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1.Government expenditure: For the year ending March2013, the Indian government set a expenditure target of
Rs 14,90,925 crore, according to budget estimates. The
government expenditure falls into two categories: plan-expenditure and non-plan expenditure. Plan
expenditure is incurred according to the proposals put
in the five-year plans. Non-plan expenditure is
maintenance of existing assets, administrative services,
interest payments, subsidies, among other things. The
spending on defence is part of both plan and non-plan
expenditure. less
2.Revenue and Capital expenditure:Both plan and non-plan expenditures include a revenue
and capital expenditure component. Revenue
expenditure is the money spent to run the day-to-day
business of the government. Subsidies and interest
payments are a key component of the revenue
expenditure. Capital expenditure is the money spent forcreating new infrastructure in the economy. So the
government investment in education, roads, bridges,
airports, urban infrastructure form a part of the capital
expenditure.
3.What is the problem:India spends 65% of its total expenditure funds in a
year on non-plan expenditure. This means two-thirds of
the government revenue is spent on simply maintaining
the day-to-day affairs of the government. Over a third
of the government expenditure or over Rs 5,10,000
crore goes for repaying loans or paying interest on them
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or subsidizing food, fuel and fertilizer for the poor.
Experts say that it is essential for India to spend more
on creating new assets to build the infrastructure in the
economy.
3.Spending right:When governments spend on building a countrys
infrastructure, it gives a push to the economic growth.
However, the spending for growth in India actually fell
over three months to December 2012. Totalexpenditure less subsidy and interest payments has
decelerated to 3% in the Sep-Dec 2012 period from
11.4% in Apr-Aug 2012, said Morgan Stanley, a global
bank in a note last week. This means Indias spending
for creating new assets to stimulate growth has gone
down.
What next:
When the budget is presented, you need to watch out for the
overall expenditure the government proposes to incur. It
should relatively lower than the previous year. It is also
important to see how the government proposes to allocate
resources. If the government allocates more money tostimulate growth by increasing the spending on the
infrastructure sector, that would be good news for the
economy.
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1. United States
United States of America is the largest importer of goods
and services and tops the list of countries for its highest
budget. It has a mixed economy which is backed by natural
resources and a very well developed infrastructure.
Revenues (million USD): 2,303,000
Expenditures (million USD): 3,599,000
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Deficit/Surplus (million USD): -1,296,000
2.2. JapanJapan is one of the largest economies in the world and
has a large industrial capacity. The country leads inscientific machinery, research and technology. It is also
known as the most technologically advanced producers
of machines in the world.
Revenues (million USD): 1,971,000
Expenditures (million USD): 2,495,000
Deficit/Surplus (million USD): -524,000
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2.3. ChinaChina is the worlds fastest growing economy and has
an upper hand in the in the manufacturing sector. Wellknown for its population growth, the country is the
largest exporter and manufacturer of goods. The
countrys rapid economic growth has led to severe
consumer inflation.
Revenues (million USD): 1,646,000
Expenditures (million USD): 1,729,000Deficit/Surplus (million USD): -83,000
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4.4. GermanyGermany is a major economic power in Europe and
ranks number four for its government budget. Thecountry has developed a very high standard of living
and is recognized for its small and medium enterprises.
The country boasts its highly skilled labour and its level
of innovation.
Revenues (million USD): 1,551,000
Expenditures (million USD): 1,588,000Deficit/Surplus (million USD): -37,000
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5. France
France has a mixed economy in which banking,
financial services and insurance are the key sectors of
the countrys economy. France has been a major
economic influence in Europe and also considered to bethe wealthiest nation there.
Revenues (million USD): 1,386,000
Expenditures (million USD): 1,535,000
Deficit/Surplus (million USD): -149,000
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6. Italy
Italy is a democratic republic and its economic influence
makes it a major regional power. The nation rapidly
transformed from agriculture based economy into one of the
worlds most industrialized nations. Italy has a free market
economy which focuses on exports of luxury products and
niche market.
Revenues (million USD): 1,025,100
Expenditures (million USD): 1,112,000
Deficit/Surplus (million USD): -86,900
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7. United Kingdom
United Kingdom is a partially regulated market economy, in
which, the service sector makes up more than 70 percent of
the countrys GDP. The automotive, pharmaceutical and
aerospace industries are a significant part of the United
Kingdoms economy.
Revenues (million USD): 986,500
Expenditures (million USD): 1,188,000
Deficit/Surplus (million USD): -201,500
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8. Brazil
Brazil is the largest country in South America and is known
as one of the fastest growing economies of the world. With
new generation tycoons and booming exports, Brazil has a
mixed economy. Since the nation has abundant natural
resources, its economy is growing rapidly.
Revenues (million USD): 978,300
Expenditures (million USD): 901,000
Deficit/Surplus (million USD): +77,300
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9. Canada
Canada has one of the most advanced economies in theworld and is recognized as an economic power
internationally. The nation ranks among the highest in
economic freedom, quality of life and government
transparency.
