1.

Government expenditure: For the year ending March 2013, the Indian government set a expenditure target of Rs 14,90,925 crore, according to budget estimates. The government expenditure falls into two categories: planexpenditure and non-plan expenditure. Plan expenditure is incurred according to the proposals put in the five-year plans. Non-plan expenditure is maintenance of existing assets, administrative services, interest payments, subsidies, among other things. The spending on defence is part of both plan and non-plan expenditure. less 2. Revenue and Capital expenditure: Both plan and non-plan expenditures include a revenue and capital expenditure component. Revenue expenditure is the money spent to run the day-to-day business of the government. Subsidies and interest payments are a key component of the revenue expenditure. Capital expenditure is the money spent for creating new infrastructure in the economy. So the government investment in education, roads, bridges, airports, urban infrastructure form a part of the capital expenditure. 3. What is the problem: India spends 65% of its total expenditure funds in a year on non-plan expenditure. This means two-thirds of the government revenue is spent on simply maintaining the day-to-day affairs of the government. Over a third of the government expenditure or over Rs 5,10,000 crore goes for repaying loans or paying interest on them

or subsidizing food, fuel and fertilizer for the poor. Experts say that it is essential for India to spend more on creating new assets to build the infrastructure in the economy.

3. Spending right: When governments spend on building a countrys infrastructure, it gives a push to the economic growth. However, the spending for growth in India actually fell over three months to December 2012. Total expenditure less subsidy and interest payments has decelerated to 3% in the Sep-Dec 2012 period from 11.4% in Apr-Aug 2012, said Morgan Stanley, a global bank in a note last week. This means Indias spending for creating new assets to stimulate growth has gone down.

What next: When the budget is presented, you need to watch out for the overall expenditure the government proposes to incur. It should relatively lower than the previous year. It is also important to see how the government proposes to allocate resources. If the government allocates more money to stimulate growth by increasing the spending on the infrastructure sector, that would be good news for the economy.

1. United States United States of America is the largest importer of goods and services and tops the list of countries for its highest budget. It has a mixed economy which is backed by natural resources and a very well developed infrastructure. Revenues (million USD): 2,303,000 Expenditures (million USD): 3,599,000

Deficit/Surplus (million USD): -1,296,000

2. 2. Japan Japan is one of the largest economies in the world and has a large industrial capacity. The country leads in scientific machinery, research and technology. It is also known as the most technologically advanced producers of machines in the world. Revenues (million USD): 1,971,000 Expenditures (million USD): 2,495,000 Deficit/Surplus (million USD): -524,000

2. 3. China China is the worlds fastest growing economy and has an upper hand in the in the manufacturing sector. Well known for its population growth, the country is the largest exporter and manufacturer of goods. The countrys rapid economic growth has led to severe consumer inflation. Revenues (million USD): 1,646,000 Expenditures (million USD): 1,729,000 Deficit/Surplus (million USD): -83,000

4. 4. Germany Germany is a major economic power in Europe and ranks number four for its government budget. The country has developed a very high standard of living and is recognized for its small and medium enterprises. The country boasts its highly skilled labour and its level of innovation. Revenues (million USD): 1,551,000 Expenditures (million USD): 1,588,000 Deficit/Surplus (million USD): -37,000

5. France France has a mixed economy in which banking, financial services and insurance are the key sectors of the countrys economy. France has been a major economic influence in Europe and also considered to be the wealthiest nation there. Revenues (million USD): 1,386,000 Expenditures (million USD): 1,535,000 Deficit/Surplus (million USD): -149,000

6. Italy Italy is a democratic republic and its economic influence makes it a major regional power. The nation rapidly transformed from agriculture based economy into one of the worlds most industrialized nations. Italy has a free market economy which focuses on exports of luxury products and niche market. Revenues (million USD): 1,025,100 Expenditures (million USD): 1,112,000 Deficit/Surplus (million USD): -86,900

7. United Kingdom United Kingdom is a partially regulated market economy, in which, the service sector makes up more than 70 percent of the countrys GDP. The automotive, pharmaceutical and aerospace industries are a significant part of the United Kingdoms economy. Revenues (million USD): 986,500 Expenditures (million USD): 1,188,000 Deficit/Surplus (million USD): -201,500

8. Brazil Brazil is the largest country in South America and is known as one of the fastest growing economies of the world. With new generation tycoons and booming exports, Brazil has a mixed economy. Since the nation has abundant natural resources, its economy is growing rapidly. Revenues (million USD): 978,300 Expenditures (million USD): 901,000 Deficit/Surplus (million USD): +77,300

