Direction (: Read the given passage carefully and answer the questions that follow. Certain words are printed in bold to help you locate them while answering some of these.

The first and most important step to effective financial planning is developing and implementing a budget. That, of course, sounds easy and even simplistic. But it’s more difficult than it seems. Budgeting simply means to live within one’s financial means. You have a limited amount of money to spend each month, so you need to separate your needs from your wants. Your “needs” usually include housing, utilities, food and clothing, medical facilities the things you can’t live without. Once your needs are taken care of, any remaining money can go to unnecessary wants those items that are nice to have, but not required to live. They usually include things like cable TV, Internet service, restaurant meals, cell phones with many features, etc. You need to be careful not to confuse wants and needs. A very common reason people get into serious debt is by failing to live within their means. They use credit to supplement their wants, but eventually this will cause financial trouble. Like our family budget, the nation’s General Budget has two major parts: Revenue and Expenditure. Assessing the revenues from different central taxes is the primary function of the Department of Revenue and the expenditure estimates for the current and the next year for various expenditure heads are assessed by the Department of Expenditure. The Department of Expenditure also assesses the resources of the public-sector undertakings (PSUs). The Budget division is a part of the Department of Economic Affairs. The Finance Secretary coordinates the overall Budget-making process. All of them keep the finance minister informed and seek directions from time to time. The Chief Economic Advisor aids the concerned departmental officer in this process. Leaving aside the tax receipts, the other sources of the revenue which go into the Budget are the dividends paid by the PSUs on the government shareholdings, including the interim dividends and the capital receipts on account of the divestment of the government share holdings. Besides external receipts on account borrowing from international agencies like World Bank, ADB, etc, are also estimated and included in the assessment of the gross budgetary resources of various programmes under various ministries. For the expenditure side, various ministries providing initial estimates of plan and non-plan expenditures. The ministries discuss the plan expenditures with the Planning Commission. The Planning commission allocates resources for continuing plan programme. After the estimation of income and expenditure of the government the concept revenue deficit is brought into focus to discuss as it cause of major concern to the Government of India. Revenue deficit indicates the excess of expenditure over receipts in the revenue budget of the government. Revenue deficit means the government is not able to finance its day to day expenses or what we call the current expenditure out of its normal revenue sources like taxes. In India, the central government’s budget had a surplus until 1977. But in 1978 budget, revenue deficit appeared for the first time. Since then there is revenue deficit in all years and the government is borrowing to finance the revenue deficit. Borrowing this year to finance revenue deficit will create interest payments in future (which is revenue expenditure). Increasing borrowing – interest payments – revenue deficit- borrowing explains the vicious circle of debt for the government. In this way, interest payment became the largest

expenditure item for the government A high revenue deficit gives a warning signal to the government to either curtail its expenditure or increase its revenue. The government missing its fiscal deficit target for the year means that either the revenue it collected fell short of projections, or that its expenditure was higher than planned. On the other hand, it can be said that the revenue deficit can be controlled by government by reducing its expenditure and by increasing it receipts from the various sources of tax. Data for the first eight months of 2017-18 show that the government’s revenue deficit has widened at an alarming pace. Revenue deficit is the gap between the government’s revenue expenditure and revenue receipts. While revenue expenditure increased in April-November 2017 by over 13 per cent over the same period of 2016, the government’s revenue receipts increased by less than 2 per cent.