Unbalanced Budget

Unbalanced budget is one where the government’s estimated receipts are not equal to the proposed expenditure for a given period. Unbalanced budget may be a surplus or deficit budget. When public are greater than the public expenditure, it is called surplus budget. On the other hand when public expenditure is greater than public receipts, it is called deficit budget. Both deficit and surplus budget are called unbalanced budget.

Surplus budget	Deficit budget
Govt. receipts are more than govt. expenditure It helps in reducing govt. liabilities. It checks inflationary pressure. Ineffective during war and emergency. It increases the contingency fund of the govt. The govt. seems to be more responsible in matters relating to public expenditure.	Govt. expenditure is more than govt. receipts. It increases govt. liabilities. It aggravates inflationary pressure. Effective during war and emergency. It decreases the contingency fund of the govt. 6.  The Govt. seems to be extragant and                irresponsible

Arguments for Deficit Budget

1. Deficit budget is an effective instrument to increase income and employment in the country. Hence to lift the economy from under-employment equilibrium to the level of full employment, the govt. deliberately follows a policy of deficit budget.
2. Deficit budget is a powerful instrument to cure depression. The objective can be achieved by raising the aggregate demand through deficit budget.
3. If the deficit in the budget is mild, then it may encourage production and employment through the slow rise in prices.
4. In a developing like India, labour and natural resources can be fully utilized through deficit budget.
5. Deficit budget is an effective weapon during war & emergency. Through the deliberate increase in govt. expenditure, emergent problems can be tackled.
6. Deficit. Budget is not harmful before the level of full employment. With the increase in public expenditure, output and employment also rise. Due to bottlenecks in production, there may be slow rise in prices which Keynes calls semi-inflation. Semi-inflation is not that harmful for the economy.

Arguments against Deficit Budget

1. If not controlled properly, deficit budget creates inflation which creates serious dislocation in production and distribution.
2. Continuous deficit budget has adverse effect on foreign trade. Exports decline and the exchange value of the home currency falls.
3. Deficit budget and deficit financing are closely connected. In case of India the method of financing the deficit is such that there is addition of purchasing power in the economy which creates demand inflation.
4. Deficit budget increases the unproductive and unnecessary govt. expenditure.
5. Continuous deficit budget adversely affects the flow of foreign investment into the country.