A brief about Budget..!!Circa, 1760, the chancellor in England
would carry the statement of government finances to the House of
Commons in a leather bag. The French word for such a leather bag is
bougette which became budget in English. Thus the Chancellor would
present the budget in house of commons.
In India, it is the finance minister who presents the Union
Budget in parliament on the last working day of February. The
fiscal year begins on April 1 and ends on March 31. The government
has to operationalize the budget from April 1. However, before that
happens, it has to get the budget approved by Parliament. The
Railway Budget is presented separately.
The speech of finance minister in parliament consists of two
parts. In part A, the minister presents the Economic Survey of
fiscal year gone by. This is the ministrys view on annual economic
development of country and it forms the backdrop for presentation
on budget for new fiscal year in part B of speech. One can
accessEconomic Survey and the Budget documents at Government of
Indias website at http://indiabudget.nic.in .
The finance minister also submits thee annual final statement
which consists of estimated reciptsan spending, which are operated
through three separate accounts: The Consolidated Fund The
Contingency Fund The Public Account
Consolidated Fund :All revenues and loans raised and recovered
from part of consolidated fund, of which no amount can be spent
without the approval of parliament.
Contingency Fund :It is an imprest that is available to
president of India to meet unforeseen expenditures, such as,
expenditure to tackle natural disasters or accidents.
Post-facto approval of such expenditure is sought from
parliament, and an equivalent amount is drawn from the consolidated
fund.
The current corpus of this Contingency fund is Rs 500 Crore.
(not sure if it is still the same)
Public Account :It holds amounts which are held by the
government in trust. These include items such as Employees
Provident Fund and Small savings.
No parliamentary approval needed for such payments, except when
the amounts are withdrawn from consolidated funds and kept in
public account for specific expenditures (for example, road
construction)
One popular and useful measure of size of an economy is called
GDP. When we express the size of economy, that tells us how big or
small government participation is in the economy.
TYPES OF EXPENDITURES AND REVENUES
Revenue Expenditure:All the expenditures incurred on the
functioning of the judiciary, maintaining law and order , routine
administration, salaries, subsidies, pension for administrative
stff and payments on past debts are classified as revenue
expenditure.
Capital Expenditures:These include asset creating expenditures
for providing public goods such as, dams, bridges & roads, and
plants & machineries built for use in Govt. sector.
Revenue Receipts:These include tax receipts and non-tax
receipts, such as, stamp duties, fees, ÷nds , if any,
from public sector undertakings.
Capital Receipts:include grants received and loans recovered by
the Govt. and occasional disinvestment proceeds earned by selling
PSUs. These are called non-debt capital receipts.Generally the
non-debt capital receipts are low, and this means that the Govt.
has to borrow to cover the deficit amount. Therefore, borrowing is
a capital receipt, albeit a debt creating capital receipt.The Govt.
has three choices for generating debt capital receipts: Borrowing
domestically from the public; borrowing from external financial
institutions; or , under extreme conditions, borrowing from Central
Bank of the country.
TYPE OF DEFICIT:
Revenue Deficit :It measure the difference between revenue
expenditure and revenue receipts. It shows that the Govt. has to
borrow money to finance administrative activities which do not lead
to the creation of any assets.
Fiscal deficit:It is the difference between Governmentstotal
expenditure and the total non-debt receipts. It shows the total
debt generated by the Govt. to finance the total budget
expenditure. Such a deficit is justified as long as the
expenditures are being incurred to finance activities leading to
the creation of National Assets.
Primary deficit:The difference between the fiscal deficit and
the interest payment on debts incurred in earlier years. The
incumbent Govt. uses this static to show that the interest payments
on previous debt are not of its making. If resultant deficit turns
out to be very small, it proves the prudent management of the
budget by incumbent Govt.
International Monetary Fund has been recommending that the
fiscal deficit should not be more than 3% of GDP.
The revenue deficit as a percentage of fiscal deficit has been
extremely high in the recent past averaging about 75% . Such a high
percentage is worrisome, for it tells us that most of the debt that
the Govt. is incurring is being used for routine administrative
expenses and will not lead to any asset creation.
When the Governments fiscal deficit is large, it implies that
the Govt. has to borrow heavily. This means that the demand for
loans will rise in the market, causing interest rates to go up. As
interest rates rise, the cost of borrowing for private firms goes
up. As the cost of borrowing rises, firms find that fewer and fewer
investment projects are economically viable. Therefore, private
firms borrow less and do not invest in new projects. The fall in
private investments naturally has an adverse impact on employment
generation and income.
Read
more:http://www.bankersadda.com/2015/02/a-brief-about-budget.html#ixzz3TDYxrbPe
