In this article, we will try to understand the terms related to budget or the terms which are often used in the budget but turns out to be difficult for us to interpret. Recently the union minister Piyush Goyal
has presented the interim budget 2019 during the budget session of parliament on February 1, 2019
. Ahead of the Lok Sabha polls, the Narendra Modi
led government has presented the final budget in the parliament and it was clarified in prior that the acting finance minister Piyush Goyal will be presenting the interim budget 2019-20
in the absence of finance minister, Arun Jaitley
What is an Interim Budget?
An Interim Budget, also known as a vote on account is introduced when the government is unable to present a full-fledged budget as it nears the end of its tenure. The government seeks the permission of the parliament in voting to meet the various expenditures of ongoing programmes in different sectors, expenditures related to paying salaries and other expenses for the first four months of the fiscal year with no change in the structure of taxation until a new government takes over or comes in power and presents a full budget which will then be revised for the full fiscal.
Fact – The first interim budget or vote on account was presented in 1948 by the then finance minister R K Shanmukham Chetty and followed it with the first regular budget of independent India.
What is a Union Budget?
Union Budget is the most comprehensive and complete report of the Government’s enhances in which revenues from all sources and outlays for all activities are consolidated. The Union Budget of India which is also known as the Annual Financial Statement in Article 112 of the Indian Constitution, is the annual budget of the Republic of India. The Government usually presents it on the first day of February so that it can be implemented before the commencement of a new financial year starting from the month of April. The Union Budget also contains the estimates of the Government’s accounts for the next fiscal year which is known as Budgeted Estimates.
How Interim Budget different from the Regular Budget?
The basic difference between an Interim Budget and a Regular Budget is that a regular budget seeks the approval of the parliament for an entire fiscal year whereas an interim budget seeks the permission of the parliament for the first four months of the fiscal year only until a new government takes over.
Terms Related To Budget 2019
Now let us discuss some terms related to budget 2019 in layman language. As we all know that before the start of a Budget Session in the parliament, the Ministry of Finance usually releases a glossary explaining the business & economic terms which are mandatory for everyone to understand before understanding the budget. So here is the list of terms,
1.) Direct and Indirect Taxes: Direct taxes as the name suggests are the one that falls directly on individuals and corporations or paid directly to the government by the taxpayers. It is the kind of tax which is applied straightly on individuals and organizations, for example, income tax, corporate tax etc. whereas Indirect taxes are imposed on the manufacture or sale of goods and services. They are paid by consumers when they buy certain goods and services.
2.) GST: The constitution states that “Goods and Services Tax” means any tax on supply of goods, or services or both except taxes on the supply of the liquor and other edible items of human consumption. ‘Goods’ means every kind of movable property or the items which are tangible other than money whereas ‘Services’ includes the activities performed by other people such as doctors, workers, waiters, barbers etc. The main difference between goods and services is that the former is produced and the latter is performed. In India, Goods and Service Tax is an indirect tax leived on the supply of various goods and services. This form of taxation has replaced many indirect tax laws which previously existed in India.
3.) Customs Duty: These are the tariff or taxes imposed on goods when transported across international borders or in other words the goods which are imported into, or exported from the country. The customs duty is paid by the importer or the exporter. The basic purpose of the customs duty is to protect the economy, residents, jobs or environment of any country by controlling the flow of goods especially those which are prohibited from moving in and out of the country.
4.) Fiscal Deficit: A fiscal deficit occurs when the total expenditure of a government surpasses the revenue that it generates, excluding money from borrowings. So when the government’s non-borrowed receipts fall short of its entire expenditure, it has to borrow money from the public to meet the shortfall. This excess of total expenditure over the total non-borrowed receipts is known as fiscal deficit. Always remember that deficit differs from the debt, as the debt is the collection of yearly deficits.
5.) Revenue Deficit: The gap between revenue expenditures of the state or union government and its current revenue receipt is known as revenue deficit. It shows the shortfall of the government’s current receipts over the current expenditure. This deficit generally occurs when the realized net income is less than the projected net income.
6.) Primary Deficit: The primary deficit refers to the gap between the fiscal deficit of the current year and the interest payments on the previous borrowings. Interest payments are the payment that a government makes on its borrowings to the creators.
7.) Fiscal policy: It is the action of the government with respect to aggregate levels of revenue and spending. Fiscal policy is implemented through the budget and is the primary means by which the government can influence the economy. In simple words, Fiscal Policy is defined as the use of government revenue collection which comprises mainly of taxes and expenditures or spendings to affect the economy.
8.) Monetary Policy: This comprises actions taken by the central bank (i.e. RBI) to regulate the level of money or liquidity in the economy, or to change the interest rates. Monetary Policy involves the management of money supply and interest rates. It is also the demand side economic policy used by the government of a country to achieve objectives like inflation, consumption, growth, and liquidity.
