(i) "Government provides essential items like food grains almost free to the families below poverty line." Identify and explain the objective of the government budget indicated. (ii) Define the following : (1) Revenue deficit (2) Primary deficit State whether the following statements are true or false, with valid reasons : (i) High tax on higher income groups aims to achieve the 'reallocation of resources' objective of the Government. (ii) Borrowings are a revenue receipt of the government. (iii) Fiscal deficit always leads to inflation.

Question

Accepted Answer

(i) Objective of government budget:
1. Redistributing income and wealth
2. Providing social security
3. Ensuring food security
4. Poverty alleviation
5. Social welfare

Providing food grains to BPL families is revenue expenditure as it is a transfer payment for social welfare.

(ii) Definitions:
1. Fiscal Deficit: Excess of total expenditure over total receipts excluding borrowings
2. Primary Deficit: Fiscal Deficit minus Interest Payments
3. Revenue Deficit: Excess of revenue expenditure over revenue receipts

These deficits indicate the government's borrowing requirements and fiscal health.