What is Budget? According to Beaulin,

Budget is a statement of estimated receipts and expensesduring a fixed period; it is a comparative table giving theamounts to be realized and the expenses to be incurred; it isfurthermore an allocation given by the proper authority toincur the expenses and collect the revenues.

Government budget is a document containing approvedplan of public revenue and expenditure.

It is estimate of inflows and outflows of governmentduring a year.

For example, budget presented on 28th February, 2015 isan estimate of inflows and outflows of funds for theperiod beginning from 1st April 2015 to 31st March 2016.

Objectives of Government Budget To promote economic development To check misuse of funds To mobilize revenue Redistribution of Income and Wealth Economic Stability Promoting Balanced Regional Development Promoting Employment, Removing poverty, and reducing

inequality

Developing infrastructure

Components of Budget Budget Receipts

Estimated monetary receipts of the government from allsources during the fiscal year.

(1) Revenue Receipts (C:\Users\user\Desktop\Receipts2014-15.pdf)

The receipts which do not create any liability and do not causeany reduction in assets for the government.

(2) Capital receipts The receipts which create liability and can cause reduction in

assets of the government.

Budget at a Glance (In crore of Rupees)Budget heads 2011-2012 2012-2013 2013-

2014Actual

EstimatesBudget

EstimatesBudget

Estimates1. Revenue Receipts (2+3) 751437 935685 1056331

2. Tax Revenue 629765 771071 8840783. Non-Tax Revenue 121672 164614 172252

4. Capital Receipts (5+6+7) 552928 555241 6089675. Recoveries of Loans 18850 11650 106546. Other Receipts 18088 30000 558147. Borrowings and other liabilities 515990 513590 542499

8. Budget Receipts (1+4) 1304365 1490925 1665297

Revenue receipts Tax receipts

Income tax, Corporate tax, Wealth tax, VAT, Service tax, etc. Non-tax receipts

Interest and dividend receipts of the government, Issue of passport and visa fees, registration of companies,

patents and license fees, import license, transport permit fee,

Receipts from services provided by Central Ministries and Departments like supply of central police force to various agencies,

Royalty from off-shore oil fields

REVENUE RECEIPTS 2011-12 AE 2012-13 BE 2012-13 RE 2013-14 BE1 Tax Revenue 889176 1077612 1038037 1235870

Corporation Tax 322816 373227 358874 419520Taxes on Income 170343 195786 206095 247639Wealth Tax 788 1244 866 950Customs 149328 186694 164853 187308Union Excise Duties 145608 194350 171996 197554Service Tax 97509 124000 132697 180141Taxes on Union Territories 2785 2310 2656 2758

2 Non-Tax Revenue 121672 164614 129713 172252Interest receipts 20252 19231 16595 17764Dividend and Profits 50608 50153 55443 73866External Grants 2962 2887 2762 1456Other Non Tax Revenue 46835 91207 53790 78000Receipts of Union Territories 1015 1136 1123 1166

Corporation Tax35%

Taxes on Income

20%Wealth Tax

0.26%

Customs16%

Union Excise Duties16%

Service Tax13%

Taxes on UT0.08%

Tax revenue (2012-13)Interest receipts

13%

Dividend and

Profits43%

External Grants

2%

Other Non Tax Revenue

41%

Receipts of UT1%

Non-tax revenue (2012-13)

Capital receipts C:\Users\user\Desktop\Receipts 2014-15.pdf

Recovery of loans Borrowings and other liabilities Other receipts like disinvestments

Recoveries of Loans

3%

Borrowings and other liabilities

93%

Other Receipts

4%

Capital receipts

Budget ExpenditureC:\Users\user\Desktop\Expenditure 2014-15.pdf

Revenue Expenditure Old-age pensions, salaries of government

employees, scholarships, etc.

Capital Expenditure Equity shares of domestic or MNCs purchased by

government, repayment of loans, etc.

