CENTRAL BUDGETING

AND FUNDING
SUBMITTED BY :
KAMLESH DHOLE
PRESENTED BY

Dr. Umesh Mishra

(11)
Dr. Anita
Chaudhery (02)
Dr. Rashmi
Dwivedi (07)
 Indian central Budget
The Union Budget of India also called the general India
budget is presented each year on the last working day
of February. The budget is presented by the Finance
Minister of India in Parliament. Budget is most
economic event in the country which outlines all the
economic planning of the Government of India for the
next year. It is not only important for corporates but for
individuals from all sections of the society.

Origin and History

The first general budget of India was presented by the
India's first Finance Minister Sir R.K. Shanmugham
Chetty on November 26, 1947. Since then, 28 Union
Finance Ministers have been presenting the budget
every year. Initially, much attention was given to the
agricultural sector but as later on, the focus shifted to
the other sectors including the industrial, financial and
other sectors.
State Level Budget
Each state government maintains its own budget, prepared
by the state's minister of finance in consultation with
appropriate officials of the central government.
• Primary control over state finances rests with the state
legislature in the same manner as at the central
government level.
• State finances are supervised by the central government,
however, through the Comptroller and the Auditor General
of India; the latter reviews State Government accounts
annually and reports the findings to the appropriate state
governor for submission to the State's Legislature.
• The Central and State Budgets consist of a budget for
current expenditures, known as the budget on revenue
account, and a capital budget for economic and social
development expenditures.
Separate Budget for Railway and
Postal Department

• The Indian Railways, the largest Public-

Sector Enterprise, and the Posts and
Telegraph Departments have their own
budgets, funds, and accounts.
• The appropriations and disbursements
under their budgets are subject to the
same form of parliamentary and audit
control as other government revenues
and expenditures.
[email protected] 5
 Procedure For Passing of Budget

•The annual India budget has to be passed by the House of

the parliament before it can come into effect on April 1,
the start of India's financial year.
•The Indian parliament has one month to review and
modify the government's budget proposals.
•If by April 1, the parliamentary discussion of the budget
has not been completed, the budget as proposed by the
minister of finance goes into effect and subject to
retroactive modifications after the parliamentary

[email protected] 6
Central Budget Structures Overview
• The House 1 budget is loaded prior to the
beginning of the fiscal year. This serves as the
effective budget until such time as the GAA is
approved in law. If the GAA is adopted late, ANF
may choose to allot funds for spending as
necessary using the House 1 budget figures
supported by an adopted interim budget. Once
the GAA is approved, the House 1 budget is
backed-out and the GAA figures are loaded to
reflect the current fiscal year original budget.
Health budget

• The federal budget is on an unsustainable path, primarily because of

the rising cost of health care.

Projected Federal Spending Under One Fiscal Scenario

(Percentage of gross domestic product)
 Budget Office!
• Mission
 To provide prompt and accurate financial
services to the University, to include oversight
of department/college budgets, advice on
proper use of State funds, timely processing
of budget documents, and effective reporting
of expenditures and revenue.
• Responsibilities
 The Budget Office is responsible for budget
planning, administration and reporting. This
includes preparation and loading of the
campus budget; (i.e. original, permanent new
funds, one-time funds, Project Authorizations,
Professional Development Grants, etc.),
monitoring expenditures, setting up new
accounts, logging and verifying Personnel
Transaction Forms, assisting
 PRINCIPLES FOR BUDGET CUTS
• Most of these “principles” have, in the past, been broadly
shared, and feedback received from various groups,
including the Budget Council, the Faculty Senate, the
Administrative Council, and union representatives, as well as
in open sessions for faculty and staff.
• Seek from faculty, staff, and administrators
recommendations on possible cost saving efficiencies from
business practices, contracts that could be dropped or
renegotiated, and/or areas of work that can be reduced,
slowed, or eliminated.
• As much as practical, consider the budget reduction to occur
over a several year period by thoughtfully employing this
year’s resources in light of likely future cuts.
• Employ significant, but prudent, share of the University
Contingency Reserve in making budget reductions.
• To the extent practicable, safeguard faculty and
staff in permanent positions.
• Depending on the size of the budget cut, reductions
in course choice and timing are likely; however, to
the extent possible, protect the ability of students to
make normal degree progress.
• Pursue revenue enhancements and diversifying the
University’s resource streams by increasing gifts
and contributions, grants and contracts,
international enrollments, revenue from outsourcing
and any CSU approved student fee increase, as well
as other strategies, including possible website
advertising.
• Continue to position the University for the future by
making select program investments in accord with
the University Strategic Plan.
• In the near term, curtail adoption and
implementation of new programs; where new
investments are necessary, offsetting savings
from current programs are likely to be required.
• Keep an inventory of cuts and other
accommodations so that consideration may be
given to restoring funding in the future.
•  To assure there are no division budget
reductions that place unacceptable burdens on
other divisions, discuss the impact of budget
cuts before recommending them.
POSSIBLE BUDGET REDUCTION STRATEGIES
• Reduce and/or delay equipment purchases.
• Freeze vacant positions.
• Reduce general fund supported travel.
• Reduce general operating expenses.
• Closely review all service contracts—e.g.,
Hershey, Hobson, Oracle—and all organizational
memberships, stipends, and special consultants.
• Reduce work schedules if employees prefer, e.g.,
12 months to 10 month employment and
voluntary furloughs.
• Emphasize recycling and energy savings,
e.g., reduced operating hours and adjusted
lighting and temperature levels. Review all
appliance usage and costs.
• Defer maintenance that doesn’t put the
campus at serious risk.
• Combine organizational units to achieve
efficiencies and/or where there is
overlapping of responsibilities, including
colleges, divisions, programs, and offices.
• Reduce assigned time and/or sabbaticals,
and possibly deny sabbaticals shorter than
one year.
• Reduce workforce, where applicable,
within collective bargaining agreement
rules.
• Suspend or eliminate low enrollment and
other programs.
• Review and adjust as appropriate the
opening hours of the library, health
center, computer labs, and other service
units.
• Hold retreats and other university events
on campus.
• Reduce FTES target.
• Review and adjust as needed the number
of positions in administrative offices.
• Scale back student recruitment and other
outreach efforts.
 Know the Budget

