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. TYPES OF BUDGETARY DEFICIT?
Cyclic budgetary deficit
Early budgetary deficit
Structural budgetary deficit
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. 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. 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. 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. ECONOMIC EFFECTS OF A BUDGET DEFICIT
•Higher debt interest payments
•Higher Taxes and lower spending
•Increased Interest rates
•Inflation
•Increased borrowing
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. 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. 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. 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. 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. 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. 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. CONCLUSION
Its difficult to eradicate deficit but by employing
proper measures it can be reduced to
considerable extent.