Sources of revenue and expenditure of Government of India

The Government of India had stated in the budget of 2017-18 that the total income of the government was Rs.21,46,735 cr. while fiscal deficit amounted to Rs. 5,46,532. Government of India receives maximum revenue from Borrowing and other Liabilities (19% of total revenue) while the share of states in taxes and fees (24% of the total expenditure)is the largest item of expenditure.

As we all know that India is a democratic country and the main aim of the government here is to increase the welfare of the people not the profit of the government. To increase the welfare of the people the Government of India has to start welfare oriented schemes. Welfare oriented schemes are not guaranteed by the good return to the Government. This is the sole reason behind the increasing fiscal deficit of the Government.

The Government has set up a target to keep fiscal deficit at 3.2% of G.D.P. in the budget of 2017-18, whereas in the financial year 2018-19 it has been targeted to reduce to 3% of the G.D.P. In this article, we mentioned the facts that how Government of India earns and spends money.

The sources of income (budget 2017-18) of the government are as follows: (in terms of paisa)

1. Borrowing and other Liabilities   ........ 19 paisa

2. Corporate Tax (Company Tax)   ......... 19 paisa

3. Income Tax                                  ....... 16 paisa

4. Union Excise Duties                    ........ 14 paisa

5. Service Tax and Other Taxes        ....... 10 paisa

6. Non-Tax Revenue                       ........ 10 paisa

7. Custom Duties                            ....... 9 paisa

8. Non-Debt Capital Receipts           ...... 3 paisa

Note: Here it is to be noted that "borrowings and other liabilities" have been shown as government's income whereas this is a kind of liabilities on the government of India which has to be repaid by the government with interest after some years. In the above list we can see that the net income of the government is 81 paisa whereas income received from borrowing and other liabilities is 19 paisa.

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The sources of expenditure (budget 2017-18) of the government are as follows: (in terms of paisa)

1. The share of states in taxes and fees     ... 24 paisa

2. Interest payment                                     ... 18 paisa

3. Other expenses                                         ... 13 paisa

4. Expenditure on centralized schemes        ... 11 paisa

5. Subsidies                                                  ... 10 paisa

6. Centrally sponsored schemes                   ... 10 paisa

7. Defence expenditure                                  ... 9 paisa

8. Finance Commission and other transfers ... 5 paisa

Note: "Expenditure on Centralized Schemes" is that Expenditure which is fully funded by the central government whereas in the case of “Centrally Sponsored Schemes”, the State government also provides financial assistance (which may be shared on the basis of 50:50 or 60:40).

So from the above figures is can be concluded that the government has two main items of  expenditure & revenue respectively, “financial assistance given to the state government “on the basis of recommendations of the Finance Commission and “Loan” taken by the central government.

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