Revenues (million USD): 660,200
Expenditures (million USD): 747,800
Deficit/Surplus (million USD): -87,600
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10. Spain
Spain has a capitalist mixed economy that has a strong
economic growth. With a balanced government budgetwhich got inflation under control, Spain was admitted into
the Eurozone in 1999. Tourism in Spain plays a key role for
the countrys economic health.
Revenues (million USD): 545,200
Expenditures (million USD): 672,100
Deficit/Surplus (million USD): -126,900
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11. Australia
Australia is recognized as one of the wealthiest and highly
developed countries in the world. The nation has a marketeconomy which emphasizes on exporting commodities.
Tourism, education and financial services account to more
than 70 percent of the nations GDP.
Revenues (million USD): 473,200
Expenditures (million USD): 521,800
Deficit/Surplus (million USD): -48,600
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12. Russia
Russia has one of the most powerful economies worldwide.
Oil and gas is a major natural economy resource in Russias
market economy. Apart from oil and gas, timber and metals
make up for a major portion of the countrys exports.
Revenues (million USD): 382,800
Expenditures (million USD): 376,200
Deficit/Surplus (million USD): +6,600
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13. Netherlands
Netherland is a constituent country which leads Europeannations in attracting foreign direct investment. This
developed economy is one of the major investors in the
United States of America. Trade, shipping, banking and
fishing are the leading sectors of the Dutch economy.
Revenues (million USD): 381,300
Expenditures (million USD): 420,400
Deficit/Surplus (million USD): -39,100
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14. Norway
Norway is categorized as one of the worlds wealthiest
nations and is a perfect example of a mixed economy. The
revenue that the nation receives from its natural resourcesadds to be a major contribution to the economic health.
Revenues (million USD): 280,500
Expenditures (million USD): 209,500
Deficit/Surplus (million USD): +71,000
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15. Sweden
Sweden is ranked among other highly developed
countries worldwide. This country is has a mixed
economy that is export oriented. The nations
engineering sector accounts for more than 50 percent ofexports. Services and manufacturing industries
dominate the Swedish economy.
Revenues (million USD): 277,600
Expenditures (million USD): 277,100
Deficit/Surplus (million USD): +0,500
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. South Korea
South Korea is a developed country with a high standard of
living. It has an export driven economy which mainlyfocuses on automobiles, electronics, machinery, ships and
pharmaceuticals. The countrys credit rating suffers in times
of military crisis with North Korea.
Revenues (million USD): 267,900
Expenditures (million USD): 242,000
Deficit/Surplus (million USD): +25,900
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17. Mexico
Mexico is a regional power as a newly industrialized
country. The country is known to produce some of the most
complex components which are mostly engaged in research
and development activities. According to Goldman Sachs,
Mexico will have the fifth largest economy in the world by
2050.
Revenues (million USD): 263,200
Expenditures (million USD): 292,200
Deficit/Surplus (million USD): -29,000
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18. Belgium
Belgium is a prosperous commerce and cultural hub. The
nations strong globalized economy and transport
infrastructure are integrated with the rest of Europe. It is a
highly industrialized economy with a highly productive workforce.
Revenues (million USD): 249,600
Expenditures (million USD): 271,200
Deficit/Surplus (million USD): -21,600
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19. Saudi Arabia
Saudi Arabia is a wealthy nation with a concentration of
large oil reserves. Oil accounts to more than 70 percent of
government reserves and 95 percent of exports. The oil
sector in the country has allowed the economy to grow at a
rapid pace.
Revenues (million USD): 221,100
Expenditures (million USD): 218,700
Deficit/Surplus (million USD): +2,400
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20. Switzerland
Switzerland is one of the worlds richest countries and
largest exporters. Among other economies, its economy isconsidered to be the most competitive in the world.
Switzerland is high-tech and prosperous economy.
Revenues (million USD): 217,900
Expenditures (million USD): 214,500
Deficit/Surplus (million USD): +3,400
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21. Austria
Austria is a developed country with a high standard of
living. It has a well developed social market economy that
has a major influence on labour politics. Tourism plays an
integral part in terms of the countrys economic revenues.
Revenues (million USD): 202,600
Expenditures (million USD): 216,600
Deficit/Surplus (million USD): -14,000
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22. India
India is one of the fastest growing economies in the world
and is considered to be a newly industrialized country.
Textiles, telecommunications, chemicals, pharmaceuticals,transport, machinery and mining are among the major
sectors of the Indian economy.
Revenues (million USD): 196,400
Expenditures (million USD): 308,800
Deficit/Surplus (million USD): -112,400
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23. Turkey
Turkeys growing economy has given it recognition as a
regional power. Tourism is a key industry that attractsrevenue for the government and has experienced a rapid
growth in the last two decades. The nations economy is
becoming dependent on industries in major cities.
