Question

Explain the ‘reallocation of resources’ objective of Government Budget.

Hint:

Reallocation of resources in the budget aims at promoting welfare through taxation, subsidies, and public investment.

Answer 1

The government reallocates resources to promote social welfare and correct market failures. By imposing taxes and providing subsidies, the government discourages the production of harmful goods (e.g., tobacco) and encourages essential goods (e.g., healthcare, education). Public investments in infrastructure, renewable energy, and welfare schemes help in equitable resource distribution and economic development.