Budget 2012 - Talk by Amal Dhru

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Amal Dhru, an expert on finance and outcome budgeting

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Budget 2012 - Talk by Amal Dhru

  1. 1. Amal Dhru F. C. A., M. B. A.(IIMA) Gujarat Vishvakosh Trust 22 nd February, 2012 How to READ a Budget? Andajpatra nee AantiGhunti
  2. 2. The Simple(?) Expectations
  3. 3. <ul><li>Aren’t we bored of Budgets? </li></ul><ul><li>Why it has lost its credibility ? </li></ul><ul><li>What best can we expect from it? </li></ul><ul><li>What is its real impact ? </li></ul><ul><li>Is it an opportunity ? For whom? </li></ul><ul><li>How to exploit it? Who will exploit it? How? </li></ul><ul><li>Before all that lets look at its format & content </li></ul>
  4. 4.       In Crore fo Rupees   2009-2010 2010-2011 2010-2011 2011-2012   Actual Budget Estimates Revised Estimates Budget Estimates 1.    Revenue Receipts 572811 682212 783833 789892 2.    Tax Revenue 456536 534094 563685 664457       (net to Centre)         3.    Non-tax Revenue 116275 148118 220148 125435 4.    Capital Receipts (5+6+7) 451676 426537 432743 467837 5.    Recoveries of   Loans 8613 5129 9001 15020 6.    Other Receipts 24581 40000 22744 40000 7.    Borrowings and other                Liabilities 418482 381408 400998 412817 8.    Total Receipts  (1+4) 1024487 1108749 1216576 1257729 9.    Non-plan Expenditure 721096 735657 821552 816182 10.   On Revenue Account  of which, 57925 643599 726749 733558 11.   Interest  Payments 213093 248664 240757 267986 12.   On Capital Account 63171 92058 94803 82624 13.   Plan Expenditure 303391 373092 395024 441547 14.   On Revenue Account 253884 315125 326928 363604 15.   On Capital Account 49507 57967 68096 77943 16.   Total Expenditure (9+13) 1024487 1108749 1216576 1257729
  5. 5. GDP for BE 2011-2012 has been projected at Rs. 8980860 crore assuming 14% growth over the advance estimate of 2010-2011 (Rs. 7877947 crore) released by CSO. 17.   Revenue Expenditure (10+14) 911809 958724 1053677 1097162 18.   On which, Grant for creation of Capital Assets   31317 90792 146853 19.   Capital Expenditure (12+15) 112678 150025 162899 160567 20.   Revenue Deficit (17-1) 338998 276512 269844 307270   (5.2) (4.0) (3.4) (3.4) 21.   Effective Revenue Deficit (17-18)   245195 179052 160417     (3.5) (2.3) (1.8) 22.   Fiscal Deficit {16-(1+5+6)} 418482 381408 400998 412817   (6.4) (5.5) (5.1) (4.6) 23.  Primary Deficit (20-11) 205389 132744 160241 144831   (3.1) (1.9) (2.0) (1.6)
  6. 6. Some Terminologies <ul><li>Revenue Budget </li></ul><ul><ul><li>- Revenue Receipt - Revenue Payment </li></ul></ul><ul><li>Capital Budget </li></ul><ul><ul><li>- Capital Receipt - Capital Payment </li></ul></ul><ul><li>Expenditure </li></ul><ul><ul><li>- Plan - Non Plan </li></ul></ul>
  7. 7. Key Indicators <ul><li>Revenue Deficit </li></ul>- Revenue Expenditure less: Revenue Receipts <ul><li>Fiscal Deficit </li></ul>- Total Expenditure less: (Revenue Receipt + Loan Recovery + Other Receipts) <ul><li>Primary Deficit </li></ul>- Fiscal Deficit less: Interest Payments Looking at the numbers, it is obvious that we don’t have enough money to spend, on so many pressing priorities
  8. 8. The huge spending power that we give through a budget <ul><li>Union Budget gives, to the Govt. a spending power of Rs.12 lakh crores in a year, i.e. Rs.10,000 per head from each citizen </li></ul><ul><li>A State budget gives, to the Govt. another Rs.10,000 per year per citizen of spending power. </li></ul><ul><li>A Local body, in a city, takes yet another Rs.10,000 per head of spending power. </li></ul><ul><li>These proposals are passed by our Representatives in a manner which is best known to all. </li></ul>
