Budget & Fiscal Policy

Zero-based budgeting is a method where every function within an organization is analyzed for its needs and costs, starting from a 'zero base' rather than incremental adjustments.

Capital receipts are those that either create a liability or reduce financial assets. Disinvestment (selling shares of PSUs) reduces the government's assets.

The FRBM Act was enacted in 2003 to ensure fiscal discipline, reduce the fiscal deficit, and improve macro-economic management.

Fiscal Deficit represents the total borrowing requirements of the government to meet its expenditure.

Under the FRBM Act, the government is required to lay down the Macro-economic Framework Statement before both Houses of Parliament along with the Annual Financial Statement.

Primary Deficit measures the borrowing requirement of the government excluding the interest burden on past debts.

A Deficit Budget is often used as a tool to stimulate economic growth and demand by increasing public spending beyond current tax revenues.

A Vote on Account allows the government to withdraw funds from the Consolidated Fund of India to meet essential expenses until the annual budget is passed.

Article 266(1) of the Constitution mandates that all revenues received by the Government of India shall be credited to the Consolidated Fund of India.

Revenue Deficit represents the shortfall of government's revenue receipts over its revenue expenditure, indicating the government is borrowing to pay for day-to-day operations.

GST is an indirect tax as the liability to pay can be shifted to another person, unlike direct taxes where the burden falls directly on the taxpayer.

The Economic Survey is prepared by the Economic Division of the Department of Economic Affairs, Ministry of Finance.

The Vijay Kelkar Committee (2000) recommended the Fiscal Responsibility and Budget Management Act.

A guillotine is a parliamentary procedure where all outstanding demands for grants are put to vote at once without discussion due to time constraints.

Small savings and provident funds are part of 'Other Liabilities' of the government, while public debt specifically refers to market loans and external debt.

The Consolidated Fund of India is the most important account where all government receipts and payments flow.

Deficit budgeting is common in developing nations as it allows the state to invest in infrastructure and development projects that exceed current tax income.

Article 280 of the Constitution provides for the Finance Commission to recommend the distribution of tax revenues between the Union and the States.

Crowding out occurs when heavy government borrowing increases interest rates, making it more expensive for the private sector to borrow and invest.

Charged expenditures (non-votable) include the salaries/pensions of the President, Supreme Court/High Court judges, CAG, and Chairman of UPSC.

Effective Revenue Deficit is the revenue deficit excluding those revenue expenditures which were made for the creation of capital assets for state governments.

The Contingency Fund (Article 267) is held by the President to meet unforeseen expenditure pending authorization by Parliament.

Indirect taxes like GST/Sales tax are considered regressive because they take a larger percentage of income from low-income earners than from high-income earners.

The FRBM Act aims to reduce the fiscal deficit to 3% of the GDP, ensuring long-term fiscal stability.

Cut motions are used to express disapproval of specific demands in the budget. If passed, it forces a reduction in the demand for grants.

A 'Vote on Account' allows the executive to withdraw funds from the Consolidated Fund to meet essential government expenses until the Budget is passed.

Capital expenditure is spending that results in the creation of assets or reduction of liabilities. Building infrastructure or purchasing machinery is capital expenditure.

The Budget Division of the Department of Economic Affairs (DEA) is the nodal body responsible for the preparation of the Union Budget.

Fiscal drag happens when inflation increases nominal wages, moving taxpayers into higher tax brackets even if their real purchasing power remains constant.

Public Account contains funds held by the government in trust, such as provident funds, small savings, and judicial deposits, which do not belong to the government.

An Appropriation Bill authorizes the government to withdraw funds from the Consolidated Fund of India to meet expenditures approved by the legislature.

Deficit financing refers to the government meeting the gap between expenditure and revenue through borrowing, particularly from the Central Bank (printing money).

The Laffer Curve illustrates that increasing tax rates beyond a certain point can actually decrease total tax revenue by disincentivizing economic activity.

Non-tax revenue includes interest receipts, dividends/profits from PSUs, and fees for services, rather than revenue derived from taxation.

Article 112 mandates the 'Annual Financial Statement'. Historically, the Railway Budget was separated from the General Budget in 1924, though it was later merged again.

Sunset legislation is a provision in a statute that provides for the automatic expiration of a law or program after a specified date unless it is extended.

Disinvestment involves the sale of government-owned assets, usually shares in Public Sector Undertakings (PSUs), to the private sector.

Article 266(1) provides for the Consolidated Fund of India, into which all revenues received by the Government are credited.

A Finance Bill is introduced every year to give effect to the financial proposals of the Government, covering both tax and revenue-raising measures.

Supplementary Grant is granted when the amount authorized by the Parliament through the appropriation act for a particular service for the current financial year is found to be insufficient.

No money can be appropriated out of the Consolidated Fund of India except in accordance with law and for the purposes and in the manner provided in the Constitution.

A regressive tax is one that takes a larger percentage of income from low-income earners than from high-income earners.

A Token Cut is used to ventilate a specific grievance by reducing the demand by Rs. 100.

Non-tax revenue includes interest receipts, dividends/profits from public sector enterprises, and fees for services provided by the government.

The FRBM Act aims to ensure inter-generational equity in fiscal management and long-term macro-economic stability by targeting fiscal deficit reduction.

Article 266(2) provides that all other public moneys (besides those in the Consolidated Fund) received by or on behalf of the Government of India shall be credited to the Public Account of India.

Deficit financing in the Indian context often involves printing new currency or borrowing from the RBI to bridge the gap between revenue and expenditure.

Capital expenditure is spending that results in the creation of physical or financial assets or the reduction of financial liabilities.

The Finance Bill is introduced in Parliament to give effect to the financial proposals of the Government of India for the immediately following financial year.