Transcript Union Budget 2008

Union Budget
B Sai Kumar Swamy
Triumphant Institute of
Management Education P Ltd
Budget Basics - 1
Budget includes
 Previous Financial Year
 Economic Review
 Assessment of Budget – Targets vs. Actuals
 Next Financial Year
 Economic Forecast
 Revenue and Expenditure Targets
 Components of Revenue and Expenditure
Budget Basics - 2
Constitutional provisions
Article 112
 Budget is mandatory
Article 265
 No Tax shall be levied or collected except by authority of law
Article 266
 Consolidated Fund of India
 Consolidated fund of the State
 Article 267
 Contingency Fund – President of India
Budget Basics - 3
Annual Financial Statement
 Under Article 112 of the Constitution, a statement of estimated receipts and
expenditure of the Government of India has to be laid before Parliament in
respect of every financial year which runs from 1st April to 31st March
 This statement is the AFS and is the main budget document
 Comprises of
 Consolidated Fund
 Contingency Fund
 Public Account
Upper House
 Vote on Account
 Appropriation Bill – Article 114
 Finance Bill – Article 110
Some Important Terms
 Public Account
 Finance Bill
 Revenue Budget
 Revenue receipt
 Revenue Expenditure
 Capital Budget
 Capital receipts
 Capital Expenditure
 Deficit
 Revenue  Revenue Expenditure – Revenue Receipt
 Fiscal  Total Expenditure – Total Receipts (excluding borrowings)
 Primary  Fiscal Deficit – Interest payments
 Fiscal Policy – Taxation & Govt. spending
 Monetary Policy – Interest Rates & Money Supply
 Debt Trap
Revenue & Expenditure
State of the Economy - Overview
 GDP growth of 9.5, 9.7, 9.2 and 6.7% in the last 4 years
 GDP growth projected – 7.2% (2009-10)
 GDP is estimated at 6164178 Crores ~ $1285 Bn
 The drivers of growth
 Services and Manufacturing
 Estd. To grow at 8.7% & 8.2 % resp.
 Growth rate in agriculture for 2007-08 is estimated at -0.2%
 Food grain production
 in 2008-09, estimated at 233.9 million tonnes
 Sugarcane - 249.48 million tonnes  -9%
 Cotton - 23.65 million bales 
State of the Economy - Overview
 Savings Rate – 32.5% of GDP
 Capital Formation Rate – 34.9% of GDP
 22.8 and 23.5% respectively in 2001
 Inflation
 2008-09 – 8.4% - Jan2011 – 8.23%
 Average of Apr-Dec 2009 – 1.6%
 Corr. CPI Inflation numbers are 9.1% and 11.4%
 Exports – -20.3%
 Imports – -23.6%
 Forex Reserves – 283.5Bn (298Bn)
 FDI - $21.0 Bn
 Fiscal Deficit – 6.5% (5.9% last year)
 Revenue Deficit – 4.6% (5.9% last year)
 Primary Deficit – 2.8% (2.5% last year)
 Estimated at 6.8, 4.8 and 3.0% at the time of presentation of 2009-10 budget
 FRBM?
Outstanding Liabilities
Where the Rupee comes from
Where the Rupee goes to
FM targets for this budget
 Reduction in Fiscal Deficit
 4.8% in 2011-12 and 4.1% in 2012-13
 Reduction in Inflation
 Tame food prices
 Target double digit growth
 Growth currently in the 8-9% band
 Expected to fall to 7-8% if high inflation persists
 Infrastructure to be the key
 Roads, Ports, Airports, Railways
 Infrastructure Debt Fund
 Companies Bill
 GST
 DTC
If you were to be the FM
Inflation
 Challenge is to curb inflation without restricting growth
 Food Grains
 Supply side incentives
 Farm subsidies - Fertilisers
 Import Duty Cuts
 Infrastructure – Stocking Food-grains
 Fuel Subsidy
Fiscal Deficit
 Govt. Spending
 Tax Revenue
 Search for new avenues – Gold; Auto; FMCG
 Disinvestment
Info on Budget
Complete Budget
 http://indiabudget.nic.in/es2009-10/esmain.htm
State of the Economy
 http://indiabudget.nic.in/es2009-10/chapt2010/chapter01.pdf
Where the Rupee comes from
 http://business.rediff.com/report/2010/feb/26/budget-2010where-the-re-will-come-where-the-re-will-go.htm
Q&A
Receipts & Expenditure
Receipts & Expenditure
Receipts & Expenditure
FRBM (Fiscal Responsibility and Budget
Management) Act
Purpose
 Impose limits on Fiscal & Revenue deficit
 Elimination of Revenue Deficit by 2009
 Reduce this by 0.5% every year
 Reduction of Fiscal Deficit to 3% of GDP by 2009
 Reduce this by 0.3% every year
 Curb borrowing from RBI
Review
 Interim Budget - 2009-10
 Fiscal Deficit – 5.5% ; Revenue Deficit – 4.4%
 FD- 381408 Cr – Public Debt- 28,98,798Cr – Debt- 42% of GDP
 Return to FRBM postponed to post recovery years
Fodder for Thought
 US – Gramm-Rudman-Hollings
 EU – Growth & Stability Pact
Important Links
 http://www.rediff.com/money/2004/jan/31bud.htm (old one but has all the relevant
info)
 http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/78937.pdf
 http://www.business-standard.com/india/news/review-frbm-act-centre-statestold/347282/
 http://www.deccanchronicle.com/neutral/fiscal-deficits-rise,-it’s-time-scrap-frbm-act066
 http://www.hinduonnet.com/fline/fl2116/stories/20040813004711700.htm (Excellent
critique of the FRBM Act)
 http://specials.rediff.com/money/2009/feb/10slide1-what-is-a-vote-on-account.htm
 http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=23199 (India’s
external Debt)