Relevance of Budget

Budget is an important tool of financial administration in addition to being the most powerful instrument of legislative controls and of executive management. Budgeting involves the largest number of policy questions in the course of making the fiscal decisions. Budget is plan of action; it reflects and manifests the programme of the government for ensuing the financial year. It is much more than a mere policy statement of revenue and expenditure of the government. It has 3 functions: control, management, and planning.

Budgeting is at the heart of administrative management. It serves as a powerful tool of coordination and acts as device to eliminate the duplication and wastage. It is done by justification of estimates, supervision of the use of appropriated funds, and regulating the expenditures. It indicates or should indicate cost-consciousness which is permeated to all levels of administration including the operating levels. It presents the opportunity for evaluating the activities and discontinuing the under-performing and the non-needy. Here it acts as pre-auditor. It thus streamlines the administration and goes hand in hand with the programme planning.

Tool of legislative control

Budget is most important tool of legislative control over the public purse. It enables the legislatures to control the executive. It signifies that no tax can be collected without the prior authorization and no expenditure can be incurred without its prior approval. The control comes out in the shape of some principles which between themselves reflect parliamentary aspirations to keep the executive under control. Some of these principles include – detailing the specification, prior authorization, periodicity which means appropriation authorized for a definite period of time, clarity, comprehensiveness and accuracy.

Economic and social implications

It is an instrument of economic and social policies. By imposing the heavy taxation on the consumption articles it improves the investment sentiments and thus promotes economic growth hence jobs. On the other side such heavy imposition hurts the daily needs of the middle and poor class. Similarly by taxing the rich it try to bring equality in the society. The social sector fund including allocation to many social sector schemes includes children, women, old aged, marginalized and the backward class. The budget attempts to improve their conditions. Tax regime if structured and simplified would better help attract the investment and hence better infrastructure, industries and thus growth.

In sum, budget is above all a political document; it provides a glimpse of the entire philosophy of the government. For an economist- it is a device of influencing the country’s economy; the politician employ it for defending or criticizing the government programme; the administrator uses it as framework for communication and coordination as well as for exercising administrative discipline throughout the administrative structure.

Video from our Channel

Random Articles


  • vinit bhutyani

    please provide me a full article on INDIA AND ITS FOREIGN RELATIONS….. I need this article as it is a very important descriptive topic for my exam of NIC AO…. please provide it