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BUDGETARY DEFICIT CONTROL
What is budget?
Budget is an organized plan in monetary terms
What is budgetary deficit?
A budget deficit is the amount by...
TYPES OF BUDGETARY DEFICIT?
 Cyclic budgetary deficit
 Early budgetary deficit
 Structural budgetary deficit
FINANCING A DEFICIT
 The government can borrow from
 Private sector (e.g. sale of bonds): expansionary
 Reserve Bank (‘...
WHY DO DEFICIT OCCURS?
Lack of availably of cash to cover the
expenses
Accounts payable
Delay in collection of sales
S...
CAUSES OF BUDGETARY DEFICIT
 Composition of Spending May Not Be
Appropriate
 Fixed Exchange Rate
 Economic Growth
 Dec...
LIMITATIONS OF BUDGETS AND
BUDGETARY CONTROL
 the benefit of the budget must exceed the cost
 budget information may not...
ECONOMIC EFFECTS OF A BUDGET DEFICIT
•Higher debt interest payments
•Higher Taxes and lower spending
•Increased Interest r...
GOVERNMENT DEFICIT : GOOD OR BAD
good
 If the government borrows
 to deal with a severe recession
 help self defense
 ...
BUDGET DEFICIT MAY DROP TO 4.5%
 India may be able to cut its fiscal deficit to 4.5
per cent of GDP by March 2011 due to ...
IMPLICATIONS OF HEAVILY BUDGET
DEFICIT IN INDIA
 Economic growth in impeded,
 Real incomes of the people is lower than t...
WHERE THE RUPEE COMES FROM?
12
GEN0190n.ppt
Service & other taxes
7%
Borrowings & other
liabilities
14%
Corporation tax
24...
WHERE THE RUPEE GOES?
13
GEN0190n.ppt
State plan assistance
7%
Non plan assistance to
state govt
5%
Other non plan
expendi...
BUDGET REVENUE AND SPENDING
22-
14
Revenue sources
 Direct taxation e.g.
 Personal income
tax
 Company tax
 Indirect t...
MEASURES
 Proper planning before implementing
 Additional training provided to finance staff
 More concentration on tra...
CONCLUSION
 Its difficult to eradicate deficit but by employing
proper measures it can be reduced to
considerable extent.
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Budgetary deficit control

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Transcript of "Budgetary deficit control"

  1. 1. BUDGETARY DEFICIT CONTROL
  2. 2. What is budget? Budget is an organized plan in monetary terms What is budgetary deficit? A budget deficit is the amount by which an individual, business, or government's income falls short of the expectations set forth in its budget over a given time period
  3. 3. TYPES OF BUDGETARY DEFICIT?  Cyclic budgetary deficit  Early budgetary deficit  Structural budgetary deficit
  4. 4. FINANCING A DEFICIT  The government can borrow from  Private sector (e.g. sale of bonds): expansionary  Reserve Bank (‘printing money’): money supply up  Public (sale of securities to the public): neutral  Overseas  Public sector borrowing requirement (PSBR) increases in a budget deficit situation  ‘Crowding-out’ (drain in the pool of funds available for private borrowers)
  5. 5. WHY DO DEFICIT OCCURS? Lack of availably of cash to cover the expenses Accounts payable Delay in collection of sales Sales down tum forecast
  6. 6. CAUSES OF BUDGETARY DEFICIT  Composition of Spending May Not Be Appropriate  Fixed Exchange Rate  Economic Growth  Decline in Competitiveness  Higher inflation  Recession in other countries.  Borrowing money
  7. 7. LIMITATIONS OF BUDGETS AND BUDGETARY CONTROL  the benefit of the budget must exceed the cost  budget information may not be accurate  budgets may lead to disfunctional management  budgets may be set at too low a level
  8. 8. ECONOMIC EFFECTS OF A BUDGET DEFICIT •Higher debt interest payments •Higher Taxes and lower spending •Increased Interest rates •Inflation •Increased borrowing
  9. 9. GOVERNMENT DEFICIT : GOOD OR BAD good  If the government borrows  to deal with a severe recession  help self defense  spends on public investment  (in infrastructure, education, basic research, or public health) Bad  If the deficit finances wasteful expenditure
  10. 10. BUDGET DEFICIT MAY DROP TO 4.5%  India may be able to cut its fiscal deficit to 4.5 per cent of GDP by March 2011 due to revenues from 3G auctions and robust economic growth.  3G auctions by themselves had the potential to cut the deficit by about 100 basis points by March 2011. He also said the government was "very keen" to restrict India's fiscal deficit.
  11. 11. IMPLICATIONS OF HEAVILY BUDGET DEFICIT IN INDIA  Economic growth in impeded,  Real incomes of the people is lower than their apparent incomes,  Inflation in prices of commodities makes life of common people miserable,  higher government borrowing, preventing a decline in interest rates.
  12. 12. WHERE THE RUPEE COMES FROM? 12 GEN0190n.ppt Service & other taxes 7% Borrowings & other liabilities 14% Corporation tax 24% Income tax 15% Customs 13% Excise 15% Non tax revenue 10% Non debt capital receipts 2%
  13. 13. WHERE THE RUPEE GOES? 13 GEN0190n.ppt State plan assistance 7% Non plan assistance to state govt 5% Other non plan expenditure 10% Subsidies 8% Defence 11% Interest 21% Central plan 19% States’ share of taxes/duties 19%
  14. 14. BUDGET REVENUE AND SPENDING 22- 14 Revenue sources  Direct taxation e.g.  Personal income tax  Company tax  Indirect taxation e.g.  Sales tax  Excise duties  Gains tax  Non-tax revenue e.g.  Asset sales, interest and rent Areas of spending  Social security and welfare  Payments to state governments  Defence and public order  Education  General public services  Economic affairs  Public debt interest
  15. 15. MEASURES  Proper planning before implementing  Additional training provided to finance staff  More concentration on tracking each activities to reduce corruption  Futuristic approach rather than considering only the present scenario
  16. 16. CONCLUSION  Its difficult to eradicate deficit but by employing proper measures it can be reduced to considerable extent.
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