Union Budget 2012-13

BUDGET PRIMER
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ANNUAL FINANCIAL STATEMENT
The Annual Financial statement is a statement of the estimated receipts and expenditures of the government. It constitutes of the following heads

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ANNUAL FINANCIAL STATEMENT
Consolidated Fund : All revenues received by Government, loans raised and its receipts from the recovery of loans granted
form the Consolidated Fund.

All expenditure of Government is incurred from the Consolidated Fund and no amount can be
withdrawn from the Fund without authorization from Parliament.

Contingency Fund : Occasions may arise when Government may have to meet urgent unforeseen expenditure pending
authorization from Parliament. The Contingency Fund is an imprest placed at the disposal of the President to incur such expenditure. Parliamentary approval for such expenditure and for withdrawal of an equivalent amount from the Consolidated Fund is subsequently obtained and the amount spent from the Contingency Fund is recouped to it. The corpus of the Fund authorized by the Parliament, at present, is Rs.500 crore.

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ANNUAL FINANCIAL STATEMENT
PUBLIC ACCOUNT :
Besides the normal receipts and expenditure of the Government, which relate to the Consolidated Fund, certain other transactions enter Government accounts, in respect of which, Government acts more as a banker. For example, transactions relating to provident funds, small savings collections, other deposits, etc. The moneys thus received are kept in the Public Account and the connected disbursements are also made there from. Generally speaking, Public Account funds do not belong to the Government and have to be paid back some time or the other to the persons and authorities who deposited them. Parliamentary authorization for payments from the Public Account is, therefore, not required. In a few cases, a part of the revenue of Government is set apart in separate funds for expenditure on specific objects like road development, primary education including mid-day meal scheme, etc. These amounts are withdrawn from the Consolidated Fund with the approval of Parliament and kept in the Public Account for expenditure on the specific objects. The actual expenditure on the specific objects is, however, again submitted for vote of Parliament even though the moneys have already been earmarked by Parliament for transfer to the funds.

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CONSOLIDATED FUND - RECEIPTS
Receipts are of the following nature:
Revenue Capital

Revenue Receipts are further classified into:

Tax Revenue Non Tax Revenue

Tax Revenue: Tax revenue refers to funds raised through taxes paid by Public & Corporate Entities. Taxes
are of two types Direct & Indirect tax. Direct taxes are Income tax, Wealth tax and Gift tax while Indirect Tax includes Custom Duty, Excise Duty, and Service tax etc. savings invested in PPF.

Non Tax Revenue: As the name suggests, non Tax Revenue are raised through sources other than taxes.
This revenue emanates from Public Sector Undertakings (PSUs), State Undertakings like Railways, State Transport, Telecom, etc. Revenue from social services like education & public health. Voluntary aid to Government charitable trust /institution, revenue from public properties etc.

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CONSOLIDATED FUND - RECEIPTS
Capital Receipt :
It includes loan raised by Government of India from public at large, borrowings from RBI (through the sale of Treasury bonds) as well as external borrowings from International institution like (IMF, World Bank etc), recoveries from loans granted to states/Union territories.

Total Receipts
Rs Crore Total receipt Revenue receipt Tax Revenue for Central (Net) Non tax revenue receipts Capital receipts Drawn Down Balance of Cash 2007-08 709,373 525,098 431,773 93,325 184,275 2008-09 900,954 562,173 465,970 96,203 338,781 2009-10 2010-11 RE 2011-12BE 1,024,487 1,216,576 1,257,729 572,811 783,833 789,892 456,536 563,685 664,457 116,275 220,148 125,435 453,062 447,742 447,837 (1,386) (15,000) 20,000

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TAX REVENUES
The sources of tax revenues include both direct and indirect taxes.
600,000

500,000
Rs crore
400,000 300,000

200,000
100,000 -

2007-08

2008-09

2009-10

2010-11

2011-12 BE

Direct Tax

Indirect Tax

Particulars (Rs crore) Tax Revenue (Gross) Corporation Tax Personal Tax Direct Tax Customs Excise Service Tax Other Tax Indirect Tax

2007-08 576,293 192,911 102,685 295,596 104,119 123,611 51,301 1,666 280,697

2008-09 590,780 213,395 106,073 319,468 99,879 108,613 60,941 1,879 271,312

2009-10 624,527 244,725 132,315 377,040 83,324 103,621 58,422 2,120 247,487

2010-11 2011-12 BE 786,888 932,440 296,377 359,990 149,066 172,026 445,443 532,016 131,800 151,700 137,778 164,116 69,400 82,000 2,467 2,608 341,445 400,424

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DIRECT TAX
Corporation (Corporate) Tax :
Tax levied on the profits generated from business operations.

Personal Tax :
Tax levied on income generated by other than corporate entities.

