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Annual Budget is one of the most anticipated economic and financial events of the year.
The report presented by the Finance Minister includes Government of Indias revenue and expenditure for one fiscal year. The Budget is the most comprehensive report of the Government`s finances, which aggregates revenues received from all sources and expenditure incurred on all activities. The Budget also includes forecasts for the next fiscal year called budgeted estimates.
Budgetary Process
The Budget process has been explained below: Every year, BUDGET DIVISION under the Ministry of Finance is responsible for the preparation of the budget. All government ministries & departments send in their funds proposals and requirements.
Once the grants are approved, 2 bills are introduced in the Lok Sabha APPROPRIATION BILL (final approval of funds to be given to each ministry) and FINANCE BILL (tax proposals). Union Budget is approved.
Source : investmentyogi.com
CAPITAL RECEIPTS
CAPITAL EXPENDITURE
REVENUE BUDGET
The revenue budget consists of revenue receipts of the government (revenues from tax and other sources) and the expenditure met from these revenues. The difference between revenue receipts and revenue expenditure is called the revenue deficit, which is usually negative. REVENUE RECEIPTS are divided into tax and non-tax revenue.
TAX REVENUES are made up of taxes such as income tax, corporate tax, excise, customs and other duties which the government levies.
NON-TAX REVENUES consist of interest and dividend on investments made by government, fees and other receipts for services rendered by Government.
incurred for the normal day-to-day running of government departments and various services that it offers to its citizens.
The government also has other expenditure like servicing interest on its borrowings, subsidies, etc.
Usually, expenditure that does not result in the creation of assets, and grants given to state governments and other parties are revenue expenditures.
Source : Moneycontrol.com
CAPITAL BUDGET
The capital budget consists of capital receipts and payments.
CAPITAL RECEIPTS
CAPITAL EXPENDITURE
Capital receipts are government loans raised from the public, government borrowings from the Reserve Bank and treasury bills, loans received from foreign bodies and governments, divestment of equity holding in public sector enterprises, securities against small savings, state provident funds, and special deposits.
Capital payments are capital expenditure on acquisition of assets like land, buildings, machinery, and equipment. Investments in shares, loans and advances granted by the central government to state and union territory governments, government companies, corporations and other parties.
Source : Moneycontrol.com
10.9
9.6
8.9
10.4
7.1
6.1
5.3
8.9 7.5
8.8
7.9
7.5
3.4 2.4
2.2 1.3
2.1
2.1 1.4
1.8
2.9
1.7
1.7
1.7 1.2
1.6
2007-08
P: Provisional Actuals , BE : Budget Estimates
2008-09
2009-10
2010-11 (P)
YEAR
1.5 1.1
1.4 1.1
1.4
1.8
2007-08 2008-09 2009-10 2010-11 (BE) 2010-11 (P) 2011-12(BE) 542 440 102 594 171 67 54 53 171 5 39 127 118 713 205 508 127 -44 540 443 97 794 192 124 73 254 344 6 1 337 90 884 275 609 337 145 573 457 116 912 213 136 91 339 452 9 25 418 113 1024 303 721 418 205 682 534 148 959 249 109 87 277 427 5 40 381 150 1109 373 736 381 133 794 573 221 1039 235 131 92 245 405 13 23 369 160 1199 377 822 369 134 790 664 125 1097 268 134 95 307 468 15 40 413 161 1258 442 816 413 145
6
4.5
6.5
5.2 3.2
4.8
3.2
4.6
3.4 1.6
2.5
1.1
2.6
1.8
-0.9
2007-08
P: Provisional Actuals , BE : Budget Estimates
2008-09
2009-10
2010-11(P)
2011-12(BE)
Data sourced from finmin.nic.in
Year
Per Cent
20 15 10 5
Effective Since
May 03 2011 Reverse Repo Rate 6.25 Repo Rate 7.25 Cash Reserve Ratio 6 Statutory Liquidity Ratio 24
Jul 26 2011 7 8 6 24
Source : RBI
44 39.7 33.7
58 33.6 41.3
64 9.2 36.8
73 14.1 33.7
75 3 39.5
77 135.8 59.1
3 1.1 2.2
61 -20 43.3
15 424.2 10.6
62 1.7 35.9
38 156.6 22.1
67 7.9 31.1
68 78.5 31.7
61 -9.3 32.1
44 -36.4 22.9
PER CENT
4
2 0
2.8
0.5
2012-13 E
2011-12
Components of Gdp
Agriculture & allied activities Year Agriculture Industry Mining & Quarrying Manufacturing
Rs. Billion
Constant Current Constant Current Constant Current Constant Current Constant Current Constant Current Prices Prices Prices Prices Prices Prices Prices Prices Prices Prices Prices Prices
2006-07 6192
2007-08 6551
7230
8365
5237
5570
6047
7163
7364
8045
8178
9414
926
960
1068
1248
5705
6291
6348
7327
734
794
762
838
2008-09 6557
2009-10 6625
9432
10794
5554
5594
8066
9246
8374
9122
10492
11770
981
1042
1398
1574
6563
7197
8183
9070
831
883
911
1125
2010-11 7091
2011-12 7287
Source: RBI
12699
14174
6029
-
10938
-
9745
10000
13556
15034
1094
1085
1912
2239
7742
7935
10403
11435
909
981
1240
1360
(Continued)
Components of Gdp
Services (Including Construction)
Year Finance, Trade, Hotel, Insurance, Real Construction Transport and Estate & Business Communications Services
Constant Prices
Rs. Billion
Constant Current Constant Current Constant Current Prices Prices Prices Prices Prices Prices
Current Constant Current Constant Current Prices Prices Prices Prices Prices
2006-07
2007-08 2008-09 2009-10 2010-11 2011-12
Source: RBI
22088
24371 26656 29329 32023 34738
24125
28042 33111 38352 45319 53119
2848
3155 3323 3557 3842 4046
3224
3889 4510 5022 5853 6707
9101
10095 10851 11972 13305 14628
9984
11500 13108 14855 17555 20724
5611
6281 7036 7699 8500 9317
5866
6915 8454 9622 11705 13955
4528
4839 5445 6101 6377 6747
5051
5738 7039 8853 10206 11732
35644 39533
38966 45821 41587 53036 45076 60915 48860 71574 52025 82327
Inflation
13 9.5 8 4.8 8.6 8.8 9.1 7.8 6.2 3.6
Inflation Rate in India is reported by the Ministry of Commerce and Industry. Historically, from 1969 until 2013, India Inflation Rate averaged 7.8 Percent reaching an all time high of 34.7 Percent in September of 1974 and a record low of -11.3 Percent in May of 1976.
