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The Big B – Understanding how the budget works


Picture this. It’s a rainy Saturday morning and your family is browsing the racks of the book store at the local mall. You are torn between the latest Percy Jackson book, the Nat Geo Kids year book and the new Angry Birds toy. You’ve got exactly Rs.400 to spend and can only buy one of these things.

After much soul searching you pick the National Geographic Kids year book, only to find that after taxes, the book costs nearly fifty rupees more than what you have. What do you do now? No point asking your mother, for her rules are clear – spend only what you have, don’t ask for more. You desperately want this book – so what do you do? Your eyes fall on your little sister, who has picked out the one thing she wants to buy, and is all set to pay for it. Luckily for you, she has extra cash left over and is willing to loan you some on one condition – that you pay her back the very next month, the entire amount of Rs.50 plus Rs.5 as interest.You can’t believe it – your own sister is charging you interest – and at the high rate of 10% per month!! But you have no choice, if you want that book on your bookshelf this month.

A few minutes later, the book is yours, but on the down-side, you have to get through the rest of the month with zero money in your pocket (no ice-creams at the canteen, sorry!) and begin the next month with Rs.55 less, since you have to re-pay your sister.

That, in one short tale, is also the story of the government and its budget. Let’s look at what we learnt from this story

Budget

Quick Facts

What’s the Budget?
The Budget is the grand plan of the government that decides how the government will earn and spend money. It earns from the people of India and spends on them too.

Why do we need a Budget?
If the government doesn’t have a plan, it may use up all its money for day-to-day expenses and miss out on the really big, important things – like building roads, schools and hospitals. Plus, by making a plan, it can make sure that it spends fairly on all parts of India.

Who is behind the Budget?
The finance minister of India is responsible for putting together the budget along with his team of officials. He presents it to the Parliament of India on the 28th of February each year. It has to be approved by the Parliament before the government can start spending the money.

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