This document defines key terminology related to the Indian union budget. It explains that a budget is a plan for government spending and revenues that includes estimates for the current and following years. It defines budgetary estimates, revised estimates, and different types of deficits including budget deficit, revenue deficit, and fiscal deficit. It provides details on how each deficit is calculated and explains concepts like GDP, current account deficit, and fiscal consolidation.

1. Union Budget - Terminologies

2. Overview Introduction Budgetary Estimates Revised Estimates Budget Deficit Revenue Deficit Fiscal Deficit Current Account Deficit Fiscal Consolidation GDP growth vis-à-vis Credit Growth Questions

3. What is Budget? Is a list of all planned expenses and revenues. Is a plan of savings & spending. It is derived from French ‘bougote’ meaning purse. First General Budget was announced on November 26, 1947. Budget comprises data for three years Actual figures for the preceding year. Budget Estimates for the current year. Revised Estimates for the current year. Budget estimates for the following year

4. Budgetary Estimates Used for cost estimates at an early stage. When there is some limited information and or some info is not available. It is like an initial estimation to begin with.

5. Revised Estimates It is a change in the estimate of the budget, when the budget period is in force. Subject to both exogenous and endogenous factors. Includes information not available at the time of Budgetary Estimate. Subject to scrutiny and potential alteration.

6. Budget Deficit Difference between public spending (expenditure) and revenues(receipts). For a particular year, it is the total of fiscal deficit for the year plus the past debt accumulated. Debt is an accumulation of yearly deficits. It is the net sum of all past deficit/surplus if any over the years

7. Budget Deficit Government Expenditure Consumption exp Revenue Exp Interest Payments Total Govt Expenditure Transfer Payments Capital Exp Exp on Infrastructure

8. Budget Deficit Government Receipts Tax Revenues Rev Receipts Non Tax revenues Total Govt Receipts Recovery of loans Capital Receipts Pub Sec Disinvestments

9. Revenue Deficit What is revenue? Tax Revenue Non Tax Revenue What is Revenue Deficit? What is Revenue Surplus? What is Revenue Expenditure? Effective Revenue Deficit .

10. Revenue Deficit

11. Fiscal Deficit It is an economic phenomenon, where the Governments total expenditure surpasses the revenue generated. It is the difference between the Government’s total receipts excluding the borrowings and total expenditure, i.e. Total Gov. Exp – Revenue Receipts + Non Debt Capital Receipts. Revenue Receipts includes Tax Revenue receipts Non Tax Revenue receipts Non Debt Capital Receipt includes Disinvestment Dividends from PSEs.

12. Fiscal Deficit

13. Current Account Deficit Current Account is of two parts – Trade Account & Invisible Account. Trade Account – Balance from Import and Exports of Merchandise only. Invisible Account – Consists of 3 components – Services, Investment Income, Transfer Payments.

14. Current Account Deficit It is the difference between the components of the Current Account in exports and imports, where imports are more than exports. The Country becomes a debtor to other countries. More money is paid out, than what is being brought into the country.

15. Current Account Deficit

16. Current Account Deficit Ways to reduce Current Account Deficit Increase exports – Subsidise exports, incentives to exporters Decrease imports – Import restrictions, quotas or duties Devaluation of Currency Promoting investor friendly environment Adjusting Government spending to favour domestic suppliers

17. Current Account Deficit

18. Fiscal Consolidation A conscious policy of the Government to live within its means. It is a long term process, a road map and is not a single budget announcement. Efforts to raise revenues. Bring down wasteful expenditure. Fiscal Responsibility and Budget Management Act 2003 (FRBM Act) Target for states to eliminate revenue deficits and fiscal deficit 3% of State GDP for 2014-15, as per 13th Finance Commission. Public Debt Management Agency Bill to be introduced.

19. GDP GDP – Gross Domestic Product, refers to the market value of final goods and services produced in an economy in a given period of time. GDP measurement methods Expenditure method Production method Income method All should give the same results. It mainly depend upon on the Risk Apatite for Investment.

20. GDP vs GNP GDP Total value of products & Services produced within the territorial boundary of a country. GDP = consumption + investment + (government spending) + (exports − imports) GNP Total value of Goods and Services produced by all nationals of a country (whether within or outside the country). GNP = GDP + NFIA(Net Factor Income From Abroad)

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