Interim Budget 2024: A glossary of all the important terminology

Interim Budget 2024: A glossary of all the important terminology

Interim Budget 2024: A glossary of all the important terminology

On February 1, Finance Minister Nirmala Sitharaman will deliver the interim Budget 2024.

On February 1, 2024, Finance Minister Nirmala Sitharaman is expected to unveil the Interim Budget 2024, taking into consideration the potential for end-of-year general elections.

The Finance Minister is anticipated to speak about a number of fiscal indicators during the budget speech, which will be delivered in Parliament. These indicators include bad loans, revenue receipts, capital expenditures, inflation, and the fiscal deficit.

To have an understanding of the government's spending intentions for the next fiscal year, it is essential that one comprehends these concepts.

The Union Budget is also known as the Annual Financial Statement (AFS) for a certain financial year. The government presents it to showcase its spending and income during the fiscal year. In accordance with Article 112 of the Constitution, an AFS for each fiscal year that runs from April 1 to March 31 must be presented to Parliament.

The projections of the government's accounts for the next fiscal year, referred to as the budget estimates, are also included in the budget, or AFS. It is significant that the Parliament must approve the budget for the next fiscal year. The government is not allowed to take money out of the Consolidated Fund of India without its consent.

One of the Finance Ministry's key documents is the Economic Survey. Annually, it is issued prior to the Union Budget. Comprehensive details of the Indian economy during the preceding fiscal year are provided by the Economic Survey. The economic prognosis and present status are provided by the Economic Survey. The Chief Economic Advisor oversees a team that creates the paper.

One day before to the unveiling of the Union Budget, this paper is handed to both Houses of Parliament. The first Economic Survey was introduced in 1950–1951, and it continued to be published with the Union Budget until 1964.

The Economic Survey is a helpful resource for the general public to comprehend the status of Indian economy and the effects of Central Government policies.

escalation

A quantifiable indicator of how quickly goods and services in an economy rise over time, inflation is often stated as a percentage. An rise in inflation is the price of a certain basket of commodities rising as a result of either internal or external economic forces.

A rise in inflation is a sign of a falling value and buying power of the national currency. Even if the phrase is more closely associated with central bank policy, it wouldn't be shocking if the finance minister brought it up in the budget address.

Treasury regulations

Fiscal policy is a key tool for tracking the nation's economic health as it essentially lays out anticipated taxes and expenditure by the government. In addition to referring to changes in tax rates and expenditure amounts, fiscal policy also describes how government actions affect the state of the economy, particularly the demand for goods and services overall, employment, inflation, and economic growth.

It is closely related to monetary policy, which is how the Reserve Bank of India (RBI) controls the amount of money in circulation in the nation. If the recession persists, the government could use an expansionary fiscal strategy by lowering taxes in order to boost overall demand.

Budgetary shortfall

A fiscal deficit occurs when a government's total outlays, net of borrowing from outside sources, exceed its total receipts. Nonetheless, debt—which may be the result of a series of yearly deficits—should not be interpreted in the same way as the fiscal deficit.

Because the overall money collected is insufficient to cover the government's revenue and capital expenditures, maintaining a sustainable fiscal deficit ratio is critical for emerging nations like India.

Developing nations often incur fiscal deficits to support the construction of assets because governments need substantial financial resources for the development of infrastructure. For this reason, some economists contend that rather than being a negative indication, the budget deficit is a trend that points to growth.

It is desirable for the budget deficit to be limited at no more than 4% of GDP.

Breaking

Disinvestment is a procedure wherein current assets are sold. Investing is the reverse of this.

The government is contemplating selling several of its assets that have grown dysfunctional over the years.

Investing in capital

The term "capital expenditure" (capex) describes the funds that the government uses to purchase, build, or renovate tangible assets like real estate, new infrastructure, or equipment.

Long-term expenses are categorized as capital expenditures, which typically include government spending on infrastructure and development projects as well as other asset creation initiatives.

Spending by the government on large-scale projects is often categorized as capital expenditure.

These kinds of costs are not often recurrent. Even though many businesses use the macroeconomic word "capital expenditure," or "capex," it is significant in the context of budgeting.

Customs charges

A tax known as customs duty is levied on the import or export of certain products into the nation. moves. These expenses are ultimately transferred to the final client. Customs tax is outside the purview of the Goods and Services Tax (GST), hence the government is free to make adjustments in the budget presentation. This is a significant portion of the budget, and the news on customs taxes will be keenly anticipated by many industries.

GST (Goods and Services Tax)

The Budget does not include any revisions to the Goods and Services Tax (GST), in contrast to Customs. Changes to the GST structure and slabs are decided by the GST Council.

Income Tax, or Direct Tax

Income tax and corporation tax are examples of direct taxes. It's unlikely that the administration will make any significant income tax announcements this year. Still, certain adjustments are reasonable.

deficit in the current account

A country's trade is measured by its current account deficit (CAD), which occurs when the value of imports surpasses the value of exports in terms of commodities and services. It is a part of the nation's payments balance.

revenue decline

When the government's revenue production or net income falls short of its projected net income, a revenue shortfall arises.

This is the circumstance in which the amount of income or expense that is actually received does not match the amount that is budgeted. Determining whether the government is spending more than its normal revenue or not is based on this important metric.

excess revenue

The opposite of a revenue shortfall is a revenue surplus. It occurs when the government's revenue output or net received income surpasses its projected net income. Real income and expenses are higher than projected in the budget.

Planned and unplanned expenses

Plan and non-plan expenditures are the two main categories of expenditures.

Budget estimates are included in plan expenditures; they are decided upon after consultation with all ministries or stakeholders.

Conversely, non-plan spending include capital expenditure as well as revenue expenditure for the most part.

These are the costs that the government bears for paying interest, pensions, statutory transfers to states and unions, and staff wages.

A significant portion of government financial expenditures are non-plan expenditures. The largest costs falling under this category are interest payments, loan repayment, and defense costs.