CENTRAL BUDGETING AND FUNDING

PRESENTED BY Dr. Umesh Mishra (11) Dr. Anita Chaudhery (02) Dr. Rashmi Dwivedi (07)

Indian central Budget

The Union Budget of India also called the general India budget is presented each year on the last working day of February. The budget is presented by the Finance Minister of India in Parliament. Budget is most economic event in the country which outlines all the economic planning of the Government of India for the next year. It is not only important for corporates but for individuals from all sections of the society.

Origin and History

The first general budget of India was presented by the India's first Finance Minister Sir R.K. Shanmugham Chetty on November 26, 1947. Since then, 28 Union Finance Ministers have been presenting the budget every year. Initially, much attention was given to the agricultural sector but as later on, the focus shifted to the other sectors including the industrial, financial and other sectors.

State Level Budget

Each state government maintains its own budget, prepared by the state's minister of finance in consultation with appropriate officials of the central government. Primary control over state finances rests with the state legislature in the same manner as at the central government level. State finances are supervised by the central government, however, through the Comptroller and the Auditor General of India; the latter reviews State Government accounts annually and reports the findings to the appropriate state governor for submission to the State's Legislature. The Central and State Budgets consist of a budget for current expenditures, known as the budget on revenue account, and a capital budget for economic and social development expenditures.

Separate Budget for Railway and Postal Department The Indian Railways, the largest Public-Sector Enterprise, and the Posts and Telegraph Departments have their own budgets, funds, and accounts. The appropriations and disbursements under their budgets are subject to the same form of parliamentary and audit control as other government revenues and expenditures.
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 Procedure For Passing of Budget

The annual India budget has to be passed by the House of the parliament before it can come into effect on April 1, the start of India's financial year. The Indian parliament has one month to review and modify the government's budget proposals. If by April 1, the parliamentary discussion of the budget has not been completed, the budget as proposed by the minister of finance goes into effect and subject to retroactive modifications after the parliamentary

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Central Budget Structures Overview The House 1 budget is loaded prior to the beginning of the fiscal year. This serves as the effective budget until such time as the GAA is approved in law. If the GAA is adopted late, ANF may choose to allot funds for spending as necessary using the House 1 budget figures supported by an adopted interim budget. Once the GAA is approved, the House 1 budget is backed-out and the GAA figures are loaded to reflect the current fiscal year original budget.

Health budget
The federal budget is on an unsustainable path, primarily because of the rising cost of health care.
Projected Federal Spending Under One Fiscal Scenario (Percentage of gross domestic product)

 Budget Office! Mission To provide prompt and accurate financial services to the University, to include oversight of department/college budgets, advice on proper use of State funds, timely processing of budget documents, and effective reporting of expenditures and revenue. Responsibilities The Budget Office is responsible for budget planning, administration and reporting. This includes preparation and loading of the campus budget; (i.e. original, permanent new funds, one-time funds, Project Authorizations, Professional Development Grants, etc.), monitoring expenditures, setting up new accounts, logging and verifying Personnel Transaction Forms, assisting

 PRINCIPLES FOR BUDGET CUTS Most of these principles have, in the past, been broadly shared, and feedback received from various groups, including the Budget Council, the Faculty Senate, the Administrative Council, and union representatives, as well as in open sessions for faculty and staff. Seek from faculty, staff, and administrators recommendations on possible cost saving efficiencies from business practices, contracts that could be dropped or renegotiated, and/or areas of work that can be reduced, slowed, or eliminated. As much as practical, consider the budget reduction to occur over a several year period by thoughtfully employing this years resources in light of likely future cuts. Employ significant, but prudent, share of the University Contingency Reserve in making budget reductions.

 To the extent practicable, safeguard faculty and staff in permanent positions. Depending on the size of the budget cut, reductions in course choice and timing are likely; however, to the extent possible, protect the ability of students to make normal degree progress. Pursue revenue enhancements and diversifying the Universitys resource streams by increasing gifts and contributions, grants and contracts, international enrollments, revenue from outsourcing and any CSU approved student fee increase, as well as other strategies, including possible website advertising. Continue to position the University for the future by making select program investments in accord with the University Strategic Plan.

 In the near term, curtail adoption and implementation of new programs; where new investments are necessary, offsetting savings from current programs are likely to be required. Keep an inventory of cuts and other accommodations so that consideration may be given to restoring funding in the future. To assure there are no division budget reductions that place unacceptable burdens on other divisions, discuss the impact of budget cuts before recommending them.

POSSIBLE BUDGET REDUCTION STRATEGIES Reduce and/or delay equipment purchases. Freeze vacant positions. Reduce general fund supported travel. Reduce general operating expenses. Closely review all service contractse.g., Hershey, Hobson, Oracleand all organizational memberships, stipends, and special consultants. Reduce work schedules if employees prefer, e.g., 12 months to 10 month employment and voluntary furloughs.