Plan vs. Non-Plan Expenditure

Plan expenditure Expenditure incurred by the government to fulfill its planned

developmental programmes. Example expenditure onagriculture, power, communication, industry, health,education, etc.

Non-plan expenditure Expenses on defence, subsidies, grants, aids, etc.

Developmental vs. Non-developmental expenditure Developmental expenditure relates to expenditure on

education, health, infrastructure, agriculture,transport, canals, rural development, energy, etc.

Non-developmental expenses includes expenditure ondefense, administration, pensions, interest loans,subsidies, etc.

Budget at a Glance (In crore of Rupees) contd.2011-12

AE2012-13

BE2012-13

RE2013-14

BE9. Non-Plan Expenditure 891990 969900 1001638 1109975

10. On Revenue Account 812049 865596 919699 99290811. Interest Payments 273150 319759 316674 37068412. On Capital Account 79941 104304 81939 117067

13. Plan Expenditure 412375 521025 429187 55532214. On Revenue Account 333737 420513 343373 44326015. On Capital Account 78639 100512 85814 112062

16. Total Expenditure (9+13) 1304365 1490925 1430825 166529717. Revenue Expenditure (10+14) 1145785 1286109 1263072 143616918. Grants for creation of Capital Assets 132582 164672 124275 174656

19. Capital Expenditure (12+15) 158580 204816 167753 229129

Total expenditure= Revenue expenditure + Capital expenditure= Plan expenditure + Non-plan expenditure= Development expenditure + Non-development expenditure

Budgetary deficits Budgetary deficit refers to a situation when budget

expenditure of the government is in excess of budgetreceipts.

Budget deficit= Total budget expenditure- Total Budgetreceipts Budget expenditure> Budget receipts (Deficit Budget) Budget expenditure< Budget receipts (Surplus Budget) Budget expenditure= Budget receipts (Balanced Budget)

Budgetary deficits Revenue deficit=Revenue Expenditure- Revenue Receipts Fiscal deficit= Total Budget Expenditure (Revenue

receipts + Recovery of loans + Other receipts) or Fiscal deficit= Borrowings and other liabilities

Primary deficit= Fiscal deficit- Interest payments

Budget at a Glance (In crore of Rupees) contd.2011-12

AE2012-13

BE2012-13

RE2013-14

BE20. Revenue Deficit (17-1) 394348 350424 391245 379838

(4.4) (3.4) (3.9) (3.3)21. Effective Revenue Deficit (20-18) 261766 185752 266970 205182

(2.9) (1.8) (2.7) (1.8)22. Fiscal Deficit {16-(1+5+6)} 515990 513590 520925 542499

(5.7) (5.1) (5.2) (4.8)23. Primary Deficit (22-11) 242840 193831 204251 171814

(2.7) (1.9) (2.0) (1.5)

Fiscal Responsibility and Budget Management FRBM Act

Notified in July 2004 with the following salient features: Annual targets of reduction in deficits, government borrowing and

debt Government to annually reduce the revenue deficit by 0.5 per cent

and the fiscal deficit by 0.3 per cent beginning fiscal 2004-05. Elimination of revenue deficit and reduction of fiscal deficit to 3%

of GDP by March 31, 2008. Due to GFC, the deadline to reducethe fiscal deficit to 3% has been extended for 2009

A cap on the level of guarantees and total liabilities of thegovernment

On a quarterly basis, that Government shall place before both theHouses of Parliament an assessment of trends in receipts andexpenditure,

Under exceptional circumstances, Government may be compelledto fall short of the targets.

Amended FRBM Act 2012 In 2011, given the process of ongoing

recovery, Economic Advisory Council publiclyadvised the Government of India to reconsiderreinstating the provisions of the FRBMA.

Government notified the new FRBM Rules in July, 2013 following FRBM (Amended) Act, 2012 as passed by the Parliament in the budget session.

Objective is to reduce fiscal deficit to 3.6% by 2015-16 and 3% by 2016-17.