the indian budget

8/14/2019 The Indian Budget

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Centre for Budget and Policy Studies,Centre for Budget and Policy Studies,

The Indian BudgetThe Indian Budget

An Interactive Session with Honourable Members ofAn Interactive Session with Honourable Members ofParliamentParliament

DelhiDelhi

December 11, 2006December 11, 2006

Vinod VyasuluVinod Vyasulu


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Centre for Budget and Policy StudiCentre for Budget and Policy Studi

What is a budget?What is a budget?

It is the Annual Financial Statement that theIt is the Annual Financial Statement that the

Government must present to ParliamentGovernment must present to Parliamenteach year in accordance with theeach year in accordance with the

ConstitutionConstitution

The Finance Minister usually presents it inThe Finance Minister usually presents it inFebruary each yearFebruary each year


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What does a budget contain?What does a budget contain?

It contains an overview of the economy, andIt contains an overview of the economy, and

the financial position of the countrythe financial position of the country

It details the Governments priorities inIt details the Governments priorities inexpenditure and the Demands for Grants ofexpenditure and the Demands for Grants of

the Ministriesthe Ministries

Based on this, it details the GovernmentsBased on this, it details the Governmentsproposals to raise revenues throughproposals to raise revenues through

taxationtaxation


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Who makes the budget?Who makes the budget?

The Finance Minister, on the basis ofThe Finance Minister, on the basis of

priorities of the Government, balances outpriorities of the Government, balances out

the need for expenditure with the resourcesthe need for expenditure with the resources

availableavailable

The various ministries make demandsThe various ministries make demandsbased on the Governments programmesbased on the Governments programmes


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Who decides on Priorities?Who decides on Priorities?

Governments come to office on the basis ofGovernments come to office on the basis of

electionselections

Promises made to the people must be keptPromises made to the people must be kept The priorities are derived from theseThe priorities are derived from these

promisespromises

For example, the UPA GovernmentFor example, the UPA Governmentprioritised the issue of rural employmentprioritised the issue of rural employment

and designed NREGAand designed NREGA


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How are Priorities Implemented?How are Priorities Implemented?

Once Parliament approves the budget, theyOnce Parliament approves the budget, they

are implemented by the ministries.are implemented by the ministries.

Some are implemented by the stateSome are implemented by the stategovernmentsgovernments

The NREGA, by law, is to be implementedThe NREGA, by law, is to be implemented

by panchayats.by panchayats. Parliament monitors the implementationParliament monitors the implementation

through Standing committeesthrough Standing committees


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How are Priorities Financed?How are Priorities Financed?

The budget makes proposals to raiseThe budget makes proposals to raise

revenue through taxationrevenue through taxation

Direct taxes are collected by the union andDirect taxes are collected by the union andshared with the states in accordance withshared with the states in accordance with

Finance Commission recommendationsFinance Commission recommendations

There are indirect taxes alsolike excise,There are indirect taxes alsolike excise,value added tax etc, which are also sharedvalue added tax etc, which are also shared

with the stateswith the states


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What is the role of Parliament?What is the role of Parliament?

The Government sets the agenda, and must getThe Government sets the agenda, and must get

Parliamentary approval to act.Parliamentary approval to act.

In addition to passing the budgetthe Finance BillIn addition to passing the budgetthe Finance Bill

the Parliament must also pass appropriationthe Parliament must also pass appropriationbills for a ministry to be able to spend moneybills for a ministry to be able to spend money

In each budget, the actual expenditures of the pastIn each budget, the actual expenditures of the past

year, revised estimates of the current year, andyear, revised estimates of the current year, andproposals for the next year are presented toproposals for the next year are presented to

ParliamentParliament


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Where Does the Money Go?Where Does the Money Go?

All revenues received by the governmentAll revenues received by the government

are placed in the Consolidated Fund ofare placed in the Consolidated Fund of

India.India.

To spend money from the ConsolidatedTo spend money from the Consolidated

Fund, a law must be passed by ParliamentFund, a law must be passed by Parliament

As an imprest to the Government,As an imprest to the Government,Parliament has created a Contingency fundParliament has created a Contingency fund

of Indiaof India


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Is Government Accountable?Is Government Accountable?

Government is accountable to ParliamentGovernment is accountable to Parliament

To enable Parliament hold governmentTo enable Parliament hold governmentaccountable, the Comptroller and Auditoraccountable, the Comptroller and AuditorGeneral audits how government spendsGeneral audits how government spendsmoney approved by Parliamentmoney approved by Parliament

The CAG reports are tabled in ParliamentThe CAG reports are tabled in Parliament

The Public Accounts Committee goesThe Public Accounts Committee goesthrough the CAG reports and decides onthrough the CAG reports and decides onnecessary actionnecessary action


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A look at Budget DocumentsA look at Budget Documents

We can relate this discussion to the budgetWe can relate this discussion to the budget

by going through some documents we haveby going through some documents we havecollectedcollected

We will now look at how the budget papersWe will now look at how the budget papers

look, and then move into discussionlook, and then move into discussion


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Issues for Discussion -1Issues for Discussion -1

Given that there are committedGiven that there are committedexpenditures, how much flexibility does theexpenditures, how much flexibility does the

Government have?Government have?


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Issues for Discussion - 3Issues for Discussion - 3

How are the budget and the 5 year PlansHow are the budget and the 5 year Plansrelated?related?


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Why should a budget be balanced?Why should a budget be balanced?

Why are there so many definitions ofWhy are there so many definitions of

deficit?deficit? Is a deficit always bad?Is a deficit always bad?


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India today has among the lowest tax ratesIndia today has among the lowest tax rates

in the worldin the world

Our system has many exemptions thatOur system has many exemptions thatreduce the tax burden on a taxpayerreduce the tax burden on a taxpayer

Is this justified when the tax rates are low?Is this justified when the tax rates are low?

Should not exemptions be removed?Should not exemptions be removed? Is there a case for a few specificIs there a case for a few specific

exemptions?exemptions?


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Centre for Budget and Policy Studies,Centre for Budget and Policy Studies,

Discussion on the BudgetDiscussion on the Budget

Thank you for your kind attention!Thank you for your kind attention!