9. Canada Canada has one of the most advanced economies in the world and is recognized as an economic power internationally. The nation ranks among the highest in economic freedom, quality of life and government transparency. Revenues (million USD): 660,200 Expenditures (million USD): 747,800 Deficit/Surplus (million USD): -87,600

10. Spain Spain has a capitalist mixed economy that has a strong economic growth. With a balanced government budget which got inflation under control, Spain was admitted into the Eurozone in 1999. Tourism in Spain plays a key role for the countrys economic health. Revenues (million USD): 545,200 Expenditures (million USD): 672,100 Deficit/Surplus (million USD): -126,900

11. Australia Australia is recognized as one of the wealthiest and highly developed countries in the world. The nation has a market economy which emphasizes on exporting commodities. Tourism, education and financial services account to more than 70 percent of the nations GDP. Revenues (million USD): 473,200 Expenditures (million USD): 521,800 Deficit/Surplus (million USD): -48,600

12. Russia Russia has one of the most powerful economies worldwide. Oil and gas is a major natural economy resource in Russias market economy. Apart from oil and gas, timber and metals make up for a major portion of the countrys exports. Revenues (million USD): 382,800 Expenditures (million USD): 376,200 Deficit/Surplus (million USD): +6,600

13. Netherlands Netherland is a constituent country which leads European nations in attracting foreign direct investment. This developed economy is one of the major investors in the United States of America. Trade, shipping, banking and fishing are the leading sectors of the Dutch economy. Revenues (million USD): 381,300 Expenditures (million USD): 420,400 Deficit/Surplus (million USD): -39,100

14. Norway Norway is categorized as one of the worlds wealthiest nations and is a perfect example of a mixed economy. The revenue that the nation receives from its natural resources adds to be a major contribution to the economic health. Revenues (million USD): 280,500 Expenditures (million USD): 209,500 Deficit/Surplus (million USD): +71,000

15. Sweden Sweden is ranked among other highly developed countries worldwide. This country is has a mixed economy that is export oriented. The nations engineering sector accounts for more than 50 percent of exports. Services and manufacturing industries dominate the Swedish economy. Revenues (million USD): 277,600 Expenditures (million USD): 277,100 Deficit/Surplus (million USD): +0,500

. South Korea South Korea is a developed country with a high standard of living. It has an export driven economy which mainly focuses on automobiles, electronics, machinery, ships and pharmaceuticals. The countrys credit rating suffers in times of military crisis with North Korea. Revenues (million USD): 267,900 Expenditures (million USD): 242,000 Deficit/Surplus (million USD): +25,900

17. Mexico Mexico is a regional power as a newly industrialized country. The country is known to produce some of the most complex components which are mostly engaged in research and development activities. According to Goldman Sachs, Mexico will have the fifth largest economy in the world by 2050. Revenues (million USD): 263,200 Expenditures (million USD): 292,200 Deficit/Surplus (million USD): -29,000

18. Belgium Belgium is a prosperous commerce and cultural hub. The nations strong globalized economy and transport infrastructure are integrated with the rest of Europe. It is a highly industrialized economy with a highly productive work force. Revenues (million USD): 249,600 Expenditures (million USD): 271,200 Deficit/Surplus (million USD): -21,600

19. Saudi Arabia Saudi Arabia is a wealthy nation with a concentration of large oil reserves. Oil accounts to more than 70 percent of government reserves and 95 percent of exports. The oil sector in the country has allowed the economy to grow at a rapid pace. Revenues (million USD): 221,100 Expenditures (million USD): 218,700 Deficit/Surplus (million USD): +2,400

20. Switzerland Switzerland is one of the worlds richest countries and largest exporters. Among other economies, its economy is considered to be the most competitive in the world. Switzerland is high-tech and prosperous economy. Revenues (million USD): 217,900 Expenditures (million USD): 214,500 Deficit/Surplus (million USD): +3,400

21. Austria Austria is a developed country with a high standard of living. It has a well developed social market economy that has a major influence on labour politics. Tourism plays an integral part in terms of the countrys economic revenues. Revenues (million USD): 202,600 Expenditures (million USD): 216,600 Deficit/Surplus (million USD): -14,000

22. India India is one of the fastest growing economies in the world and is considered to be a newly industrialized country. Textiles, telecommunications, chemicals, pharmaceuticals, transport, machinery and mining are among the major sectors of the Indian economy. Revenues (million USD): 196,400 Expenditures (million USD): 308,800 Deficit/Surplus (million USD): -112,400