  9. 9. Need to focus also on Expenses <ul><li>We are giving huge spending power </li></ul><ul><li>Almost Rs. 12,00,000 Crore at Union Level another Rs.50,000 Crore at State Level and another Rs. 5000 Crore at Local Body Levels </li></ul><ul><li>Please Focus More on the Expenses that are being budgeted </li></ul><ul><li>On Tax issues, People and Press are more vocal </li></ul><ul><li>But it is all the more important to understand, in details, as to how efficiently and effectively the government intends to spend </li></ul><ul><li>It is the media that needs to take a note of this </li></ul><ul><li>A lot of Research is required to present Huge Data already available and present it in a simple manner. </li></ul>
  10. 10. Special Place for Budget in India <ul><li>Various Announcements are </li></ul><ul><li>made in speech!! </li></ul><ul><li>Key Policy issues are laid down </li></ul><ul><li>Direction of Monetary Policy Spelt Out </li></ul><ul><li>Various Schemes are Announced </li></ul><ul><li>Economic Review discussed </li></ul><ul><li>Its Effect on the Share Prices, investment outlook and so on is well known. </li></ul>
  11. 11. The Internal Pressures <ul><li>Growth v/s Equal distribution </li></ul><ul><li>Fiscal discipline </li></ul><ul><li>Good economics makes bad politics & vice a versa </li></ul><ul><li>Games F. M’s play </li></ul><ul><ul><li>Over Estimation of Revenue </li></ul></ul><ul><ul><li>Bold statements with promises to perform </li></ul></ul><ul><ul><li>Half conceived proposals </li></ul></ul><ul><ul><li>Sugar coated speech with unpopular Amendments hidden in the fine line </li></ul></ul><ul><ul><li>Convenient Assumptions on </li></ul></ul><ul><ul><li>Collection Efficiency of Revenue </li></ul></ul><ul><ul><li>Actual Growth In Economy </li></ul></ul><ul><ul><li>Money Supply and Financial Stability </li></ul></ul><ul><ul><li>Economic Environment viz. Global & Domestic </li></ul></ul><ul><ul><li>Overall Stability And Security </li></ul></ul>
  12. 12. We need a budget that has an IMPACT <ul><li>Budget is beyond & much much beyond mere tax proposals </li></ul><ul><li>We need to Concentrate, Debate & Act towards performance/outcome budgeting </li></ul><ul><li>Current system concentrates on expenditure rather than outcome </li></ul><ul><li>Increased expenditure may not necessarily mean improved performance, in fact the same output in lesser expenditure can point to higher efficiency </li></ul><ul><li>No indicators to gauge whether the output of activities and programs lead to concrete outcomes for achieving the objectives </li></ul><ul><li>Value of each rupee being spent is not fully realized in such a mechanism </li></ul><ul><li>Key performance Indicators, should be identified and announced </li></ul>
  13. 13. SWOT of the Indian Economy <ul><li>Strength </li></ul><ul><li>Democracy </li></ul><ul><li>Independence of </li></ul><ul><li>Election Commission </li></ul><ul><li>Apex judiciary / Legal set-up </li></ul><ul><li>Restrained Defense Forces </li></ul><ul><li>Peace Loving, God Fearing, Law abiding people </li></ul><ul><li>Huge And Ambitious Middle Class </li></ul><ul><li>Robust Civil Society & cultural heritage </li></ul><ul><li>Young Population </li></ul><ul><li>IT – English </li></ul><ul><li>Weakness </li></ul><ul><li>Corruption / Vested Interest </li></ul><ul><li>Inactive fatalist population </li></ul><ul><li>Lack of Confident Leadership </li></ul><ul><li>Bad Implementation/ Management </li></ul><ul><li>Poor Education ( job oriented) </li></ul><ul><li>Indecisive & inactive Governance </li></ul><ul><li>Lack of Innovation </li></ul><ul><li>Poor Infrastructure and Distribution Setup </li></ul><ul><li>Rising Political and Social Conflicts </li></ul><ul><li>Coalition Governance </li></ul><ul><li>Opportunity </li></ul><ul><li>Untapped Resources </li></ul><ul><li>Weak US & Europe </li></ul><ul><li>Positive World Attitude </li></ul><ul><li>Huge Customer Base </li></ul><ul><li>Powerful Image </li></ul><ul><li>Huge Growth Potential </li></ul><ul><li>Threat </li></ul><ul><li>Inequality </li></ul><ul><li>Growing Impatience, Unemployed Youth </li></ul><ul><li>Corruption /Vested Interest </li></ul><ul><li>Wrong Priorities & lack of vision from Politicians </li></ul><ul><li>Fast Erosion of Moral Value </li></ul><ul><li>Bad relation with neighbors </li></ul><ul><li>Internal Law and Order / Terrorism </li></ul><ul><li>Population Growth </li></ul>
