Question

Deficit budget promotes development and welfare activities. Give reason.

Answer 1

• A budget in which the government’s anticipated total expenditure is more than the anticipated total income is called deficit budget.
• In times of slow economic activity, the government spends more in the economy for investment and creating employment. This boosts the economy during depression and hence can lead to economic growth.
• Since the expenditures are high and incomes are low and taxes are a major source of income for the government, the government put lesser tax burden on people in proportion to the economic activity going on in the state.
• A developing economy usually spends a lot on development activities like education, social welfare, creation of public utilities, etc. However, since the economy is yet developing, the income of such nations from taxes and other sources are lower. Hence, developing nations have a deficit budget.
• On the other hand, developed nations spend quite a lot on defence, research, etc. and hence even developed countries can have a deficit budget.
• Hence, deficit budget promotes development and welfare activities.