 Emphasize recycling and energy savings, e.g., reduced operating hours and adjusted lighting and temperature levels. Review all appliance usage and costs. Defer maintenance that doesnt put the campus at serious risk. Combine organizational units to achieve efficiencies and/or where there is overlapping of responsibilities, including colleges, divisions, programs, and offices. Reduce assigned time and/or sabbaticals, and possibly deny sabbaticals shorter than one year.

 Reduce workforce, where applicable, within collective bargaining agreement rules. Suspend or eliminate low enrollment and other programs. Review and adjust as appropriate the opening hours of the library, health center, computer labs, and other service units. Hold retreats and other university events on campus.

 Reduce FTES target. Review and adjust as needed the number of positions in administrative offices. Scale back student recruitment and other outreach efforts.

Know the Budget

The Economy Survey 2008-09 What is Budget? How is budget formulated? Budget assumptions Budget Proposals In nutshell

Key Figures from the 2009/10 Federal Budget of Republic of India

And Export Highlights

Budget Facts
Final Budget for Year 2009-2010 Presented By Honb. Finance Minister Mr. Pranab Mukharji Put on Desk as on 6th July , 2009

Key Facts of Economy

Name of Economy :- Republic of India Type of Economy :- Open Economy **

Size of Economy :- $ 1 Trillion

Population :- 1.15 Billion GDP 2008-09 :- Rs.53,21,753 crore

Growth Rate
Growth Achieved in 2008-09 ( Non Audited ) is 6.7 % Target was set at 9.0% for 2008-09 Slowest Growth rate in 6 years Target set for 2009-10 is 8.0%

Budget Estimates for 2009-10

Total Receipts :- Rs. 10.21 Trillion Revenue Receipts :- Rs. 6.14 Trillion Capital Receipts :- Rs. 4.06 Trillion Borrowings & Liabilities :- Rs.4.01 Trillion Total Expenditure :- Rs. 10.21 Trillion Plan Expenditure :- Rs. 3.25 Trillion Non Plan Expenditure :- Rs. 6.96 Trillion

 Democracy is the art and science of mobilising the entire physical, economic and spiritual resources of various sections of people in the service of the common good of all. Arthasasthra, Kautilya quoted by the FM in Budget speech

Economic Survey
The Economy sees signs of revival Growth at 6.7% of GDP Predicted growth -7.75% subject to global economic recovery Agri growth 1.6% Industrial growth: 2.4% -Mfr: 2.3%; Mining:2.3%;Electricity:2.8% Credit 17.3% Savings rate 37.8% of GDP (07-08) Investment rate 39.3% of GDP (07-08) Households covered under NREGP 4cr Dip in Private consumption Dip in Exports significantly.

The Survey adds

Growth path takes a U-shape Tax structure may be simplified Support for commodity derivatives market Higher FDI in Insurance could be proposed PSU disinvestment may be pushed Fiscal Deficit 4.8% 1.4% of large projects ahead of schedule while 50.7% are delayed Power sector in Govt. growth was just 2.3% while in private sector 12.1% Reform subsidies

Financial Sector- Survey suggestions

Reform regulatory regimes: Bring all financial regulations under SEBI Passage of the Banking regulations Bill 2005 Liberalise and develop spot and futures currency markets ( exchange traded) Introduction of repos and derivative in corporate debt Introduce standardised credit default swaps tradable on exchanges Auction rights to commercial borrowing within already defined limits, with in-built preference for long term borrowing; auction of rights to invest in govt.securitiies by FIIs HNIs could be allowed to register and invest directly through authorised Indian Investment intermediaries Align voting rights in Banks with equity holdings Allow trading of direct credit obligations among banks and other financial institutions Link small savings rates of interest to government debt instruments or bank deposit rates of similar maturity.

What is a Budget?
It is an estimate of future revenues and expenditure over a specific period. Budgets are usually prepared on annual basis for governments both Centre and State and annual and monthly basis for business enterprises. It is convention to present it on the last day of February every year preceded by Economic Survey of the year. During the current year however it is presented this month because of the Government coming to power effectively after the elections in May 2009.

 Annual Financial Statement: Governments receipts and expenditure presented to the Parliament Consolidated Fund; Contingency Fund; and Public Account Consolidated Fund: Summation of all revenues, money borrowed and receipts from loans it has given. All State expenditure is given from this fund Contingency Fund: Any urgent and unforeseen expenditure is met from this Fund and is at the disposal of the President of India. Public Account: It is a collection of deposits like the Public Provident Fund. Consolidated Fund is split into revenue and capital budgets. Revenue Budget consists of all revenue account; Capital budget or capital account includes non-revenue receipts and expenditure. Revenue Account: All receipts like taxes and expenditure like salaries, subsidies, interest payments that does not involve creation of any assets Capital account: Receipts from liquidating (selling) assets or shares of a public sector company and spending to create assets and lending to receive interest.

