So the Union Budget is out! And so are people’s
analyses on them and various interpretations. Though Sachin Tendulkar’s Ton Ton
did make the news next day, as did our own Finance Minister’s Pranabda’s
statements on Shakespeare; here’s the actual numbers that speak for themselves.
Read on to find out the bare essentials of the budget this year:
The budget can broadly be divided into three parts:-
Deficit: Deficit basically means lack of or falling short of. When the total expenditure of a nation exceeds its income, it is a deficit. Deficit in a budget is further classified as:
i. Fiscal Deficit: When a government's total expenditures exceed the revenue that it generates, it leads to a fiscal deficit in the budget. Fiscal deficit targeted at 5.1 per cent of GDP, as against 5.9 per cent in revised estimates for 2011-12.
ii.
Current
Account Deficit: Occurs when a country's total imports
of goods, services and transfers are greater than the country's total export of
goods, services and transfers. This situation makes a country a net
debtor to the rest of the world. The finance minister said in his speech that the
current account deficit as a proportion of GDP for 2011-12 is likely to be
around 3.6 per cent.
iii.
Trade
Deficit: An economic measure of a negative balance of
trade in which a country's imports exceeds its exports. A trade
deficit represents an outflow of domestic currency to foreign markets. India's
trade deficit widens to $15.1 billion in February 2012 from $9.4 billion a year
ago.
Revenue:
Revenue is the money received from taxation, fees, fines, inter-governmental
grants or transfers, securities sales, mineral rights and resource rights, as
well as any sales that are made. In lay man’s terms it is the income of
the government. The sources of revenue for the government are:
i.
Taxes:
Tax refers to the amount of money that citizens pay to the government from
their income, profits from business etc. Taxes are of three types:
a) Direct Taxes:
A tax that is levied on the person on income/profits and not on the
goods/services is a direct tax. The budget changed slabs for income tax payment
this year. The first slab went up to 2-5 lakh from 1.80-2 lakh, second slab to
5-10 lakh from 2-5 lakh and third slab to 10 lakh and above from the previous 8
lakh and above. The Finance Minister also announced individual taxpayers, a deduction of upto Rs. 10,000 for
interest from savings bank accounts.
b) Indirect Taxes:
The taxes that are levied from corporate on goods and services are indirect
taxes. Standard rate of excise duty
raised from 10 per cent to 12 per cent; service tax rates raised from 10 per
cent to 12 per cent; no change in peak customs duty of 10 per cent on
non-agricultural goods.
c) Corporate Taxes: Corporate tax refers to the tax levid on corporate
as an organisation on profits in a particular jurisdiction. The Finance
Minister announced that there would be no change in the tax structures for the corporates,
however announced some relief to increase investments. These include the rate
of withholding tax on interest payments on external commercial borrowings is to
be reduced from 20 per cent to 5 per cent for three years. These sectors include: power,airlines,roads
and bridges, ports and shipyards amongst others.
ii.
Interest
Income: This is the income that the government gets in the
form of interest that the Public Sector Units pay the government. This amount
is a variable depending on how well the PSUs perform in the fiscal year. The
Finance Minister made no reference to the same in his budget this year.
iii.
Disinvestments:
The action of an organization
or government selling or liquidating an asset or subsidiary in
disinvesting. Rs 30,000 crore to be raised through disinvestment
according to this budget.
Expenditure:
Expenditure refers to the amount of money that is paid for goods/services or
simply the expenses of running a country. Expenses are divided into three
categories:
i.
Defence
Expenditure: India’s biggest expenditure is its
defence allocation. This is year the defence budget was increased from 11.59%
to 16% of the GDP. The Finance
Minister announced a provision of Rs 1,93,407crore for Defence Services
including Rs 79,579 crore for capital expenditure. He said the allocation is
based on present needs and any further requirement would be met.
ii.
Subsidies: India being a developing nation, subsidies form the biggest part of its
expenditure since her citizens cannot afford even the basic necessities. The
Finance Minister announced that the central subsidies to be kept under 2 per
cent of GDP; to be further brought down to 1.75 per cent of GDP over the next 3
years. He also announced that over the next three years, it would be further
brought down to 1.75 per cent of GDP. This year the subsidy is important since
the Food Security Bill comes into picture. The Government has decided that from
2012-13 subsidies related to food and for administering the Food Security Act
will be fully provided for.
iii.
Salaries:
The salaries of its government employees and their benefits is a permanent expenditure
for any country. While the Government of India often increases the pay
according to the recommendations of various pay commissions that are set every
year. This year there was no major change in the same.