23. Turkey Turkeys growing economy has given it recognition as a regional power. Tourism is a key industry that attracts revenue for the government and has experienced a rapid growth in the last two decades. The nations economy is becoming dependent on industries in major cities. Revenues (million USD): 176,700 Expenditures (million USD): 187,100 Deficit/Surplus (million USD): -10,400

24. Finland Finland is ranked among other wealthiest countries in the world despite it being a latecomer to industrialization. The economic development was rapid and is considered to be one of the most competitive nations in the world. It is also known to a have high quality of life. Revenues (million USD): 136,200 Expenditures (million USD): 137,600 Deficit/Surplus (million USD): -1,400

25. Indonesia Indonesia has a mixed economy and serves as the largest economy in Southeast Asia. The industry sector contributes the most for the countrys GDP. The rapidly developing export oriented sector attracts foreign investment for the nation. Revenues (million USD): 134,200 Expenditures (million USD): 144,100 Deficit/Surplus (million USD): -9,900

Measures taken positively by markets: - Measures to reduce fiscal deficit - Any increase in foreign investor participation - Thrust to infrastructure- Roads, Power etc. - Reduction in taxes Measures taken negatively by markets: Added pressure on fiscal deficit New tax measures, mostly higher taxes or change in tax policy

Policy measures that hinder investment climate Budget and market performance - Last 20 years, MSCI India outperformed MSCI EM (MSCI Emerging Markets Index) 8 out of 20 times in the month after budget - 20 year average shows Indian markets are down 2.3% in month after Budget underperforming EM by 1.5%, - MSCI India outperformed MSCI EM (years): 1997, 1999, 2001 , 2004 , 2005, 2006, 2010, 2011 1. Measures taken positively by markets: - Measures to reduce fiscal deficit - Any increase in foreign investor participation - Thrust to infrastructure- Roads, Power etc. - Reduction in taxes (AFP PHOTO/ Punit PARANJPE) 2. Measures taken negatively by markets: Added pressure on fiscal deficit New tax measures, mostly higher taxes or change in tax policy Policy measures that hinder investment climate (AFP PHOTO/Indranil MUKHERJEE)

3. Budget and market performance - Last 20 years, MSCI India outperformed MSCI EM (MSCI Emerging Markets Index) 8 out of 20 times in the month after budget - 20 year average shows Indian markets are down 2.3% in month after Budget underperforming EM by 1.5%, - MSCI India outperformed MSCI EM (years): 1997, 1999, 2001 , 2004 , 2005, 2006, 2010, 2011 (REUTERS/Ajay Verma) 4. 1. UNION BUDGET 1992-93 Finance Minister: Manmohan Singh Stock market reaction: Feb 29, 1992: Sensex up (+) 9.37% - Indian economy liberalized thorough reforms across the board - New import-export policy encouraged FDI - Foreign investment limit in high-priority industries was raised to 51% - Private sector expansion and participation encouraged - Licences and quotas were abolished - Interest rates were made flexible

- Banks got freedom to set lending rates according to risk profile 2. UNION BUDGET: 1997 -98 Finance Minister: P Chidambaram Stock market reaction: Feb 28, 1997: Sensex up (+) 6.54% - This Budget was called a Dream Budget - Budget presented a plan for economic reforms in India - Tax policy (Direct and indirect) was reormed - FII investment limit was raised from 24% to 30% - Maximum income tax rate for individuals was cut from 40% to 30% - Income tax rate for companies was decreased to 35% per from 40% - Peak customs duty was reduced to 40% from 50% - Dividend tax on individual investors was abolished - Budget launched Voluntary Disclosure of Income Scheme or VDS to recover of black money 3. UNION BUDGET: 1998 Finance Minister: Yashwant Sinha Stock market reaction: June 1, 1998: Sensex fell (-) 11%

- Budget after India conducted Nuclear tests and US sanctions - Defence spending was hiked - Allocation for Department of Atomic Energy was hiked by 68% - Import duties were increased 4. UNION BUDGET: 2002 Finance Minister: Yashwant Sinha Stock market reaction: Feb 28, 2002: Sensex fell (-) 3.87% - Dividend distribution tax was abolished: Dividends were to be taxed in the hands of the investors instead of taxing companies and mutual funds - Gujarat riots were an added pressure 5. UNION BUDGET 2012 Finance Minister: Pranab Mukherjee Stock market reaction: March 16, 2012: Sensex fell (-) 1.9% - Introduction of GAAR or General Anti Avoidance Rule - GAAR to counter aggressive tax avoidance sent markets into a tizzy - Budget sought to amend the Income Tax Act retrospectively from 1962

- Lack of clarity on retrospective tax on older deals further dipped market sentiment - A ballooning fiscal deficit at 5.1% of GDP further worried investors