BUDGET GLOSSARY

BUDGET GLOSSARY

APPROPRIATION BILL

It is presented to Parliament for its approval, so that the government can withdraw from the Consolidated Fund the amounts required for meeting the expenditure charged on the Consolidated Fund. No amount can be withdrawn from the Consolidated Fund till the Appropriation Bill is voted is enacted.

CAPITAL BUDGET

It consists of capital receipts and payments. It also incorporates transactions in the Public Account. It has two components: Capital Receipt and Capital Expenditure.

• CAPITAL RECEIPTS : The main items of capital receipts are loans raised by the government from public which are called market loans, borrowings by the government from the Reserve Bank of India and other parties through sale of Treasury Bills, loans received from foreign governments and bodies and recoveries of loans granted by the Central government to state and union territory governments and other parties. It also includes proceeds from disinvestment of government equity in public enterprises.
• CAPITAL EXPENDITURE : It consists of payments for acquisition of assets like land, buildings, machinery, equipment, as also investments in share etc, and loans and advances granted by the Central government to state and union territory governments, government companies, corporations and other parties.

CENTRAL PLAN

It consists of the government’s budget support to the Plan and the internal and extra budgetary resources raised by public enterprises.

CONSOLIDATED FUND

It is made up of all revenues received by the government, loans raised by it, and also its receipts from recoveries of loans granted by it. All expenditure of the government is incurred from the Consolidated Fund and no amount can be withdrawn from the Fund without authorization from Parliament.

CONTINGENCY FUND

It is an amount Rs. 500 Crore placed at the disposal of the President and is used by the government to incur all its urgent and unforeseen 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 the Fund.

EXPENDITURE BUDGET

It contains expenditure estimates made for a scheme or programme under both revenue and capital heads. These estimates are brought together and shown on a net basis at one place by major heads.

FINANCE BILL

This contains the government’s proposals for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament. It is submitted to Parliament along with the Budget for its approval.

FISCAL CONSOLIDATION

A policy aimed at reducing government deficits and debt accumulation.

FISCAL DEFICIT

It is the difference between the revenue receipts plus certain non-debt capital receipts and the total expenditure including loans (net of repayments). This indicates the total borrowing requirements of the government from all sources.

FISCAL POLICY

The policy that decides the terms of government expenditure and revenue collection (taxation) to ensure best possible growth of the economy. It is the policy for deciding the shape of govt. budget.

FRBM ACT, 2003

The Fiscal Responsibility and Budget Management Act was enacted by Parliament in 2003 to bring in fiscal discipline in the govt. expenditure. The FRBM rules impose limits on fiscal and revenue deficit. In the long run, the fiscal deficit is required to be reduced to 3% of the GDP.

GOVERNMENT BORROWING

The money government borrows to fund public spending. It is the total amount of money that the country’s Government has borrowed to fund its spending on public services and benefits.

NON-PLAN EXPENDITURE

It includes both revenue and capital expenditure on interest payments, the entire defence expenditure (both revenue and capital expenditure), subsidies, postal deficit, police, pensions, and economic services, loans to public enterprises and loans as well as grants to state governments, union territory governments and foreign governments.

NON-TAX REVENUES

Interest from loans to states, public bodies and PSUs is a key item under this head. So are dividends from PSUs. The government also earns income from the services it provides. Though the Railways is a separate ministry, all its money is routed through the consolidated fund.

PLAN EXPENDITURE

This is largely made up of the budget support to the central plan. It also comprises the amount the Centre sets aside for plans of states and Union territories. Like all budget heads, this is also split into revenue and capital components.

PRIMARY DEFICIT

If we deduct amount of interest payments from the amount of fiscal deficit, we get the amount of Primary Deficit.

PUBLIC DEBT

The government’s borrowings are the burden of the people. The difference between borrowings and repayments is the net accretion to the public debt. Public debt can be split into two heads, internal debt and external debt. The internal debt comprises Treasury Bills, market stabilization scheme, ways and means advances, and securities against small savings.

PUBLIC ACCOUNT

It is an account in which money received through transactions not relating to the Consolidated Fund is kept. For example transactions relating to provident funds, small savings collections, other deposits etc. 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 not required.

REVENUE BUDGET

It consists of the revenue receipts of the government (which is tax revenues plus other revenues) and the expenditure met from these revenues. It has two components: Revenue Receipt and Revenue Expenditure.

REVENUE RECEIPTS

It includes proceeds of taxes and other duties levied by the Centre, interest and dividend on investments made by the government, fees and other receipts for services rendered by the government.

REVENUE EXPENDITURE

It is meant for the normal running of government departments and various services, interest charges on debt incurred by the government and subsidies. Broadly speaking, expenditure which does not result in creation of assets is treated as revenue expenditure. All grants given to state governments and other parties are also treated as revenue expenditure even though some of the grants may be for creation of assets.

Excess of revenue receipts over revenue expenditure is called revenue deficit.

VALUE ADDED TAX (VAT)

It is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the “Value Added” to a product, material or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.