Budget 2017 at a Glance

Budget 2017 at a Glance

The Union Budget of India, also referred to as the Annual financial statement in the Article 112 of the Constitution of India, is the annual budget of the Republic of India. Quite simply, it contains a detailed account of different sources of revenue and expenditure of the government.

Important Terms

Fiscal Deficit is the difference between the Revenue Receipts plus Non-debt Capital Receipts (NDCR) and the total expenditure. This indicates the total borrowing requirements of Government from all sources.

Revenue Deficit refers to the excess of revenue expenditure over revenue receipts.

Effective Revenue Deficit is the difference between Revenue Deficit and grants for creation of capital assets.

Primary Deficit is measured by Fiscal Deficit less interest payments.

BUDGET 2017 – DOING THINGS IN A NEW WAY

Removal of Distinction between Plan & Non-Plan Expenditure

A significant reform initiative in the budgeting process, announced by the Finance Minister, in his Budget Speech of 2016-17 was the removal of the Plan and Non-Plan distinction in expenditure budgeting. This has been implemented from the Budget of 2017-18. With the removal of this distinction it is expected that the link between spending and outcomes will improve and become more holistic and focused.

Advancement of Union Budget

The Union Budget this year was presented on 1st Feb. The date of budget presentation was advanced so that expenditure is authorised by the time the new financial year begins.

Merger of Rail Budget with Union Budget

Another key highlight of this year’s budget was that no separate rail budget was presented. The move to discard the British-era practice of a separate rail budget by the Modi government was in line with recommendation of a two-member committee comprising Niti Aayog member Bibek Debroy and Kishore Desai. The merger, without effecting financial autonomy of railways, will help the Railways get rid of the annual dividend they has to pay for gross budgetary support from the government every year. Merger of Rail Budget with Union Budget would facilitate multimodal transport planning between highways, railways and inland waterways; and  a unified budget will help present a holistic picture of the financial position of the Government.

Balancing Fiscal Consolidation & Investment Needs

Budget 2017-18 reflects Government’s firm commitment to substantially boost investment in Agriculture, Social Sector, Infrastructure and Employment Generation on the one hand and simultaneously sticking to the fiscal consolidation path on the other hand. This is substantiated by increase of ` 1,32,328 crores over RE (2016-17) while simultaneously conforming to the fiscal deficit target of 3.2%.

Hike in Devolution to States – Cooperative Federalism

Since 2015-16, the devolution of States’ share in taxes has witnessed a major jump. Continuing with this trend, the total resources going to States including the devolution of State’s share in taxes, Grants/Loans, and releases under Centrally Sponsored Schemes in BE (2017-18) is ` 10,85,075 crore, with a jump of ` 94,764 crore over RE (2016-17) and ` 2,50,592 crore more than the Actual (2015-16). These facts reflect Government’s firm commitment to co-operative federalism and strong belief in the principle that the Nation grows when States grow.

Budget Statement of Receipts and Expenditure

Key Insights from Budget Statement of Receipts & Expenditure:

  • Revenue Receipts of government exceed the Capital Receipt. (more than twice – It is a good thing because more capital receipts (in form of borrowings) bring with them interest payment obligations while revenue receipts bring no such obligation.)
  • Tax Revenue of the government exceeds Non-Tax Revenue.
  • “Borrowings and other Liabilities” form significant chunk of Capital Receipts.
  • Expenditure on other than schemes exceeds scheme expenditure.
  • Revenue Expenditure of the government exceeds Capital Expenditure. (Higher capital expenditure (in form of investments) creates assets for future which generate revenue receipts (return on investments) in future. However, higher revenue expenditure (salaries, interest etc.) is just one time expenditure with no future gains. So, more revenue expenditure is not a good thing.)
  • Revenue Deficit as a % of GDP is declining. (It is a good thing as government is trying to bridge the gap between revenue receipts and revenue expenditure. Target for 2017-18 is 1.9%. Same is the case with Effective Revenue Deficit. (Revenue deficit exclusive of grants for creation of capital assets.
  • Fiscal Deficit as % of GDP is also declining. Target for 2017-18 is 3.2%. (This signifies government’s commitment to fiscal consolidation.)
  • Primary Deficit as % of GDP is also declining. Target for 2017-18 is 0.1% (It means if we exclude Borrowings and Interest thereon, our receipts are just 0.1% short of our expenditure.)

Sources of Money – Where does money come from? (Budget 2017-18)

Key Insights:

  • Top sources of money are “Borrowings & other Liabilities” and “Corporation Tax”.
  • In term of taxes, Direct taxes (19+16 i.e. 35) are more than indirect taxes (14+10+9 i.e. 33).
  • In terms of Direct taxes, Corporation tax is biggest contributor.
  • In terms of Indirect taxes, Union Excise Duties are biggest contributor followed by Service Tax & Customs.

Uses of Money – Where does money go? (Budget 2017-18) 

Key Insights:

  • Biggest component of outflow is “States’ share of taxes & duties”.
  • Next, biggest component is Interest Payments. (Higher interest payments are result of higher borrowing in past. Remember, Capital receipts bring with them future interest obligations and so should be kept as low as possible.

  • Of total subsidy burden, Food subsidies account for the maximum portion followed by Petroleum and Fertilizer.

To check out Multiple Choice Questions (MCQs) on Union Budget, click on the following links:

  1. MCQs BASED ON UNION BUDGET- CONCEPTUAL FRAMEWORK
  2. MCQs BASED ON UNION BUDGET 2017-18 – BUDGET TRENDS & INSIGHTS
  3. MCQs BASED ON UNION BUDGET 2017-18 – ABBREVIATIONS & JAGRONS
  4. MCQs BASED ON UNION BUDGET 2017-18 – BUDGETARY REFORMS, CHALLENGES & ROAD AHEAD
  5. MCQs BASED ON UNION BUDGET 2017-18 – BROAD THEMES

To check out MCQs based on Economic Survey 2017, use the following Links:

  1. MCQs based on Economic Survey 2017 (Part I)
  2. MCQs based on Economic Survey 2017 – (Part II)

Compiled by – Commerce for IAS

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