Budget Nomenclature

 Direct Taxes: Taxes that you and I pay to the Government directly: income tax; wealth tax; Gift tax, Fringe Benefit tax (FBT), Securities Transaction Tax,etc Indirect Tax: It is essentially a tax on our expenditure; like customs, excise, and service tax Corporate tax is the tax that all companies pay on their profit Excise Tax: Tax levied on all manufactured goods Minimum Alternate Tax: (MAT) If a company pays less than 10% of its profits as income tax, it has to pay a minimum of 10% on book profits. (2009-10 Budget changed this percentage)] VAT and GST: Value added is a transparent form of tax on the sales based on the difference between the value of inputs used to produce particular goods and the output produced; Goods and Services Tax on the other hand, contains the entire element of tax borne by a good including a Central and State level tax. There are also non-tax revenues: Dividends of the PSUs; revenues from the public services etc.

Taxes

Expenditure
A Central Plan is the Governments expenditure that includes a five-year road map. This is met both from budget and nonbudgetary sources (State owned enterprises) Governments support to the Central Plan is known as Budget support. Plan expenditure: It is the amount the centre sets aside to States and UTs split into revenue and capital components in addition to the budget support. Non-Plan expenditure: All those bills the government has to pay under the revenue expenditure: interest payments, subsidies, salaries, defense and pension. Most of the capital expenditure goes for Defense.

Deficits
Revenue Deficit: Ideally all revenue expenditure must be met from revenue receipts. Where it falls short, it has to raise a debt from the public. Primary Deficit: Fiscal Deficit-Interest payments on earlier borrowings. If this is growing it means that our fiscal strength is bad. FRBM Act 2003 specifies that revenue expenditure shall be met fully out of revenue receipts only. Any borrowing should be done only to meet capital expenditure. The Act also mandates 3% fiscal deficit after 2008-09 in order to maintain fiscal stability. The global financial crisis and our economys melt down has forced to abandon this fiscal discipline in 2008-09. Now the Fiscal deficit is 4.8% and is expected to rise to beyond 6%. Fiscal Deficit: Living beyond the means Non-borrowed receipts-(revenue receipts+ loan repayments+ miscellaneous capital receipts, primarily disinvestment proceeds) falling short of expenditure. The excess of total expenditure over total non-borrowed receipts is called fiscal deficit.

Rural and Agriculture Sectors

Allocation under NREGP hiked to Rs.39100cr (144%) Target of Farm Credit Rs.3.25cr (up from 2.87cr) Allocation for PM Gram Sadak Yojana up by 59% to Rs.12000cr Direct transfer of fertiliser subsidy to farmers Accelerated irrigation benefit programme hiked from interim budget by Rs.1000cr. Rural Employment gets a boost

Banking: Focus on Inclusive Growth

Rs.100cr to expand rural branches No-frills accounts under Financial inclusion to expand SHG-Bank linkage programme to cover 50% of women in next five years Rs.4000cr to SIDBI from RIDF funds for giving boost to MSME sector. First time repayment culture is recognised by the Government when it extended 1 percent subvention to farmers who promptly repay their loans to Banks.

Infrastructure
60% refinancing of PPP projects (financed by the commercial banks) by the IIFCL; 23% increase in National Highways Development Programme Allocation under JNNURM up by 87% to Rs.12,887cr 160%hike in allocation to Accelerated Power Development and Reform Programme REC to accelerate the Rural Gramin Vidyudikaran Yojana

 National Female Literacy Mission to be launched Student Loans to weaker sections: Over 5lakh students to benefit Grants in aid to minority education institutions and national fellowships for students from the minority community Allocation to Aligarh Muslim University to establish its branches in WB and Kerala Modernization of Employment Exchanges in PPP mode to ensure job seeker registration on-line National Rural Health Mission Interim Budget outlay of Rs.12070cr hiked by Rs 2057cr. National Action Plan on Climate Change would be launched. National Ganga River Basin Authority and National River and Lake authority allocated Rs.335cr.

