Friday, 22 February 2013

Budget: 10 terms we should know

There are many terms that an individual hears at the time of the Union Budget. Knowing what they mean could be helpful to understand the impact on the economy.
Here are ten such top terms (in no particular order) to look at:
Disinvestment
The process of selling the stake of the central government in companies that it controls or in some cases where it has a small holding refers to disinvestment. The amount that is raised by selling the stake is then applied for either meeting normal expenditure of running the government or for special projects like giving additional capital to banks. This has become a significant source of revenue for the government and in 2012-13 the government put an estimate of Rs 30,000 crore on the amount that would be raised through disinvestment.
Subsidies
These are the amounts spent by the government to provide goods and services to the people of the country at prices that are lower than the market rates. There are various areas in which the subsidies are spent and this includes food, fertilisers, petroleum products and in the year 2012-13 it was estimated that the amount spent on subsidies would be Rs 1.9 lakh crore.
Tax revenue
The amount that the government raises through levying taxes is known as the tax revenue. The taxes through which the amount is raised includes income tax, corporation tax, excise duty, customs duty and service tax. In the year 2012-13 it was estimated that the total tax revenue would be around Rs 7.7 lakh crore.
Plan expenditure
This is the expenditure that is incurred by the central government in consultations with the Planning Commission for projects and in areas related to the achievement of the goals set out in the 5 year plans. The expenditure here is expected to result in creation of better infrastructure and facilities across the country. In 2012-13 the total plan expenditure was estimated at Rs 5.2 lakh crore.
Non-plan expenditure
This is the amount spent by the central government for the day to day running of the country and it is based on what the priorities of the government are. Expenses like salaries, pension, administrative costs, defence expenses, subsidies are all under non plan expenditure. A total of Rs 9.7 lakh crore was estimated to be spent under the non-plan expenditure in 2012-13.
Debt servicing
The amount of debt servicing of the country that is mentioned in the Union Budget consists of the total of the capital repaid during the year along with the interest payments made on loans. This shows the amount that is spent in managing the debt of the country. In 2012-13 the debt servicing expense was estimated at Rs 4.44 lakh crore or 34 per cent of the total revenue expenditure of the government.
Revenue deficit
This is the difference between the revenue expenditure of the government and the revenue receipts that are earned during the year. It shows how much the regular expenses are more than the regular receipts. In 2012-13 the revenue deficit was at Rs 3.5 lakh crore or 3.4 per cent of the GDP.
Fiscal deficit
This is the difference between the total expenditure of the government in a year and the revenue receipts and the recoveries of loans. This also represents the amount that the government will have to borrow to fund its shortfall. The lower the revenue deficit the better it is for the country and in the year 2012-13 the fiscal deficit was estimated at Rs 5.13 lakh crore or 5.1 per cent of the GDP.
Primary deficit
This is the amount that is arrived at when the fiscal deficit is reduced by the interest payments for the year. It shows the amount of the deficit that arises on account of the activities other than the interest payments and a large difference between the fiscal deficit and the primary deficit is a worrying sign that interest payments have become very large in the economy. In 2012-13 the primary deficit was estimated at Rs 1.93 lakh crore or 1.9 per cent of the GDP.
Deductions
This refers to the amounts that will be allowed as a reduction from the total taxable income of the taxpayer. The final tax is calculated on the taxable income after considering the deductions so this helps to reduce the taxable income and consequently the tax to be paid and hence deductions are eagerly awaited by all taxpayers so that they can make the most out of it.

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