Surplus budget
Also called: Budget surplus · Topic: Government Budget, Fiscal Policy and FRBM · NCERT: Class 12, Ch 5 "Government Budget and the Economy"
Meaning
A surplus budget is one where the government's receipts, other than borrowing, are more than its expenditure. The government takes more out of the economy than it puts back, so the surplus reduces aggregate demand, meaning total spending in the economy. It is useful in a boom, when demand is too high and pushing up prices. It is rare in India, where deficit budgets are normal.
Example
Suppose a government earns ₹600 crore and spends ₹550 crore. It has a surplus of ₹50 crore, which it can use to repay old debt. Countercyclical fiscal policy means saving in booms (running surpluses) and spending in slumps.
Don't confuse with
- Revenue surplus: only revenue receipts are more than revenue expenditure. There can still be an overall fiscal deficit. The FRBM Act 2003 aimed to remove the revenue deficit and then build a revenue surplus, not an overall surplus budget.
Related concepts
- Balanced budget
- Budget deficit
- Revenue deficit
- Effective revenue deficit
- Fiscal deficit
- Primary deficit
- Net interest liabilities
- Government dissaving
- Quality of government expenditure