Monday 12 March 2012

Union Budget of India

Budget is an annual financial statement of the government.It gives out the details of the Total Receipts and Total Expenditure for a year.
In India the budget of the government at the centre is known as the Union Budget.
It is presented in the last working day of  the month of February. This year it has been postponed to 16th March because of Assembly elections in five states of the Indian Union.

There are two basic parts of the budget.
1.Revenue Budget.
2.Capital  Budget.

Revenue Budget shows revenue receipts( such as Taxes.Fees,Fines)of the government and the  expenditures met from these revenues (such as Salaries to its administrative officials ,defence personnel )
Capital Budget shows capital receipts (such as recovery of loans ,borrowing Disinvestment etc.) and Capital expenditure (such as repayment of loans and development expenditure.)

The Budget contains data relating to the following years .
1.Actual Accounts for the year 2011-2012
2.Revised estimates for the year 2012-2013
3.Budget estimates for the year 2013-2014.
This year’s budget is the first Budget of the 12th Five –Year Plan .

The common man waits for it to determine if and how will it dent his  pocket .This would include both the direct tax proposals that could reduce his take home as well as indirect tax that will impact the goods and services he consumes!
The macro issues to watch for by the corporate world are as follows
1.     Assumptions for growth and inflation.
2.     Total Borrowings
3.    Fiscal deficit and key assumptions underlying this
4.     Cuts in subsidies.
5.     Investment-creating measures like investment tax credits or lower borrowing costs for infrastructure.
6.     Sector –specific measures in power,financial services,renewable energy etc.
7.     Genuine Privatisation ,with strategic sales or higher levels of disinvestment of public assets
8.     F.D.I.-boosting measures.

In the Sunday Hindustan Times the exercise of making the Budget interested me .It is an exercise in deftly juggling political pressures,conflicting demands ,the economy’s priorities with utmost secrecy!

Each year this is how it all begins
1. In September: a voluminous budget circular is sent out to all ministries,departments and autonomous bodies. Each department replies with detailed estimates of the funds they will need for the following year –for everything …for special projects to routine expenses and wages.These reams of accounts are distilled to form the first broad contours of next year’s budget.

2. In November: Finance Ministry officials begin consultations with stakeholders-a)industry associations,b)chambers of commerce,c)farmers associations,d)employees unions- in North Block on Raisina Hill the seat of power of the Finance Ministry.Each group plead for tax breaks ,fiscal incentives and government subsidies.

3. In January: The focus shifts to the big picture .Final meetings are held with the stakeholders,this time chaired by the finance minister himself.Programmes are dovetailed to mirror leanings of ruling coalition,marrying ideology with economics!

4. Quarantine in Valentine’s Month: February:  Interestingly  top finance ministry officials ,printing technicians,stenographers and officials from N.I.C.(national informatics centre)all go under protection of CRPF which keeps the North Block out of bounds for everyone. For a week they are totally cut off from the outside world ,including their families.Only the finance minister can enter or exit the quarantined basement area  where these officials work and live.Only a handful who know the budget live outside the North Block …the finance minister,finance secretary,revenue secretary,expenditure secretary,additional secretary (budget)chief economic adviser and chiefs of two boards –Central Board of Direct Taxes and the Central Board of Excise and Customs.
A team of Intelligence Bureau officials,headed by a joint secretary maintain a round –the –clock monitoring of people’s movements and phone call,including the five selected stenographers.The computers of these stenos are delinked from the NIC server to rule out the possibility of cyber theft.
A powerful mobile phone jammer is also installed inside the North Block to block calls .Sometimes the Intelligence Bureau chief himself makes a surprise visit to the printing press area in the  basement of the North Block all this in view of minimising  the chances of leakage of information.
In case of emergency however,the families of these officials can leave a message on a number given to them , but cannot  directly speak to them.

5. The F.M’s speech is the most guarded document .It is usually handed over to the printers at midnight two days before the budget.

6. Initially ,the Budget was printed at Rashtrapati Bhavan .But after it was leaked in 1950 ,the printing shifted to a press at Minto Road .Since 1980 ,it is printed  at North Block ‘s basement.
That sure was interesting wasn’t it?

Today  a front page  box  caught my eye in The Economic Times .
1.What the common man wants?
a)relief from price rise.
b)more avenues for jobs
c)more tax saving options
d)higher income-tax exemption limit.

2.Industry’s long wish list consist of..
a)keep excise and service rate unchanged.
b)increase depreciation on plant and machinery.
c)scrap surcharge and cess on corporate tax
d)re-introduce investment allowance
e)remove minimum alternative tax on SEZs( special economic zones)

3.Even in the back drop that investments have come to a stand still and govt. finances in a mess…the populist temptation  could be…
a)diesel ,LPG,fertilisers untouched
b)higher allocation for food subsidy
c)push for food security bill ,health care legislation.

4.Economists and markets favour a Reforms Push in the following ways
a)a clear fiscal consolidation(decreasing expenditure and maximising revenue)road map
b)cut subsidies on diesel,LPG,fertilisers
c)increase excise duty and service tax rate .
d)to hasten project clearances .
e)resolve  fuel supply problems projects ,end mining bans .
f)attempt to reach consensus on reforms with the state Chief Ministers.

Big Week Ahead
14th March –Railway Budget
15th March- Economic and Monetary Policy.
16th March  Union Budget
Follow them for your General knowledge!!!!!

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