Union Budget, Economic Survey, and Related Financial Terms Explained

The Budget 2020, is going to be announced on 1st February 2020 at 11 A.M. by the Union Finance Minister, Nirmala Sitharaman. This is her second Union Budget to be presented in the Parliament. Budget is the most important statutory document which specifies the performance status of different sectors of the last fiscal year and the schemes or policies to be incorporated or the proposals to be incorporated in the coming fiscal year in the economy for the upliftment of weak sectors, to give continuous support for growth.

A Budget is prepared with consultation of all ministries and member groups of Cabinet based on the economic survey of the country. An Economic Survey is a documented report of the Finance Minister placed ahead of the Budget release, specifying the health report of the economy.

If you didn’t understand what all these terms Budget, Economic Survey, Government expenditures, etc mean, this post will give you a good dose of understanding for them all.

#1 Union Budget

Union budget is a document of Central Government issued before the common public by the Finance Minister of India through Parliament, to reveal the estimated government expenditures and receipts in the coming financial year.

It is not merely a statement of expenditures or receipts of government, rather it also considers the problems hampering the growth of different sectors in the economy, the changes or new policies schemes to be introduced and allocation of financial resources of government in affairs of economy.

#2 Economic Survey:

Economic Survey is an annual documented report placed by the Finance Minister, a day before the announcement of Union Budget. With all estimated figures and facts, the report states about performance status as well as well being of different sectors of the economy.

It measures the overall developments, successes, and failures of past initiatives, trends of agricultural, infrastructure, production, employment, money supply, growth, price, exports, foreign exchange, trade, and other relevant economic factors. Based on the economic survey policy incentives, programs and allocation of government funds are planned in the Union Budget.

#3 Constitutional Provision:

Article 112 of the Constitution of India prescribes for preparation and presentation of an annual financial statement in simple terms the Budget, by the President before the Parliament.

#4 Annual Financial Statement:

Prescribed under Article 112 of the Constitution of India, an annual financial statement (Union Budget) is to be prepared and be presented before the Parliament. The Statement consists of three funds –  Consolidated fund, Contingency fund, and Public account. For each fund estimated expenditures and receipts have to be recorded in the Annual financial statement.

#5 Consolidated Fund: 

All funds raised, granted, received and utilized by the government of India, is done through the Consolidated Fund. The fund restricts the flow of funds until the approval of Parliament is received.

#6 Contingency Fund:

Fund managed by the government which is kept aside for any unforeseen for urgent expenditure to be made during the financial year. Any expenditure incurred through this fund by the government has to be made with the approval of Parliament and has to be returned back from the Consolidated Fund.

#7 Public Account: 

The fund includes an investment of funds by the common public, they have to be managed by the government and paid back at some time to their owners. Any expenditure made through this fund requires the approval of Parliament.

#8 Revenue Receipt / Expenditure: 

All revenue expenditures or receipts of government that do not create or intend to create or reduce/sell off any asset of government are placed under the revenue receipts and expenditures. For instance, on receipt side, taxes, service payments by the public to the government can be called as revenue receipts of government, while on the revenue expenditure side it can be issue of salaries to government employees, issue of subsidies, interest payments by the government.

#9 Capital Receipt / Expenditure:  

All receipts and expenditures that liquidate or create an asset for the government can be accounted for under Capital revenues or expenditures. For instance, the government policy of disinvestment in the public sector or investment in some credit agency or financial project or technology, etc.

#10 Revenue Deficit:  

The Excess of revenue expenditures over revenue receipts causes to be a situation of revenue deficit. In a revenue account of government, all expenditures are to be incurred from all revenue receipts,  thus resulting in the revenue deficit in the revenue account to be zero.

#11 Fiscal Deficit:

When government funds (excluding funds in public account) fall short of its entire expenditure incurred or to be incurred, in such a situation government has to find an alternate source to raise funds. The funds in excess of government funds to meet such expenditures seek to a situation of Fiscal Deficit. 

#12 Primary Deficit:  

The government has to pay interest on its earlier borrowings, i.e., credits taken before being in a situation of fiscal deficit. So, the Primary deficit is Fiscal deficit fewer interest payments. A decrease in the Primary deficit indicates the progress of government and decline in Fiscal deficit.

#13 Finance Bill:  

A document presented before the Parliament, for the inclusion of new tax rules, proposed changes in tax structure or changes to be made in current tax rules for any respective financial year.

#14 Subvention: 

 Aid or support provided by the government to different sectors either through owned institutions or by placing schemes for private institutions. For instance, the issue of Credit Subsidy Scheme by government, for granting subsidized loans to farmers through both private and public banks. Losses under such policies are usually bared by the government which is reimbursed to the government through other policies.

#15 Public Debt:   

Public debt is sum total of all borrowings of the Union Government by way of market loans, issue of special bearer bonds, issue of other securities and loans taken by Reserve Bank of India. In short, excess of the difference of public borrowings to public expenditures /disbursal is Public Debt.

Plan your taxes for 2020 with Taxreturnwala.com

Email us at info@taxreturnwala.com