WPI (AVERAGE)
2007-08 2008-09 2009-10
CPI (AVERAGE)
2010-11 2011-12 2012-13
In India, the wholesale price index (WPI) is the main measure of inflation. The WPI measures the price of a representative basket of wholesale goods. Wholesale price index is divided into three groups:
Primary Articles 20% Manufactured Products 65% Fuel and Power 15%
(Rs Billion)
Household Sector Year 1 2005-06 2006-07 2007-08 Financial Savings 2 4383 4843 5802 Physical Savings 3 4307 5101 5381 Total (2+3) 4 8690 9944 11183 Private Corporate Sector 5 2772 3386 4690 Public Sector 6 890 1529 2490 Gross Domestic Savings (4+5+6) 7 12352 14859 18363 Net Domestic Savings 8 8714 10672 13516
2008-09
2009-10 2010-11
Source : RBI
5710
8356 7677
7598
8035 9816
13309
16390 17493
4175
5321 6025
543
118 1302
18026
21830 24819
12374
15251 17285
Trade
2007-08 Exports (US$bn) % YoY Imports (US$bn) %YoY Trade deficit (US$bn) Invisibles (US$bn) Current Account Deficit (US$bn) % to GDP
Source: Planning Commission, Govt. of India
Trade
-300 -200 -100 0 100 200 300 400 500
Exports (US$bn)
Imports (US$bn)
Invisibles (US$bn)
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13 E
2009-10
2010-11 2011-12 RE 2012-13 BE
5282
6661 7113 7767
3044
4043 4504 4587
1026
1250 1078 1293
5141
5515 6362 7385
10423
12175 13475 15152
Source : RBI
of which Year (endMarch) Internal debt Market loans 1 2 3 91-day treasury bills 4
provident
182/364day treasury bills 5 6 funds
(2+6+7+8)
10
11
Financing of GFD
Internal finance Market Other borrowings borrowings 6 1148 1306 2470 3944 3264 4843 4930 7 148 142 264 145 172 520 104 Draw down of cash balances 8 45 -272 526 -14 64 -247 0 Total (6+7+8) 9 1341 1176 3260 4074 3787 3983 Source : RBI
Year
GFD receipts
GFD expenditure
Year
FDI by India
Total
Rupees Billion
US $ Million
1030 22826 1399 34843 1914 41873 1796 37745 1500 34847 2200 46553
2006-07
2007-08 2008-09
0.08
0.74 0.06
2
18 1
295.73
401.24 487.93
6784
10039 9577
8365.97
191924
20.44
17.44 50.00
469
436 981
8682.22
199179
2009-10
2010-11 2011-12
Source : RBI
225.96
204.01 228.60
5006
4569 4469
811.88
1025.72 1382.50
17986
22972 27023
11496.50 254685
12248.83 274330 13305.11 260069
62.31
131.58 145.11
1380
2947 2836
12596.65 279057
13610.13 304818 15061.30 294398
Impact of Budget
The Budget impacts the economy, the interest rate and the stock markets. How the finance minister spends and invests money affects the fiscal deficit. The extent of the deficit and the means of financing it influence the money supply and the interest rate in the economy. High interest rates mean higher cost of capital for the industry, lower profits and hence lower stock prices. The fiscal measures undertaken by the government affect public expenditure. For instance, an increase in direct taxes would decrease disposable income, thus reducing demand for goods. This decrease in demand will translate into a decrease in production, therefore affecting economic growth. Similarly, an increase in indirect taxes would also decrease demand. This is because indirect taxes are often partially or completely passed on to consumers in the form of higher prices. Higher prices imply a reduction in demand and this in turn would reduce profit margins of companies, thus slowing down production and growth. Non-plan expenditure like subsidies and defence also affect the economy as limited government resources are used for non-productive purposes.
Source : Moneycontrol.com
P Chidambaram
POSITION: Minister of Finance, India INCUMBENT: Palaniappan Chidambaram DATE OF BIRTH: September 16, 1945 TERM: Appointed in August 2012 KEY FACTS: A member of the Indian National Congress and member of the lower house of parliament since 1984, Chidambaram has held several ministerial posts since 1985. This is Chidambaram's third stint as Finance Minister, having held the post in 1996-1998 and 2004-2008. He also served as Home Minister from December 2008 to July 2012, and as Deputy Commerce Minister on two occasions. He is widely credited with implementing a series of reforms, along with Prime Minister Manmohan Singh, to stem a slowdown in growth, curb a widening fiscal deficit and attract more foreign investment into Asia's third largest economy. Chidambaram holds degrees from Madras University in Chennai and a Masters of Business Administration from Harvard University. He is married and has a son.
Source : Reuters