8 important terms to know about Union Budget
01 February, 2024
The Union Budget will be presented on February 1, at 11 am. This year, we can expect several policy announcements to strengthen the economy and build momentum for steady growth.
Before the Union Budget is tabled, our current Finance Minister Nirmala Sitharaman will shed light on the plans for the coming financial year and brief the house on various economic indicators such as inflation, debt, bad loans, deficits, divestment, and more.
Making sense of these important terms for the Union Budget can be difficult. However, decoding them is crucial to gain an understanding of the government's plans for the upcoming financial year. To help you get started, we have listed below some of the most important economic terms you should know about before the Union Budget is presented on February 1, every year.
Annual Financial Statement: The Union Budget is also known as the Annual Financial Statement (AFS). According to Article 112 of the Constitution, the government must present the AFS before Parliament every year. This statement is bifurcated into three parts, i.e., the consolidated fund, contingency fund, and public account. The government must provide expenditures and receipts for each of these parts during their budget presentation.
Economic Survey: The Economic Survey is one of the most important documents published by the Ministry of Finance. It contains detailed information regarding the country's economic performance over the last financial year. It is presented in the Lok Sabha and the Rajya Sabha just before the Union Budget. This document provides key insights into the state of affairs within the economy and highlights the decisions made by the Union Government.
Fiscal Policy: The Fiscal Policy specifies the adjustments made to government expenditure and revenue collection. It denotes how spending levels and tax rates have been increased or decreased to influence prevalent economic conditions such as inflation, unemployment, the demand for goods and services, economic growth, and more. As such, the Fiscal Policy also serves as a vital instrument to measure and monitor the nation's financial position.
Fiscal Deficit: Fiscal Deficit is the shortfall in a government's revenue compared with its total expenditure in a financial year. While having higher levels of expenditure as compared to income is not ideal, Fiscal Deficit is not always a negative indicator. Why is this so? Because the government expenditure for the development of infrastructure—such as roads, railways, and airports— may cause a higher Fiscal Deficit though it’s good for the country’s growth. Also, Fiscal Deficit should not be confused with debt, as the latter can be the result of many yearly deficits put together.
Current Account Deficit (CAD): The government's current account keeps track of trade by recording the value of imports and exports. As such, a Current Account Deficit is when the value of imports exceeds the value of exports. Simply put, the country has spent more money buying goods and services from other countries than it received from selling them.
Demand for Grants: It is presented to Lok Sabha along with the Annual Financial Statement. It is the formal request made by each Ministry or Department of the government to the Lok Sabha for funds to cover their planned expenditures. Per Article 113 of the Indian Constitution, these estimates of expenditure are to be included in the Annual Financial Statement. These expenditures require approval through a voting process.
Expenditure Budget: It consolidates the estimates made for different schemes or programs presented in the Demands for Grants. It organises these estimates on a net basis, combining both Revenue and Capital sections.
Receipt Budget: It includes the analysis of estimates of receipts in the Annual Financial Statement. This document breaks down details of both tax and non-tax revenue receipts, along with capital receipts. It explains the estimates and provides additional information, such as the arrears of tax and non-tax revenues, in line with fiscal responsibility rules.
The next financial year is just around the corner, and the Union Budget could provide the support needed to start this year on a promising note. A quick look at the previous Union Budget highlights should help you to get an idea.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
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