General Basics and few fact and figures

1. “Union Budget Basics”
Submitted to : Submitted by :
Prof. Dr. Anurag Trivedi Krishna kumar omer
0601EE131021
Under Guidance : 6th
Semester
Mr. Amit Agrawal Electrical Engineering

2. A statement of the estimated receipts and
expenditure by the government for a particular year or
simply it is a annual financial statement.

3.  Economic survey (ex. this time of 2015).
 Budget speech (ex. this time for 2016-17).
 Union budget is presented on the last day of february but adopted from 1st
April :-
1. Debate and discussion,
2. Amendment to original provision,
3. Administrative machinery.
 Fiscal year – 12 months period of economy of a country.
 In INDIA Fiscal year (FY) is applicable from 1st
April to 31st
March (FY16 = 2016-17).
 Revenue = income, Expenditure = investment, Import, Export.

4.  Excise duty – tax charged on any kind of manufactures.
 Revenue receipts – tax revenues.
 Dividend – distributed deposit (ex.ONGC).
 Revenue expenditure – routine expenses, like salaries, subsidies,
pensions, etc.
 Capital receipts – recoveries of loans, grants, etc.
 Inflation – Rise in prices.

5. 1) Consolidated fund :
- Main account of Govt. of India,
- All revenues are put here,
- Amt. of expenditure is withdrawn from it,
- Amt. is withdrawn by the approval of Parliament.
2) Contingency fund :
- Emergency account (ex.draught),
- Can be withdrawn without parliament approval.
3) Public Accounts :
-Money that belongs to public is kept here (ex. Tax) ,
-Govt. can withdraw amt from this but will redeposit in case of short comings.

6. “Total money value of all goods and services produced in one
country in one year is called GDP or simply assets that a country has”
- GDP growth rate :
FY14-6.8%,
FY15-7.4%,
FY16-8.5% (projected)
- India has the fastest growth rate as quoted in Union budget 2016-17
(even faster than China).

7. 1. More expenses but less revenue in a Fiscal year is Fiscal Deficit.
2. ( Total Expenditure - Total revenue ) = Fiscal Deficit (F.D.)
Ex. 15 Rs. - 10 Rs. = +5
so to sustain further I (or govt) will borrow from somewhere.
3. So higher F.D. means loss to economy.
4. FY14 4.1 %,
FY15 4.1 %,
FY16 3.9 % (target),
FY18 3.0 % (projected). Credit Mr. Raghu Ram Rajan (Governer)

8. If Fiscal Deficit is High –
- government will borrow money (from : public, banks in India,
foreign sources like WB)
- we will lend money because lending to govt. means our money is safe
(+interest)
- if we lend money, now less money is available in market
- hence interest rates or loans Increases by bank
- expensive loans, so businessmen will not borrow, even I will postpone
my plans to purchase a car or house, so on so forth
- if businessmen not borrows then he is left with less money thus less
money for his company also

9. - less money in company, so company will go in saving mode and will try to
control their expenses
- to control expenses, they cut down employees and salaries
- so employment growth goes down
- the employees fired from job won’t have purchasing power and they will cut
down their expenses (ex. Cut down groceries, daily needs)
- So demand of products by such community of employees will come down
hence less demand in market
- By seeing less demand, producer won’t come with incentives, and will not
produce enough
- this cycle goes on and whole system stagnates

10. So…. Decrement in :
1. employment growth rate,
2. employment,
3. goods and services,
4. Income.
And Higher Interest rates….

11. Trade Deficit = Import more Export less
Further, effect of Fiscal deficit on trade deficit :
- If govt. borrows from foreign entity ex. US Dollar comes to the country.
- It will come in exchange of domestic currency (Rs.).
- If current exchange rate is 1 USD = 66.00 Rs.
-But I will bargain and pay him 1 USD = 65 Rs., hence Rupee will be strong and
exchange rate goes down.
-Think now , if exchange rate goes down so I will purchase more or IMPORT
increases but EXPORT decreases as Rs. got strong

12. - Thus Trade deficit increses if Fiscal deficit increases
- This is the reason Why Mr. Narendra Modi is campaigning MAKE IN INDIA,
simply because, it will decrease the IMPORT and boost EXPORT and then
“ we can catch the Fish ourself….”
- Rupees goes to (FY15) :
1st
. Interest payments (20 %)
2nd
. Defence (11 %)
- we are the world’s largest importers of defence equipments,
As shown above, defence is our 2nd
highest investing area as IMPORT
hence in FY16, we are expending Rs. 2.46 lakh crore (increased by 9.8%)
and promoting Foreign countries to come in INDIA and manufacture hear
and support our MAKE IN INDIA .

14. - Though we are the largest growing economy but we don’t even have
appreciable assets (ex. China).
- Rupee comes from-
1st
. Borrowing (24 %),
2nd
. Corporation tax (20%), etc.

15.  Simply decrease expenditure,
 Support make in INDIA,
 “ Do purchase Indian tourister instead of American Tourister “
 Reduce various subsidies,
 Reduce Leave Travelling concessions(LTC), etc.