Securities Transaction Tax (STT) : Tax levied on the equity transactions carried out on the stock exchanges.

INDIRECT TAX
The different types of Indirect Taxes are as follows:
Customs: Tax levied on the goods imported in the country. Union Excise Duty: This duty is imposed on goods manufactured in the country. Service Tax: Tax levied on services rendered. Minimum Alternate Tax (MAT): When a corporate's tax liability is less than of its profits, the company has to pay a minimum alternate tax of 18.5% of the book profits.
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18.5%

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Surcharge: This is an extra bit of 10% on their tax liability that corporates pay for earning more than Rs 1 crore. VAT and GST: This tax is based on the difference between the value of the output and the value of the inputs used to produce it. VAT helps to avoid a cascading of taxes as a product passes through different stages of production/value addition. A GST, or goods and services tax, on the other hand, will contain the entire element of tax borne by a good including a Central and a state-level tax.

NON TAX REVENUE The source of Non Tax Revenues are:

Interest receipts on the loan extended to state governments and others Dividend and Profit of PSUs Other non tax.

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Among all the components, interests receipts, dividend and profits are the highest contributor to Non Tax Revenues
250,000 200,000

Rs crore

150,000

100,000
50,000 -

Non Tax Revenue

Non tax revenues

Particulars (Rs crore) Non Tax Revenue Interest Reciepts Dividend and Profits Other non-tax 2007-08 102,317 21,060 34,499 46,758 2008-09 99,734 20,717 38,607 40,410 2009-10 116,275 21,756 50,248 44,271 2010-11 2011-12 BE 220,148 125,435 19,728 19,578 48,727 42,624 151,694 63,234
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CAPITAL RECEIPTS
Receipts in the capital account of the consolidated fund are grouped under three broad heads
Public Debt Recoveries of loans and advances, and Miscellaneous Receipts

Rs Crore Capital Receipt Market Borrowings Other short, medium & long term loan External Debt Recoveries of loan and Advances Others

2007-08 184,275 110,671 25,553 9,970 4,497 33,584

2008-09 338,780 261,972 57,500 9,603 9,698 7

2009-10 2010-11 RE 2011-12BE 453,062 447,742 447,837 398,424 335,414 343,000 (9,769) 10,000 15,000 11,038 22,264 14,500 8,613 9,001 15,020 44,757 71,064 60,317

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PUBLIC DEBT
Public debt includes the amount raised from various sources to support the deficit. Sources are as follows Internal debt (money borrowed within the country) and External debt (funds borrowed from non-Indian sources)

The internal debt comprises Treasury Bills, market stabilization scheme, ways and means advance, and securities against small savings.
Rs Crore Internal Debt Borrowings Securities against Small Savings State Provident Funds Other Receipts External Debt Total Liabilities 2007-08 141,837 111,327 10,510 5,000 15,000 9,111 150,948 2008-09 273,381 333,226 (1,302) 8,041 (66,584) 11,015 284,396 2009-10 2010-11 RE 408,831 393,734 388,656 345,414 13,256 17,781 16,056 10,000 (9,136) 20,539 11,038 22,264 419,868 415,997 2011-12BE 378,317 358,000 24,182 10,000 (13,866) 14,500 392,817

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EXPENDITURE
The expenditure is classified as follows:
Revenue Expenditure: It is incurred for the normal functioning of the government departments and various other services such as salaries to government employees, subsidies, interest payment made to service debt etc. Capital Expenditure: Long-term in nature they are used for acquiring fixed assets such as land, building, machinery and equipment. Other items that also fall under this category include loans and advances sanctioned by the Centre to the State governments, union territories and public sector undertakings etc.
Particulars (Rs crore) Total Expenditure Non Plan Expenditure Revenue Expenditure Capital Expenditure Plan Expenditure Revenue Expenditure Capital Expenditure 2007-08 709,373 501,849 412,975 88,874 207,524 175,611 31,913 2008-09 900,953 617,996 561,790 56,206 282,957 241,656 41,301 2009-10 1,024,488 721,096 657,925 63,172 303,391 253,884 49,507 2010-11 2011-12 BE 1,216,576 1,257,729 821,552 816,182 726,749 733,558 94,802 82,623 395,024 441,547 326,928 363,603 68,096 77,943

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PLAN & NON PLAN EXPENDITURE
Plan Expenditure: As the name implies, it is incurred in connection with all expenditures which fall under the purview of Countrys Five year plan. Non-plan Expenditure: It consists of Revenue and Capital Expenditure on interest payments, Defense Expenditure, subsidies, postal deficit, police, pensions, economic services, loans to public sector enterprises and loans as well as grants to State governments, Union territories and foreign governments etc.