Education and Health Sectors

Personal IncomeTax(Individual ; HUF Artificial Juridical Person) Basic Tax Exemption Limit (in INR- Lacs) No Surcharge on Personal Income Tax (to be removed in phased manner) (persons covered: Firm and Local Authority also) (AY 2010-2011)

Direct Tax Proposals

Assessees Earlier( 2)00910)lakh s 2.25 1.50 1.50 Changed( 2001011)lakhs 2.40 1.80 1.60

Sr.Citizen Women Others

Other Taxes
MAT increased to 15% from 10%, carry forward expenditure to 10years Fringe Benefit Tax abolished Commodity Transaction Tax abolished Taxation on LLPs to be same as for Partnership companies Extension of benefits of sunset clause under Sec 10A and 10B for EOUs and those in Free Trade Zone Deduction in respect of contribution to political parties Tax benefits of New Pension policy available to private/public employees only Service tax coverage extended to Continental shelf of India and Export Economic Zones

Estimates
Fiscal Deficit to be 6.8% of GDP compared to 2.5% last fiscal Total expenditure goes up by 36% Food Security Act to be introduced: People below poverty line to be provided rice and wheat up to 25kg per month. Defence outlay hiked to Rs.1,41,703cr from Rs.1,05,600cr. Interest payments would be 36% of non-plan expenditure. (R.2.25lakh crores) Unique Identity Number to be issued to all citizens to improve access to citizenship services universally in the next two years. Allotted Rs.500cr.

Comments
Budget is one of missed opportunities Fillip to investments lacking Direct input subsidy other than fertilisers not mentioned No strategy to achieve the budgeted agriculture growth of 4% p.a without which the 7.25-7.75 percent growth of economy cannot be ensured Steps for improving manufacturing sector growth are also found wanting The Rs.100 per day minimum wage under NREGS although welcome from the overall wage security angle, would increase the farmers wage bill No measures to contain the ever-rising food bill of the common man. No mention of Bankruptcy Law and other important Laws affecting the financial and corporate sector to give boost to reforms.

Budget Deficits
Fiscal Deficit :- Rs. 4.01 Trillion Fiscal Deficit :- 6.08 % of GDP Revenue Deficit :- Rs. 2.83 Trillion Revenue Deficit :- 4.83 % of GDP

For 2009-10
Revenue receipts expected to be in line with budgeted estimates for current year Rs. 609551 crores compared to Rs. 602935 crores. Tax revenue projected lower than current years budgeted estimates, but higher than the revised estimates.

There has been growth in non-tax revenue in 2008-09, this is assumed to continue in the year ahead, this includes interest on loans, dividends and profits of PSUs, royalty on offshore crude oil and gas production, charges for services provided by govt etc.
Huge borrowing continues.

Receipts and expenditures estimated to be 6% higher than the revised estimates for 2008-09. Fiscal deficit therefore estimated at 5.5% of GDP and revenue deficit at 4% of GDP Stress in budget speech on social sector, rural development, infrastructure, highways etc. BUT No major change in social sector spending from last year despite budget speech claims

What about the Fiscal Deficit worry?

It remains such high fiscal deficit numbers will impact economic growth down the road. Flip side is the expenditure on infrastructure and rural development can work to providing incomes and employment potential for growth. Govt. should concentrate on more effective utilization of funds.

Why has the stock market reacted unfavourably?

Stock market reaction unreal. plunges 3% as budget disappoints But, there was no need to raise expectations for anything very different as Pranab Mukherjee says, There is no mandate to tweak taxes.. I cant indulge in reckless borrowing.

(In Crore of Rupees) 1. 2. Revenue Receipts Tax Revenue(net to Centre)

2008-2009 Budget Estimates 602,935 507,150

2008-2009 Revised Estimates 562,173 465,970

2009-2010 Budget Estimates 609,551 497,596

3.
4. 5. 6.

Non-tax Revenue
Capital Receipts (5+6+7)$ Recoveries of Other Receipts Loans

95,785
147,949 4,497 10,165

96,203
338,780 9,698 2,567

111,955
343,680 9,725 1,120

7.
8. 9. 10.

Borrowings and other Liabilities $

Total Receipts (1+4)$ Non-plan Expenditure On Revenue Account of which,

133,287
750,884 507,498 448,352

326,512
900,953 617,996 561,790

332,835
953,231 668,082 599,736

11.
12. 13. 14. 15. 16. 17. 18. 19.

Interest Payments
On Capital Account Plan Expenditure On Revenue Account On Capital Account Total Expenditure Revenue Expenditure Capital Expenditure Revenue Deficit (17-1)

190,807
59,146 243,386 209,767 33,619 750,884 658,119 92,765 55,184 1.0 133,287 2.5

192,694
56,206 282,957 241,656 41,301 900,953 803,446 97,507 241,273 4.4 326,515 6.0

225,511
68,346 285,149 248,349 36,800 953,231 848,085 105,146 238,534 4.0 332,835 5.5

% of GDP 20. Fiscal Deficit

% of GDP

STATISTICS

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Is this a Good Budget?

Given the circumstances, it is a sensible budget.. major changes can be made in June, with revised numbers depending on the scenario as it unfolds. Full scale budget in a few months thats where the action should be, if at all

This is a Rs.10lakh crores and above Budget, the largest since independence.

THANK YOU