Budget Part 3 Flashcards
FRBM ACT
STAGFLATION / ECONOMIC SLOWDOWN
Unemployment (-)
Inflation (-)
Slow growth
To counter stagflation- DEMAND is created
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Tax rate cuts
Fiscal stimulus <
Govt expenditure
Fiscal deficit. VS. Fiscal stimulus
( TE - TR)
Eg:
Our house budget - Income - Expenditure.
Govt plan - Expenditure - Income
create assets FD = TE-TR ( borrowings)
Consumption exp
RD = RE - RR ( not create asset) consumption exp
Serious-threat to inflation
70% of fiscal deficit
WHY FRBM ACT
To bring fiscal discipline
OBJECTIVES
Reduce FD to 3% by 2008-9 ( annual reduction 0.3% of gdp.
RD Eliminate by 2008-9 ( annual reduction 0.5)
Nationally security
Flexibility
Calamity
AMENDMENTS
2015 - Targets extended to march 2018
2018 - RD target eliminated
FD to march 2021
N K SINGH COMMITTEE :
To review the FRBM ACT
They prescribed COUNTER CYCLICAL FD targeting
Escape clause - 0.5%
During calamities we can borrow extra 5% than the limit
Should be congrence between Monetary Policy and Fiscal Policy
CRITICISM
RD is more dangerous than FD So many criticised for removing RD target
Budget documents
Finance ministry
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Dept of economic affairs
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Budget division
Central government — budget before parliament — president will lay it
Finance minister will give budget speech
/ \
Part A. Part B
* progress. * tax
* schemes Proposals
DOCUMENTS SUBMITTED BY FINANCE MINISTER
Annual financial statements
Demand for grant
Finance bills
Macro eco
Framework
Statements under FRBM ACT <
Medium term fiscal policy / fiscal policy strategy statement.
Expenditure budget
Receipt budget
Statements of revenue forgone
Expenditure profile
Budget at a glance
Memorandum of explaining provisions in finance bil
Outcome budget
STATEMENTS SUBMITTED ALONG BUDGET
Afs + demand for grants +. Finance bill ( mandate of constitution )
DEMAND FOR GRANT. — Charged expenditure and expenditure to be voted will be submitted
Charged exp Exp to vote
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No vote only discuss. Vote and discuss
Charged on CFI (conso). Demand parl 1st
Demand parl 2 aacpt
Both are laid to parl by various ministries
FINANCE BILL — Imposition, abolition,
remission, alteration
Art 110(1)(a) __ money bill
Income tax. )
Corporate tax. ). Fixed by this bill
Custom duties. )
MACRO ECONOMIC FRAMEWORK
Growth of economy [ 4quarters 3months, compare with previous year quarter]
GDP growth rate [“]
Internal market
Stability
External market
Fiscal balance
MID TERM FISCAL POLICY/ fiscal policy strategy framework
Target for 6 fiscal indicators will be set
FD
RD
Primary deficit ( FD - past yr )
Tax revenues
Non tax revenues
Internal borrowing
C’govt debt
External borrowing
CR — borrowing, productive assets
Taxation expenditure (where tax money is used)
Lending
Fiscal }. Sound fiscal
Policies }. Management
EXPENDITURE BUDGET
RE & CE — to show net basis
RECEIPT BUDGET
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(Revenue)
Tax revenues
Non tax receipt
Capital receipt
STATEMENTS OF REVENUES FORGONE
Forgone bcoz of tax incentives
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Tax expenditure
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Merged with receipt budget
BUDGET AT A GLANCE
Overall picture of all these budgets will be given
MoU OF EXPLAINING PROVISIONS IN FINANCE BILL
taxation proposal
OUTCOME BUDGET
put input and get output ( eg agriculture produce)
Like that Finance ministry + niti aayog = budget
Countervailing duty
Encourage export — govt — subsidy
Cost of production for exporters |
^
Affected — producers of importing country
Imposed by — importing country
Anti dumping duty
Price dumping (profit) — Selling
