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Under Article 112 of the constitution, a statement of
estimated receipts and expenditure, called the ‘Annual
Financial Statement’, has to be placed before Parliament for
each financial year.
This Statement is the main budget document. It is an
estimate of the Government’s revenue and expenditure at the
end of a fiscal year, which runs from April 1 to March 31.
A Union Budget is the most comprehensive report of the
Government’s finances, in which revenues from all sources
and outlays to all activities are consolidated. The budget
also contains estimates of the Government’s accounts for the
next fiscal, called budgeted estimates.
The capital budget consists of capital receipts and
payments. Capital receipts are Government loans raised from
the public, Government borrowings from the Reserve Bank and
treasury bills, divestment of equity holding in public
sector enterprises, loans received from foreign Governments
and bodies, securities against small savings, State
provident funds, and special deposits.
Capital payments refer to capital expenditures on
construction of capital projects and acquisition of assets
like land, buildings machinery and equipment. It also
includes investments in shares, and loans and advances
granted by the Central Government to State Governments,
Government companies, corporations and other parties.
The revenue budget consists of revenue receipts of the
Government and its expenditure. Revenue receipts are divided
into tax and non-tax revenue. Tax revenues constitute taxes
like income tax, corporate tax, excise, customs, service and
other duties that the Government levies.
The non-tax revenue sources include interest on loans,
dividend on investments etc.
Revenue expenditure is the expenditure incurred on the
day-to-day running of the Government and its various
departments, and for services that it provides.
It also includes interest on its borrowings, subsidies and
grants given to State Governments and other parties.
This expenditure does not result in the creation of assets.
In case the difference between revenue receipts and revenue
expenditure is negative, there is a revenue deficit.
It shows the shortfall of the Government’s current receipts
over current expenditure. If the capital expenditure and
capital receipts are taken into account too, there will be a
gap between the receipts and expenditure in a year. This gap
constitutes the overall budgetary deficit, and it is covered
by issuing 91-day Treasury Bills, mostly held by the Reserve
Bank.
Revenue surplus is the excess of revenue receipts over
revenue expenditure.
This is the gap between the Government’s total spending and
the sum of its revenue receipts and non-debt capital
receipts.
It represents the total amount of borrowed funds required by
the Government to completely meet its expenditure. The gap
is bridged through additional borrowing from the Reserve
Bank of India, issuing Government securities etc. Fiscal
deficit is one of the major contributors to inflation.
The primary deficit is the fiscal deficit minus interest
payments. It tells how much of the Government’s
borrowings are going towards meeting expenses other than
interest payments.
The Government proposals for the levy of new taxes,
alterations in the present tax structure, or continuance of
the current tax structure are placed before the Parliament
in this bill. The bill contains amendments proposed to
direct and indirect taxes.
Direct taxes are levied on the incomes of individuals and
corporates. For example, income tax, corporate tax etc.
Indirect taxes are paid by consumers when they buy goods and
services. These include excise duty, customs duty etc.
Central plan outlay : It refers to the allocation of
monetary resources among the different sectors in the
economy and the ministries of the Government.
Public account : The Government acts like a banker
for transactions relating to provident funds, small savings
collection etc.
The funds that the Government thus receives from its bank
like operations are kept in the public account, from which
the related disbursements are made.
These funds do not belong to the Government and have to be
paid back to the persons and authorities who have deposited
them.
Ad-valorem duties : These are the duties determined
as a certain percentage of the price of products.
Balance of payments : Balance of payments is the
difference between the demand for, and supply of, a
country’s currency on the foreign exchange market.
Budget estimates : It is an estimate of fiscal and
revenue deficits for the year. The term is associated with
the estimates of the Centre’s spending during the financial
year and the income received through taxes.
Capital receipt : Loans raised by the Centre from the
market. Government borrowings from the Reserve Bank and
other parties, sale of Treasury Bills, and loans received
from foreign governments form a part of capital receipt.
Other items that also fall under this category include
recovery of loans granted by the Centre to State Governments
and proceeds from disinvestments of Government stake in
public sector undertakings.
Consolidated fund : Under this, the Government pools
all its funds together. It includes all Government revenues,
loans raised, and recoveries of loans granted.
All expenditure of the Government is incurred from the
consolidated fund and no amount can be withdrawn from the
fund without authorisation of the Parliament.
Contingency fund : This is a fund used for meeting
emergencies where the Government cannot wait for an
authorisation of the Parliament. The Government subsequently
obtains Parliamentary approval for the expenditure. The
amount spent from the contingency fund is returned to the
fund later.
Monetary policy : This comprises actions taken by the
central bank to regulate the level of money or liquidity in
the economy, or change the interest rates. |