Revenues (million USD): 176,700
Expenditures (million USD): 187,100
Deficit/Surplus (million USD): -10,400
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24. Finland
Finland is ranked among other wealthiest countries in the
world despite it being a latecomer to industrialization. Theeconomic development was rapid and is considered to be one
of the most competitive nations in the world. It is also known
to a have high quality of life.
Revenues (million USD): 136,200
Expenditures (million USD): 137,600
Deficit/Surplus (million USD): -1,400
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25. Indonesia
Indonesia has a mixed economy and serves as the largest
economy in Southeast Asia. The industry sector contributes
the most for the countrys GDP. The rapidly developing
export oriented sector attracts foreign investment for the
nation.
Revenues (million USD): 134,200
Expenditures (million USD): 144,100
Deficit/Surplus (million USD): -9,900
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Measures taken positively by markets:
- Measures to reduce fiscal deficit
- Any increase in foreign investor participation
- Thrust to infrastructure- Roads, Power etc.
- Reduction in taxes
Measures taken negatively by markets:
Added pressure on fiscal deficit
New tax measures, mostly higher taxes or change in tax
policy
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Policy measures that hinder investment climate
Budget and market performance
- Last 20 years, MSCI India outperformed MSCI EM (MSCIEmerging Markets Index) 8 out of 20 times in the month
after budget
- 20 year average shows Indian markets are down 2.3% in
month after Budget underperforming EM by 1.5%,
- MSCI India outperformed MSCI EM (years): 1997, 1999,
2001 , 2004 , 2005, 2006, 2010, 2011
1.Measures taken positively by markets:- Measures to reduce fiscal deficit
- Any increase in foreign investor participation
- Thrust to infrastructure- Roads, Power etc.
- Reduction in taxes
(AFP PHOTO/ Punit PARANJPE)
2.Measures taken negatively by markets:Added pressure on fiscal deficit
New tax measures, mostly higher taxes or change in taxpolicy
Policy measures that hinder investment climate
(AFP PHOTO/Indranil MUKHERJEE)
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3.Budget and market performance- Last 20 years, MSCI India outperformed MSCI EM
(MSCI Emerging Markets Index) 8 out of 20 times in
the month after budget
- 20 year average shows Indian markets are down 2.3%
in month after Budget underperforming EM by 1.5%,
- MSCI India outperformed MSCI EM (years): 1997,
1999, 2001 , 2004 , 2005, 2006, 2010, 2011
(REUTERS/Ajay Verma)
4.1. UNION BUDGET 1992-93Finance Minister: Manmohan Singh
Stock market reaction: Feb 29, 1992: Sensex up (+)
9.37%
- Indian economy liberalized thorough reforms acrossthe board
- New import-export policy encouraged FDI
- Foreign investment limit in high-priority industries
was raised to 51%
- Private sector expansion and participation encouraged
- Licences and quotas were abolished
- Interest rates were made flexible
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- Banks got freedom to set lending rates according to
risk profile
2. UNION BUDGET: 1997 -98
Finance Minister: P Chidambaram
Stock market reaction: Feb 28, 1997: Sensex up (+) 6.54%
- This Budget was called a Dream Budget
- Budget presented a plan for economic reforms in India
- Tax policy (Direct and indirect) was reormed
- FII investment limit was raised from 24% to 30%
- Maximum income tax rate for individuals was cut from
40% to 30%
- Income tax rate for companies was decreased to 35% per
from 40%
- Peak customs duty was reduced to 40% from 50%
- Dividend tax on individual investors was abolished
- Budget launched Voluntary Disclosure of Income Scheme
or VDS to recover of black money
3. UNION BUDGET: 1998
Finance Minister: Yashwant Sinha
Stock market reaction: June 1, 1998: Sensex fell (-) 11%
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- Budget after India conducted Nuclear tests and US
sanctions
- Defence spending was hiked
- Allocation for Department of Atomic Energy was hiked by
68%
- Import duties were increased
4. UNION BUDGET: 2002
Finance Minister: Yashwant Sinha
Stock market reaction: Feb 28, 2002: Sensex fell (-) 3.87%
- Dividend distribution tax was abolished: Dividends were to
be taxed in the hands of the investors instead of taxing
companies and mutual funds
- Gujarat riots were an added pressure
5. UNION BUDGET 2012
Finance Minister: Pranab Mukherjee
Stock market reaction: March 16, 2012: Sensex fell (-) 1.9%
- Introduction of GAAR or General Anti Avoidance Rule
- GAAR to counter aggressive tax avoidance sent marketsinto a tizzy
- Budget sought to amend the Income Tax Act
retrospectively from 1962
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- Lack of clarity on retrospective tax on older deals further
dipped market sentiment
- A ballooning fiscal deficit at 5.1% of GDP further worried
investors