(A) Surplus budget:
- A budget in which the government’s anticipated total expenditure is less than the anticipated total income is called deficit budget.
- Thus, Surplus Budget = Anticipated Expenditure < Anticipated Income.
- If a government’s budget is a surplus budget it means that the government is collecting more revenue from citizens through taxes as compared to the amount it is spending for the citizens.
- A surplus budget will result in lesser overall development and welfare activities. In reality most governments do not do this i.e. do not have a surplus budget.
(B) Merits of surplus budget:
- Surplus budget is useful in times of severe inflation. When the government spends less, employment, income and demand reduce. This helps in restricting inflation.
- Since the budget is surplus, there is no burden of borrowing.
- Savings of the government increase which can be used for development in future periods.
(C) Demerits of a surplus budget:
- People are made to pay more taxes to increase the income of government. On the other hand, the welfare they receive from government spending reduces.
- In case of deflation lower spending will result in lower investment, employment, income and production which may lead to depression in the economy.
- If the surplus in the budget persistently rises for several years then excess savings may lead to several problems.
