Budgeting
Key components and features of the Union Budget in India include:
Revenue and Expenditure: The budget provides details on the government’s expected revenue from various sources, such as taxes, non-tax revenue, and borrowings. It also outlines the planned expenditures in different sectors, including infrastructure, healthcare, education, defense, and social welfare programs.
Budgetary Allocation: The budget allocates funds to different ministries and departments for their operations and various projects. These allocations are based on the government’s priorities and policies for the fiscal year.
Fiscal Deficit: The budget includes information on the fiscal deficit, which is the difference between the government’s total revenue and total expenditure. It also provides details on how the government plans to finance this deficit.
Tax Proposals: The Union Budget may introduce new tax policies, revise tax rates, or propose changes to the tax structure. These changes can impact individual taxpayers, as well as businesses.
Economic Projections: The budget typically includes economic growth forecasts, inflation estimates, and other key economic indicators. These projections provide insights into the government’s expectations for the country’s economic performance in the coming year.
Policy Announcements: The Finance Minister often uses the budget speech to announce policy measures and initiatives that can affect various sectors of the economy. This can include changes in subsidy programs, investment incentives, and other policy reforms.
Sectoral Allocation: The budget outlines allocations for various sectors, such as agriculture, healthcare, education, infrastructure, and defense. These allocations reflect the government’s priorities and its plan to support different areas of the economy.
Social Schemes: The budget may include provisions for social welfare programs, such as subsidies, food security, healthcare, and education, aimed at improving the living standards of the population.
Plan and Non-plan Expenditure are two categories of government expenditure in India. The distinction between the two was made to prioritize and allocate resources towards developmental activities and programs in line with national priorities.
1.Plan Expenditure
Plan Expenditure is expenditure that is incurred on new or ongoing programs and schemes that are included in the Five-Year Plan. These programs and schemes are aimed at promoting economic growth, social welfare, and overall development. Some examples of Plan Expenditure include:
- Construction of new roads, bridges, and other infrastructure
- Investment in education and healthcare
- Development of agriculture and industry
- Poverty alleviation programs
2.Non-Plan Expenditure
Non-plan expenditure is expenditure that is incurred on the day-to-day functioning of the government and on existing programs and schemes. This category of expenditure includes:
- Salaries and pensions of government employees
- Interest payments on loans
- Defense expenditures
- Subsidies
- Grants to states
- Maintenance expenses
- Other routine administrative costs
3.Abolition of Plan and Non-Plan Expenditure
In 2017, the Government of India abolished the distinction between Plan and Non-plan Expenditure. This was done on the recommendation of the C Rangarajan Committee, which argued that the classification system was outdated and was no longer effective in promoting economic growth and development.
The Government of India now classifies its expenditure as Capital and Revenue spending. Capital Expenditure is expenditure that is incurred on the creation of new assets or the improvement of existing assets. Revenue Expenditure is expenditure that is incurred on the day-to-day functioning of the government and on the provision of public services.
The abolition of Plan and Non-plan Expenditure has been welcomed by many economists and experts, who argue that it will lead to a more efficient and effective allocation of resources. However, some critics have argued that the move could lead to a decline in investment in developmental activities
Revenue Receipts
Revenue receipts refer to the income or revenue generated by the government from various sources during a specific period, typically within a fiscal year. These receipts play a crucial role in funding the day-to-day operational expenses of the government, as opposed to capital receipts, which are used for capital investments and the creation of assets. Revenue receipts are considered a part of the government’s non-debt income and include the following key sources:
Tax Revenue: This is the most significant component of revenue receipts and includes the income earned by the government from various taxes. Tax revenue can be further divided into two categories:
- Direct Taxes: These are taxes levied on the income or profits of individuals and businesses, such as income tax, corporate tax, and wealth tax.
- Indirect Taxes: These are taxes imposed on goods and services, like the Goods and Services Tax (GST), excise duty, customs duty, and service tax.
Non-Tax Revenue: Non-tax revenue comprises income generated by the government from sources other than taxes. Some common sources of non-tax revenue include:
- Interest and Dividend: Income earned from investments in various financial instruments, such as bonds, stocks, and deposits.
- Fees and Fines: Revenues from charges for government services and penalties or fines for violations.
- User Charges: Fees collected from individuals or entities for using government-owned assets or services, like tolls on highways or entrance fees to public parks.
- Grants-in-Aid: Transfers or grants received from other governments or international organizations for specific projects or purposes.
- Revenue from State Lotteries: Income earned from state-run lottery schemes.
Grants from Central Government: State governments in a federal system often receive grants from the central government to meet specific expenses. These grants are also included in revenue receipts.
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