9.) Inflation: A sustained increase in the general price level and fall in the purchasing value of money is known as inflation. The measure of inflation over time is referred to as the inflation rate. The inflation rate is the percentage rate of change in the price level. Inflation has a major effect on the economy of the entire country and also affects people from all walks of life. As the general price rises, the purchasing power of the consumer decreases.
10.) Capital Budget: The Capital Budget consists of capital receipts and payments. It includes investments in shares, loans, and advances granted by the Central Government to State Governments, Government companies, corporations, and other parties. Basically, in a capital budget, the money is allocated for the acquisition or the maintenance of fixed assets such as land, buildings, and equipment.
11.) Revenue Budget: The revenue budget consists of revenue receipts of the Government and its’ expenditures. Revenue receipts are divided into tax and a non-tax revenue. Tax revenues constitute of taxes like income tax, corporate tax, excise, customs, service and other duties that are levied by the Government. The non-tax revenue sources include interest on loans and dividend on investments.
12.) Finance Bill: The Bill produced immediately after the presentation of the Union Budget detailing the Imposition, abolition, alteration or regulation of taxes proposed in the Budget.
13.) Vote on Account: The Vote on Account is a grant made in advance by the parliament, in respect of the estimated expenditure for a part of a new financial year, pending the completion of procedure relating to the voting on the Demand for Grants and the passing of the Appropriation Act.
14.) Excess Grants: If the total expenditure under a Grant exceeds the provision allowed through its original Grant and Supplementary Grant, then, the excess requires regularization by obtaining the Excess Grant from the Parliament under Article 115 of the Constitution of India. It will have to go through the whole process as in the case of the Annual Budget, i.e. through the presentation of Demands for Grants and passing of Appropriation Bills.
15.) Budget Estimates: Amount of money allocated in the Budget to any ministry or scheme for the coming financial year.
16.) Revised Estimates: Revised Estimates are the mid-year review of possible expenditure, taking into account the rest of expenditure, New Services and New instrument of Services etc. Revised Estimates are not voted by the Parliament, and hence by itself do not provide any authority for expenditure. Any additional projections made in the Revised Estimates need to be authorized for expenditure through the Parliament’s approval or by Re-appropriation order.
17.) Re-appropriations: Re-appropriations allow the Government to re-appropriate provisions from one sub-head to another within the same Grant. Re-appropriation provisions may be sanctioned by a competent authority at any time before the close of the financial year to which such grant or appropriation relates. The Comptroller & Auditor General and the Public Accounts Committee reviews these re-appropriations and comments on them for taking corrective actions.
18.) Outcome Budget: From the fiscal year 2006-07, every Ministry presents a preliminary Outcome Budget to the Ministry of Finance, which is responsible for compiling them. The Outcome Budget is a progress card on what various Ministries and Departments have done with the outlays in the previous annual budget. It measures the development outcomes of all Government programs and whether the money has been spent for the purpose it was sanctioned including the outcome of the fund usage.
19.) Guillotine: Parliament, unfortunately, has very limited time for scrutinizing the expenditure demands of all the Ministries. So, once the prescribed period for the discussion on Demands for Grants is over, the Speaker of Lok Sabha puts all the outstanding Demands for Grants, Whether discussed or not, to the vote of the House. This process is popularly known as ‘Guillotine’.
20.) Cut Motions: Motions for reduction to various Demands for Grants are made in the Form of Cut Motions seeking to reduce the sums sought by Government on grounds of economy or difference of opinion on matters of policy or just in order to voice a grievance.
21.) Consolidated Fund of India: All revenues raised by the Government, money borrowed and receipts from loans given by the Government flow into it. All Government expenditure other than certain exceptional items met from Contingency Fund and Public Account are made from this account. No money can be appropriated from the Fund except in accordance with the law.
22.) Contingency Fund of India: A fund placed at the disposal of the President to enable him/her to make advances to the executive/Government to meet urgent unforeseen expenditure.
23.) Public Account: Under provisions of Article 266(1) of the Constitution of India, Public Account is used in relation to all the fund flows where Government is acting as a banker. Examples include Provident Funds and Small Savings. This money does not belong to the government but is to be returned to the depositors. The expenditure from this fund need not be approved by the Parliament.
24.) Corporate Tax: This is the tax paid by corporations or firms on the incomes they earn.
25.) Minimum Alternative Tax (MAT): The Minimum Alternative Tax is a minimum tax that a company must pay, even if it is under zero tax limits.
By disinvestment, we mean the sale of shares of public sector undertakings from the Government. The shares of government companies held by the Government are earning assets at the disposal of the Government. If these shares are sold to get cash, then earning assets are converted into cash, So it is referred to as disinvestment.
That’s all in this short article, further if you have any doubt, any feedback or suggestion then feel free to share with us in the comment section given below.
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