Union BudgetB Sai Kumar Swamy

Triumphant Institute of Management Education P Ltd

Budget Basics - 1Budget includes

Previous Financial Year Economic Review Assessment of Budget – Targets vs. Actuals

Next Financial Year Economic Forecast Revenue and Expenditure Targets Components of Revenue and Expenditure

Budget Basics - 2Constitutional provisions

Article 112 Budget is mandatory

Article 265 No Tax shall be levied or collected except by authority of law

Article 266 Consolidated Fund of India Consolidated fund of the State

Article 267 Contingency Fund – President of India

Budget Basics - 3Annual Financial Statement

Under Article 112 of the Constitution, a statement of estimated receipts and expenditure of the Government of India has to be laid before Parliament in respect of every financial year which runs from 1st April to 31st March

This statement is the AFS and is the main budget document

Comprises of Consolidated Fund Contingency Fund Public Account

Upper HouseVote on AccountAppropriation Bill – Article 114Finance Bill – Article 110

Some Important Terms

Public Account Finance Bill Revenue Budget

Revenue receipt Revenue Expenditure

Capital Budget Capital receipts Capital Expenditure

Deficit Revenue Revenue Expenditure – Revenue Receipt Fiscal Total Expenditure – Total Receipts (excluding borrowings) Primary Fiscal Deficit – Interest payments

Fiscal Policy – Taxation & Govt. spending Monetary Policy – Interest Rates & Money Supply Debt Trap

Revenue & Expenditure

State of the Economy - OverviewGDP growth of 9.5, 9.7, 9.2 and 6.7% in the last 4 years

GDP growth projected – 7.2% (2009-10) GDP is estimated at 6164178 Crores ~ $1285 Bn

The drivers of growth Services and Manufacturing Estd. To grow at 8.7% & 8.2 % resp.

Growth rate in agriculture for 2007-08 is estimated at -0.2%

Food grain production in 2008-09, estimated at 233.9 million tonnes

Sugarcane - 249.48 million tonnes -9% Cotton - 23.65 million bales

State of the Economy - OverviewSavings Rate – 32.5% of GDPCapital Formation Rate – 34.9% of GDP

22.8 and 23.5% respectively in 2001 Inflation

2008-09 – 8.4% - Jan2011 – 8.23% Average of Apr-Dec 2009 – 1.6% Corr. CPI Inflation numbers are 9.1% and 11.4%

Exports – -20.3% Imports – -23.6%Forex Reserves – 283.5Bn (298Bn)FDI - $21.0 BnFiscal Deficit – 6.5% (5.9% last year)Revenue Deficit – 4.6% (5.9% last year)Primary Deficit – 2.8% (2.5% last year)

Estimated at 6.8, 4.8 and 3.0% at the time of presentation of 2009-10 budgetFRBM?

Outstanding Liabilities

Where the Rupee comes from

Where the Rupee goes to

FM targets for this budgetReduction in Fiscal Deficit

4.8% in 2011-12 and 4.1% in 2012-13

Reduction in Inflation Tame food prices

Target double digit growth Growth currently in the 8-9% band Expected to fall to 7-8% if high inflation persists

Infrastructure to be the key Roads, Ports, Airports, Railways Infrastructure Debt Fund

Companies BillGSTDTC

If you were to be the FM

Inflation Challenge is to curb inflation without restricting growth Food Grains

Supply side incentives Farm subsidies - Fertilisers Import Duty Cuts Infrastructure – Stocking Food-grains

Fuel SubsidyFiscal Deficit

Govt. Spending Tax Revenue

Search for new avenues – Gold; Auto; FMCG

Disinvestment

Info on BudgetComplete Budget

http://indiabudget.nic.in/es2009-10/esmain.htm

State of the Economyhttp://indiabudget.nic.in/es2009-10/chapt2010/chapter01.pdf

Where the Rupee comes fromhttp://

business.rediff.com/report/2010/feb/26/budget-2010-where-the-re-will-come-where-the-re-will-go.htm

Q & A

Receipts & Expenditure

Receipts & Expenditure

Receipts & Expenditure

FRBM (Fiscal Responsibility and Budget Management) ActPurpose

Impose limits on Fiscal & Revenue deficit Elimination of Revenue Deficit by 2009 Reduce this by 0.5% every year

Reduction of Fiscal Deficit to 3% of GDP by 2009 Reduce this by 0.3% every year

Curb borrowing from RBI

Review Interim Budget - 2009-10 Fiscal Deficit – 5.5% ; Revenue Deficit – 4.4% FD- 381408 Cr – Public Debt- 28,98,798Cr – Debt- 42% of GDP Return to FRBM postponed to post recovery years

Fodder for Thought US – Gramm-Rudman-Hollings EU – Growth & Stability Pact

Important Links

http://www.rediff.com/money/2004/jan/31bud.htm (old one but has all the relevant info)

http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/78937.pdf http://www.business-standard.com/india/news/review-frbm-act-centre-states-told/

347282/ http://www.deccanchronicle.com/neutral/fiscal-deficits-rise,-it’s-time-scrap-frbm-act-

066 http://www.hinduonnet.com/fline/fl2116/stories/20040813004711700.htm (Excellent

critique of the FRBM Act) http://specials.rediff.com/money/2009/feb/10slide1-what-is-a-vote-on-account.htm http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=23199 (India’s

external Debt)