to formulate such a budget which may enable government to allocate resources in a manner so that it may take care of its social and economic objectives.