Q. With reference to the objectives of the Government Budget in India, consider the following statements:
1.The allocation function of the budget implies the provision of public goods like national defense and pollution control, which are non-rivalrous and non-excludable in nature.
2.The redistribution function of the budget aims to ensure a fair distribution of income by altering personal disposable income through taxation and transfer payments.
Which of the statements given above is/are correct?
Answer: C
Notes:
Explanation:
- The allocation function of the government budget deals with the provision of public goods, which are non-rivalrous (consumption by one does not reduce availability for others) and non-excludable (no one can be prevented from enjoying them). Examples include national defense, public parks, roads, and pollution control. These goods are not efficiently provided by the market due to the free-rider problem, so the government intervenes.
- The redistribution function is performed by the government through its budget by collecting taxes and making transfer payments (such as subsidies, pensions, welfare schemes). This affects the personal disposable income and helps reduce inequality in income distribution, aiming for social justice and economic fairness.
Source: Indian Economy (NCERT)
