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Budget terminologies1

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Simple terminlogy used in union budget

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Budget terminologies1

  1. 1. Union Budget - Terminologies<br />
  2. 2. Overview<br />Introduction <br />Budgetary Estimates<br />Revised Estimates<br />Budget Deficit<br />Revenue Deficit<br />Fiscal Deficit<br />Current Account Deficit<br />Fiscal Consolidation<br />GDP growth vis-à-vis Credit Growth<br />Questions<br />
  3. 3. What is Budget?<br />Is a list of all planned expenses and revenues.<br />Is a plan of savings & spending.<br />It is derived from French ‘bougote’ meaning purse.<br />First General Budget was announced on November 26, 1947.<br />Budget comprises data for three years<br />Actual figures for the preceding year.<br />Budget Estimates for the current year.<br />Revised Estimates for the current year.<br />Budget estimates for the following year<br />
  4. 4. Budgetary Estimates<br />Used for cost estimates at an early stage.<br />When there is some limited information and or some info is not available.<br />It is like an initial estimation to begin with.<br />
  5. 5. Revised Estimates<br />It is a change in the estimate of the budget, when the budget period is in force.<br />Subject to both exogenous and endogenous factors.<br />Includes information not available at the time of Budgetary Estimate.<br />Subject to scrutiny and potential alteration.<br />
  6. 6. Budget Deficit<br />Difference between public spending (expenditure) and revenues(receipts).<br />For a particular year, it is the total of fiscal deficit for the year plus the past debt accumulated.<br />Debt is an accumulation of yearly deficits.<br />It is the net sum of all past deficit/surplus if any over the years<br />
  7. 7. Budget Deficit<br />Government Expenditure<br />Consumption exp<br />Revenue Exp<br />Interest Payments<br />Total Govt Expenditure <br />Transfer Payments<br />Capital Exp<br />Exp on Infrastructure<br />
  8. 8. Budget Deficit<br />Government Receipts<br />Tax Revenues<br />Rev Receipts<br />Non Tax revenues<br />Total Govt Receipts<br />Recovery of loans<br />Capital Receipts<br />Pub Sec Disinvestments<br />
  9. 9. Revenue Deficit<br />What is revenue?<br />Tax Revenue<br />Non Tax Revenue<br />What is Revenue Deficit?<br />What is Revenue Surplus?<br />What is Revenue Expenditure?<br />Effective Revenue Deficit .<br />
  10. 10. Revenue Deficit<br />
  11. 11. Fiscal Deficit<br />It is an economic phenomenon, where the Governments total expenditure surpasses the revenue generated.<br />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.<br />Revenue Receipts includes<br />Tax Revenue receipts<br />Non Tax Revenue receipts <br />Non Debt Capital Receipt includes<br />Disinvestment<br />Dividends from PSEs.<br />
  12. 12. Fiscal Deficit<br />
  13. 13. Current Account Deficit<br />Current Account is of two parts – Trade Account & Invisible Account.<br />Trade Account – Balance from Import and Exports of Merchandise only.<br />Invisible Account – Consists of 3 components – Services, Investment Income, Transfer Payments.<br />
  14. 14. Current Account Deficit<br />It is the difference between the components of the Current Account in exports and imports, where imports are more than exports.<br />The Country becomes a debtor to other countries.<br />More money is paid out, than what is being brought into the country.<br />
  15. 15. Current Account Deficit<br />
  16. 16. Current Account Deficit<br />Ways to reduce Current Account Deficit<br />Increase exports – Subsidise exports, incentives to exporters<br />Decrease imports – Import restrictions, quotas or duties<br />Devaluation of Currency<br />Promoting investor friendly environment<br />Adjusting Government spending to favour domestic suppliers<br />
  17. 17. Current Account Deficit<br />
  18. 18. Fiscal Consolidation<br />A conscious policy of the Government to live within its means.<br />It is a long term process, a road map and is not a single budget announcement.<br />Efforts to raise revenues.<br />Bring down wasteful expenditure.<br />Fiscal Responsibility and Budget Management Act 2003 (FRBM Act)<br />Target for states to eliminate revenue deficits and fiscal deficit 3% of State GDP for 2014-15, as per 13th Finance Commission.<br />Public Debt Management Agency Bill to be introduced.<br />
  19. 19. GDP <br />GDP – Gross Domestic Product, refers to the market value of final goods and services produced in an economy in a given period of time.<br />GDP measurement methods<br />Expenditure method<br />Production method<br />Income method<br />All should give the same results.<br />It mainly depend upon on the Risk Apatite for Investment.<br />
  20. 20. GDP vs GNP<br />GDP<br />Total value of products & Services produced within the territorial boundary of a country. <br />GDP = consumption + investment + (government spending) + (exports − imports)<br />GNP<br />Total value of Goods and Services produced by all nationals of a country (whether within or outside the country).<br />GNP = GDP + NFIA(Net Factor Income From Abroad)<br />
  21. 21. Thank You!!!<br />

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