Every year, the drum of BUDGET is beaten throughout the world. A state has to plan annually about the sources of income and the income’s proper utilization on the public sector development program and as well as protection of the borders and security of the nation. The government has a responsibility to use timely, reliable, and comprehensive financial information when making decisions, which have an impact on citizens’ lives and livelihood. Strong centralized leadership is the key to solve the government’s long-standing financial management problems.
Today, the budget 2011-2012 was presented in the lower house of the parliament with the rhetoric slogans by the opposition, and finally approved by the cabinet. The phrase “friendly budget”, usually, echoes in the both houses of the parliament and outside. And, the phrase is repeated by every federal government, though the implications bring opposite and grim picture of the said promises in the budget at the end of the fiscal year. Very importantly, a budget is like a mirror for a nation in which it foresees the standard of the economy in the coming years, and ultimately that changes the living standard of the people.
Budget is a financial term which is often misunderstood by a common and a layman. A common man takes in the term BUDGET DEFICIT as a loss of the economy, and actually it does not mean that. Actually, budget indicates to a plan specifying how resources, especially time or money will be allocated or spent during a particular fiscal period. It does not mean business. In addition to it, budget deficit describes the excess of the expenditure over the revenues. Therefore, it must not be taken as a loss. Simply, we can say that a man has to spend Rs. 100 in order to meet his daily domestic requirements, but the man possesses Rs.90. So, he shorts with Rs. 10. Now, it is the test for the man that how he utilizes his resources in orders to meet the gap between expense and revenue. Similarly, a government chalks out the development programs to be initiated in the coming year and their costs.
Moreover, many developed countries like the US, the UK and Japan usually present a budget with deficit which does not reflect the economic status. Now a question arises that what are the parameters that measure the status of a stable economy. First, above 6% GDP growth, Second, Controlled inflation rate, third and the main export and import ratio, positive export ratio, undoubtedly, portrays the picture of the lucrative investment environment, finally the per capita income in response with population depicts complete scenario of an economy in a jiffy. Per capita means for each person and currently, Pakistan enjoys $2400 per year. When compared with the neighbors like Iran ($11200), India ($3400) and China ($7400), Pakistan is lagging far behind them.
It is another matter as to how much portion of the GDP is allocated for a particular department. It is up to a government’s priority whether it wants to boost defense to secure the borders or to brighten up the minds of the people with education. It must be noted that foreign aids and donations are not included in GDP growth.
As discussed earlier, a budget is mainly composed on the plans of income generation and consumption of the income. The income sources are: The important and main source is TAX which is due right of a government and on the behalf of this main source of income, the government plans development programs for the welfare of the public. The other sources are the government owned large corporations which yield profit in billions if administered effectively and efficiently. In Pakistan, the state owned companies are in woeful conditions. In result, bailout packages are given to the white elephants in order to provide some oxygen. The pak railyway, Steel Mills and PIA are the best examples of the mismanagement. The companies are being run through the public tax instead of giving profit to the people in return.
Sometimes, a budget can be like an earthquake which jolts a common man with shocks of tax increment. It is, basically, a financial policy. It brings, unquestionably, some negative effects on common citizens, but, on the other hand, it brings huge amount for the government for a particular fiscal period. Later on, the tax rate can be lowered when the money tank of the federal government is filled up with the collected tax. Additionally, it is important for the cabinet to inspire the people to welcome the tax widening by adopting austerity and other measures.
Budget and economy should not be confused and intermixed. In short, budget shows the futuristic picture of the economy and the plans to eliminate the bottlenecks in the way of development, whereas the economy presents the current scenario of the trade and commerce of a state.