900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 -

1,200,000
1,000,000
Rs crore

Rs crore

800,000
600,000

400,000
200,000

Non Plan Expenditure

Plan Expenditure

Revenue Expenditure

Capital Expenditure

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GROSS DOMESTIC PRODUCT (GDP)
GDP is the gross final value of all goods and services produced in the economy estimated at market prices i.e. value of goods and services produced and sold at actual market price. The market price includes all indirect taxes and subsidies. It is the sum of value added at each stage of processing and is, thus, a duplicate value of output.

Constituents of GDP:
Agriculture Industry Mining & Quarrying Manufacturing Electricity, Gas and Water Supply Construction Services Trade, Hotels, Transport & Communication Financing, Insurance, Real Estate & Business Services Community, Social & Personal Services

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GDP
Gross Domestic Product measures the value of economic activity within a country. Strictly defined, GDP is the sum of the market values, or prices, of all final goods and services produced in an economy during a period of time.

GDP and its growth rate

100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0
Rs Bn

14.0% 12.0%
10.0% 8.0% 6.0%

4.0% 2.0% 0.0% 2007-08 2008-09 2009-10 2010-11 2011-12E GDP at market price GDP growth (%)

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CONSTITUENTS OF GDP AND THEIR TRENDS
1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 2007-08 2008-09 Industry 2009-10 2010-11 2011-12E

Industry (Rs crore)

18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 2007-08

Agriculture (Rs. crore)

30% 25% 20% 15% 10% 5% 0%

2008-09

2009-10

2010-11

2011-12E

y-o-y Growth (%)

Agriculture & allied activities

y-o-y Growth (%)

6000000 5000000 4000000

Services (Rs crore)

19%

18% 18% 17% 17%

16% 16% 15% 2007-08 2008-09 Services 2009-10 2010-11 2011-12E y-o-y Growth (%)

3000000 2000000 1000000

0

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FISCAL DEFICIT
Fiscal Deficit:
The excess of total expenditure over total non-borrowed receipts is called fiscal deficit. The government then has to borrow money from the people to meet the shortfall.
Rs. Crore GDP Nominal Gross Fiscal Deficit Fiscal deficit as a % of GDP 2007-08 2008-09 2009-10 2010-11 RE 2011-12BE 4,478,222 5,574,449 6,550,271 7,877,947 8,986,860 143,653 336,992 418,483 400,998 412,816 3.21% 6.05% 6.39% 5.09% 4.59%

The fiscal deficit is usually measured as a percentage of GDP. In absolute terms, the fiscal deficit may be large, but if it is small compared to the size of the economy, then its not such a bad thing after all. Prudent fiscal management requires that government does not borrow to consume, in the normal course.

Various Deficits
Fiscal Deficit Revenue Deficit Primary Deficit

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REVENUE AND PRIMARY DEFICIT
Revenue Deficit
All expenditure on revenue account should ideally be met from receipts on revenue account; the revenue deficit should be zero, else the government will be in debt.
Rs. Crore GDP Nominal Revenue Deficit Revenue deficit as a % of GDP 2007-08 2008-09 2009-10 2010-11 RE 2011-12BE 4,478,222 5,574,449 6,550,271 7,877,947 8,986,860 63,488 253,539 338,998 269,844 307,270 1.42% 4.55% 5.18% 3.43% 3.42%

Primary Deficit
Primary deficit is the fiscal deficit less interest payments the government makes on its earlier borrowings. Its the basic deficit figure.
Rs. Crore GDP Nominal Primary Deficit Primary deficit as a % of GDP 2007-08 2008-09 2009-10 2010-11 RE 2011-12BE 4,478,222 5,574,449 6,550,271 7,877,947 8,986,860 (28,318) 144,788 205,389 160,241 144,830 -0.63% 2.60% 3.14% 2.03% 1.61%

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AND THE REST
Some of the other important terms that figure in the Budget
Bharat Nirman : Bharat Nirman is UPAs unfulfilled dream of Build India, Build: irrigation, roads, water supply, housing, rural electrification and rural telecom connectivity. Though it couldnt meet the target of 2009, the government is still at it. Finance Bill: This, all important sheaves of papers, is all about taxes and is presented in time before the levy breaks. Financial Inclusion: This is to ensure that everyone has a bank account and financial institutions are accountable. It sees to it the common denizen is not denied of timely and cheap credit and, more importantly, not intimidated by the facade of a modern bank. However, it has not fully got past the counter. Pass-Through Status: Nothing can be more dreadful than having to pay twice for the same thing. This position is accorded to those investments which stands the danger of being taxed twice like mutual funds. Subvention: This is how a government bears the loss that financial institutions incur when asked to give farmers loans below the market rates. Resources transferred to the States: As we saw earlier, the Centre gives states a helping hand in two ways a part of its gross tax collections goes to state governments. The Centre also transfers funds to states to support their plans. These are largely in the nature of grants, and include those given to states for managing centrally sponsored schemes.

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