  14. 14. SWOT Analysis for a Budget <ul><li>Strength </li></ul><ul><li>Annual Basis </li></ul><ul><li>Highly Respected and accepted, still </li></ul><ul><li>Openness to improve </li></ul><ul><li>Awareness about Corruption </li></ul><ul><li>Weakness </li></ul><ul><li>Non Imaginative / Monotonous </li></ul><ul><li>Lack of a firm Resolve/ Goal/ ambition </li></ul><ul><li>Outcomes Forgotten </li></ul><ul><li>Corruption </li></ul><ul><li>Inflation </li></ul><ul><li>Poor Implementation </li></ul><ul><li>Opportunity </li></ul><ul><li>Change the Momentum </li></ul><ul><li>Take a firm step </li></ul><ul><li>Election Year !! </li></ul><ul><li>Threat </li></ul><ul><li>Election Year !! </li></ul><ul><li>Growing Impatience </li></ul><ul><li>Corruption/ Vested Interests </li></ul><ul><li>Lack Of Appreciating International Responsibility </li></ul>
  15. 15. <ul><li>Eliminate / Dilute Weaknesses through Strength </li></ul><ul><li>Convert Threats into Opportunities </li></ul><ul><li>Exploit Opportunities through Strengths to achieve Results </li></ul>Strengths Weakness Opportunities Threats
  16. 16. Need for Awareness / A Bottom Up Approach <ul><li>Outcome </li></ul><ul><ul><li>Reducing Disparity </li></ul></ul><ul><ul><li>Increase in Per Capita Income </li></ul></ul><ul><li>Planned Outputs ( Activities) </li></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li>Banking Reach </li></ul></ul><ul><ul><li>Rural Push </li></ul></ul><ul><ul><li>Urban Poverty </li></ul></ul><ul><ul><li>Health </li></ul></ul><ul><ul><li>Infrastructure </li></ul></ul><ul><ul><li>Power </li></ul></ul><ul><ul><li>Agriculture </li></ul></ul><ul><ul><li>Banking Sector </li></ul></ul><ul><li>Inputs </li></ul><ul><ul><li>Expenses </li></ul></ul><ul><ul><li>Effective Implementation </li></ul></ul><ul><ul><li>NOW , PLAN THE REVENUES WITHIN FISCAL DISCIPLINE </li></ul></ul>
  17. 17. A Typical Outcome Budget Approach Education Sector <ul><li>Objective – Increasing the spread of education so that maximum number of people can read and write </li></ul><ul><li>Program – Primary School development </li></ul><ul><li>Outlay – Rs.100 crore </li></ul><ul><li>Output – Opening up of 20,000 new schools; 2,000 training for teachers and staff; 5,000 orientation and awareness drives for parents </li></ul><ul><li>Outcome – Increase in literacy level from 52% to 58% (primary education) </li></ul><ul><li>Key Performance Indicator – Number of children enrolled in primary school </li></ul>
  18. 18. Suggestions <ul><li>Decentralize and Monitor </li></ul><ul><li>Review of Scheme. Provide at least 10% of expense for this </li></ul><ul><li>Quarterly Review of Budget Outcomes </li></ul><ul><li>Concentrate on </li></ul><ul><ul><li>R & D </li></ul></ul><ul><ul><li>Education-Job oriented </li></ul></ul><ul><ul><li>Health Care </li></ul></ul><ul><ul><li>Small and Medium Industries </li></ul></ul><ul><ul><li>Agro industry </li></ul></ul><ul><ul><li>Law & Order </li></ul></ul><ul><li>Administrative Reforms </li></ul>
  19. 19. Suggestions <ul><li>Provide strong leadership </li></ul><ul><li>Keep International Focus – Globalization </li></ul><ul><li>Expedite Reforms </li></ul><ul><li>Install effective MIS and Control System </li></ul><ul><li>Educate Masses and Political Leaders </li></ul><ul><li>Control corruption with effective and timely controls and punishments , with confidence </li></ul><ul><li>No Raid Raj or License Raj, again, please. </li></ul><ul><li>Speed up action & no backlog in approvals/ decisions </li></ul><ul><li>Put up a big mission statement, have clearly spelt out Goals </li></ul><ul><li>Budget & Act accordingly </li></ul>
  20. 20. Amal Datt & Associates E-mail Id: - [email_address] , [email_address] This presentation is also available on www. financefundas.com, www.amaldatt.com Copyrights: Amal Dhru Thank You!

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