The entire budget speech (of the Finance Minister) is broadly classified under two parts, viz. Part A and part B. Part A of the speech covers the broad allocation of funds for various sectors and sub-sectors, initiation of new schemes, and focus areas of the government. This part is more concerned about the development issues at macro level. On the other hand, Part B covers the specific tax proposals in the economy. It has direct bearing over household and manufacturing/service providing unit. Therefore it deals with the micro aspects of the economy.
- Components of Union Budget
Flow Chart
Budget Heads
The followings are the budget heads and the important components of union budget.
Budget Heads |
1. |
Revenue receipts |
|
(a) Tax revenue (net to centre) |
|
(b) Non-tax revenue (Interest receipts, Dividends from PSUs, Fees, Stamp duties, etc) |
2. |
Capital receipts |
|
(a) Recovery of loans |
|
(b) Disinvestment of equity of PSUs (other receipts) and net grants |
|
(c) Borrowings and other liabilities (Internal and External borrowings) |
3. |
Total receipts (1 + 2) |
4. |
Non-plan expenditure |
|
(a) On revenue account |
|
- of which (a 1) interest payment
|
|
(b) On capital account |
|
Other items on capital account |
|
(b 1) Defence capital |
|
(b 2) Other non-plan capital |
|
(c) States’ share of small savings |
|
(c 1) included in capital account |
|
(c 2) included in the NSSF |
|
(d) Centre’s share in small savings |
5. |
Plan expenditure |
|
(a) On revenue account |
|
(b) On capital account |
6. |
Total Expenditure (4 + 5) |
|
(a) Revenue expenditure (4a + 5a) |
|
(b) Capital expenditure (4b + 5b) |
7. |
Revenue deficit = 1 – 6a |
8. |
Budgetary deficit = 3 – 6 |
9. |
Fiscal deficit = 2c + 8 OR = 1 + 2a + 2b – 6 |
10. |
Primary deficit = 9 – 4a1 |
|
|
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- Concepts of Union Budget
Broad Components of the Budget Speech
The entire budget speech (of the Finance Minister) is broadly classified under two parts, viz. Part A and part B. Part A of the speech covers the broad allocation of funds for various sectors and sub-sectors, initiation of new schemes, and focus areas of the government. This part is more concerned about the development issues at macro level. On the other hand, Part B covers the specific tax proposals in the economy. It has direct bearing over household and manufacturing/service providing unit. Therefore it deals with the micro aspects of the economy.
Budget
The budget is the outline of a government’s planned receipts and expenditures for some future period, normally one year.
Revenue Expenditure
The revenue expenditure is akin to consumption expenditure. In addition to expenditure on salaries and administration of government departments, it includes subsidies, interest payments on past debts and pension.
Capital Expenditure
Unlike revenue expenditure, capital expenditure is on the creation of assets. It includes: government expenditure on roads, structures and equipments; government investment including shares; and loans to public sector undertakings (PSUs).
Plan Expenditure
The plan expenditure deals with the new initiatives of government. It includes: the central plan expenditure; and the central assistance to state and union territory plans. Plan expenditure has the budget heads of revenue plan expenditure and capital plan expenditure.
Non-Plan Expenditure
Unlike plan expenditure, non-plan expenditure deals with the past commitments of the government. Non-plan expenditure has the budget heads of revenue non-plan expenditure and capital non-plan expenditure. Compared to revenue non-plan expenditure, the share of non-plan capital expenditure is much lower. Within the capital component of non-plan expenditure, the largest allocation goes to defence.
Revenue Receipt
Government’s revenue receipt is consisting of tax revenue (net to centre) and non-tax revenue. Tax revenue includes both direct and indirect taxes. Direct tax includes corporation tax, personal income tax and wealth tax. Direct taxes, by nature, cannot be passed on to other. It is based on the ability to pay principle. Indirect tax includes custom duty, excise duty and service tax.
Non-tax revenue
It is explained under Revenue Receipt.
Tax Revenue (net to centre)
It is explained under Revenue Receipt.
Direct Tax
It is explained under Revenue Receipt.
Indirect Tax
It is explained under Revenue Receipt.
Custom Duties
These are referred to duties charged on goods imported to or exported from the country. Accordingly, the importer or the exporter pays custom duties. It is being regulated by the Customs Act, 1962.
Peak Rate
Peak rate is the highest rate of custom duty applicable on an item.
Excise Duties
These are referred to duties imposed on goods produced or manufactured within the country.
Capital Receipt
The capital receipt is consisting of non-debt and debt receipt. The former consists of loan recovery, net grants, proceeds from PSUs disinvestments. The latter includes public borrowing from both internal and external sources, and other liabilities.
Revenue Deficit
The revenue deficit is defined as the difference between the government revenue expenditure and government revenue receipts. In fact, revenue receipt is not enough to meet revenue expenditure. However, as per the Fiscal Responsibility and Budget Management (FRBM) Act 2003, revenue deficit should not have been since 2008‑09.
Budgetary Deficit
The budgetary deficit refers to the difference between government total expenditure (revenue expenditure and capital expenditure) and total receipts (revenue receipts and capital receipts).
Fiscal Deficit
The fiscal deficit is defined as the difference between the government total expenditure and the government total non-debt receipt. It is also defined as the combination of budgetary deficit and government debt receipt, i.e. borrowing from both internal and external sources, and other liabilities.
Primary Deficit
The primary deficit is measured by the difference between the fiscal deficit and interest payments (a component of non-plan revenue expenditure).
FRBM Act 2003
It is explained under Revenue Deficit.
Current Account Deficit
The current account deficit refers to the difference between the country’s export and import.
Gross Domestic Product (GDP)
The gross domestic product (GDP) is defined as the money value of final goods and services produced within the country’s territory, irrespective of the ownership of the resources that produced it.
Gross National Product (GNP)
The gross national product (GNP) is defined as the money value of final goods and services produced by the country’s owned resources, irrespective of the place of production. [GNPF = GNPM – Indirect Taxes + Subsidies]
Net Domestic Product (NDP)
The net domestic product (NDP) is measured as the difference between GDP and the capital consumption, i.e. depreciation.
Net National Product (NNP)
The net national product (NNP) is measured as the difference between GNP and the capital consumption, i.e. depreciation. The net national product at factor cost (NNPF) is internationally referred to as national income.