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Budget Basics - 1Budget includes
Previous Financial Year Economic Review Assessment of Budget – Targets vs. Actuals
Next Financial Year Economic Forecast Revenue and Expenditure Targets Components of Revenue and Expenditure
Budget Basics - 2Constitutional provisions
Article 112 Budget is mandatory
Article 265 No Tax shall be levied or collected except by authority of law
Article 266 Consolidated Fund of India Consolidated fund of the State
Article 267 Contingency Fund – President of India
Budget Basics - 3Annual Financial Statement
Under Article 112 of the Constitution, a statement of estimated receipts and expenditure of the Government of India has to be laid before Parliament in respect of every financial year which runs from 1st April to 31st March
This statement is the AFS and is the main budget document
Comprises of Consolidated Fund Contingency Fund Public Account
Upper HouseVote on AccountAppropriation Bill – Article 114Finance Bill – Article 110
Some Important Terms
Public Account Finance Bill Revenue Budget
Revenue receipt Revenue Expenditure
Capital Budget Capital receipts Capital Expenditure
Deficit Revenue Revenue Expenditure – Revenue Receipt Fiscal Total Expenditure – Total Receipts (excluding borrowings) Primary Fiscal Deficit – Interest payments
Fiscal Policy – Taxation & Govt. spending Monetary Policy – Interest Rates & Money Supply Debt Trap
State of the Economy - OverviewGDP growth of 9.5, 9.7, 9.2 and 6.7% in the last 4 years
GDP growth projected – 7.2% (2009-10) GDP is estimated at 6164178 Crores ~ $1285 Bn
The drivers of growth Services and Manufacturing Estd. To grow at 8.7% & 8.2 % resp.
Growth rate in agriculture for 2007-08 is estimated at -0.2%
Food grain production in 2008-09, estimated at 233.9 million tonnes
Sugarcane - 249.48 million tonnes -9% Cotton - 23.65 million bales
State of the Economy - OverviewSavings Rate – 32.5% of GDPCapital Formation Rate – 34.9% of GDP
22.8 and 23.5% respectively in 2001 Inflation
2008-09 – 8.4% - Jan2011 – 8.23% Average of Apr-Dec 2009 – 1.6% Corr. CPI Inflation numbers are 9.1% and 11.4%
Exports – -20.3% Imports – -23.6%Forex Reserves – 283.5Bn (298Bn)FDI - $21.0 BnFiscal Deficit – 6.5% (5.9% last year)Revenue Deficit – 4.6% (5.9% last year)Primary Deficit – 2.8% (2.5% last year)
Estimated at 6.8, 4.8 and 3.0% at the time of presentation of 2009-10 budgetFRBM?
FM targets for this budgetReduction in Fiscal Deficit
4.8% in 2011-12 and 4.1% in 2012-13
Reduction in Inflation Tame food prices
Target double digit growth Growth currently in the 8-9% band Expected to fall to 7-8% if high inflation persists
Infrastructure to be the key Roads, Ports, Airports, Railways Infrastructure Debt Fund
Companies BillGSTDTC
If you were to be the FM
Inflation Challenge is to curb inflation without restricting growth Food Grains
Supply side incentives Farm subsidies - Fertilisers Import Duty Cuts Infrastructure – Stocking Food-grains
Fuel SubsidyFiscal Deficit
Govt. Spending Tax Revenue
Search for new avenues – Gold; Auto; FMCG
Disinvestment
Info on BudgetComplete Budget
http://indiabudget.nic.in/es2009-10/esmain.htm
State of the Economyhttp://indiabudget.nic.in/es2009-10/chapt2010/chapter01.pdf
Where the Rupee comes fromhttp://
business.rediff.com/report/2010/feb/26/budget-2010-where-the-re-will-come-where-the-re-will-go.htm
FRBM (Fiscal Responsibility and Budget Management) ActPurpose
Impose limits on Fiscal & Revenue deficit Elimination of Revenue Deficit by 2009 Reduce this by 0.5% every year
Reduction of Fiscal Deficit to 3% of GDP by 2009 Reduce this by 0.3% every year
Curb borrowing from RBI
Review Interim Budget - 2009-10 Fiscal Deficit – 5.5% ; Revenue Deficit – 4.4% FD- 381408 Cr – Public Debt- 28,98,798Cr – Debt- 42% of GDP Return to FRBM postponed to post recovery years
Fodder for Thought US – Gramm-Rudman-Hollings EU – Growth & Stability Pact
Important Links
http://www.rediff.com/money/2004/jan/31bud.htm (old one but has all the relevant info)
http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/78937.pdf http://www.business-standard.com/india/news/review-frbm-act-centre-states-told/
347282/ http://www.deccanchronicle.com/neutral/fiscal-deficits-rise,-it’s-time-scrap-frbm-act-
066 http://www.hinduonnet.com/fline/fl2116/stories/20040813004711700.htm (Excellent
critique of the FRBM Act) http://specials.rediff.com/money/2009/feb/10slide1-what-is-a-vote-on-account.htm http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=23199 (India’s
external Debt)
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