• The Economy – Survey 2008-09

• What is Budget?
• How is budget formulated?
• Budget assumptions
• Budget Proposals – In nutshell
Key Figures from the 2009/10
Federal Budget of
Republic of India

And Export Highlights

 Budget Facts
• Final Budget for Year 2009-2010

• Presented By Honb. Finance Minister

Mr. Pranab Mukharji

• Put on Desk as on 6th July , 2009

 Key Facts of Economy
• Name of Economy :- Republic of India

• Type of Economy :- Open Economy **

• Size of Economy :- $ 1 Trillion

• Population :- 1.15 Billion

• GDP 2008-09 :- Rs.53,21,753 crore

 Growth Rate
• Growth Achieved in 2008-09 ( Non
Audited ) is 6.7 %

• Target was set at 9.0% for 2008-09

• Slowest Growth rate in 6 years

• Target set for 2009-10 is 8.0%

 Budget Estimates for 2009-
10
• Total Receipts :- Rs. 10.21 Trillion
• Revenue Receipts :- Rs. 6.14 Trillion
• Capital Receipts :- Rs. 4.06 Trillion
• Borrowings & Liabilities :- Rs.4.01 Trillion
• Total Expenditure :- Rs. 10.21 Trillion
• Plan Expenditure :- Rs. 3.25 Trillion
• Non Plan Expenditure :- Rs. 6.96 Trillion
“ Democracy is the art and science
of mobilising the entire physical,
economic and spiritual resources
of various sections of people in
the service of the common good
of all.”
Arthasasthra, Kautilya quoted
by the FM in Budget speech
 Economic Survey
• The Economy sees signs of revival
– Growth at 6.7% of GDP
– Predicted growth -7.75% subject to global
economic recovery
– Agri growth 1.6%
– Industrial growth: 2.4% -Mfr: 2.3%;
Mining:2.3%;Electricity:2.8%
– Credit – 17.3%
Savings rate 37.8% of GDP (07-08)
• Investment rate 39.3% of GDP (07-08)
• Households covered under NREGP 4cr
• Dip in Private consumption
• Dip in Exports significantly.
 The Survey adds…
• Growth path takes a U-shape
• Tax structure may be simplified
• Support for commodity derivatives market
• Higher FDI in Insurance could be proposed
• PSU disinvestment may be pushed
• Fiscal Deficit 4.8%
• 1.4% of large projects ahead of schedule
while 50.7% are delayed
• Power sector in Govt. growth was just 2.3%
while in private sector 12.1%
• Reform subsidies
 Financial Sector- Survey
•
suggestions
Reform regulatory regimes: Bring all financial
regulations under SEBI
• Passage of the Banking regulations Bill 2005
• Liberalise and develop spot and futures currency
markets ( exchange traded)
• Introduction of repos and derivative in corporate debt
• Introduce standardised credit default swaps tradable on
exchanges
• Auction rights to commercial borrowing within already
defined limits, with in-built preference for long term
borrowing; auction of rights to invest in govt.securitiies
by FIIs
• HNIs could be allowed to register and invest directly
through authorised Indian Investment intermediaries
• Align voting rights in Banks with equity holdings
• Allow trading of direct credit obligations among banks
and other financial institutions
• Link small savings rates of interest to government debt
instruments or bank deposit rates of similar maturity.
 What is a Budget?
It is an estimate of future revenues and
expenditure over a specific period. Budgets are
usually prepared on annual basis for
governments – both Centre and State and annual
and monthly basis for business enterprises.
It is convention to present it on the last day of
February every year preceded by Economic
Survey of the year. During the current year
however it is presented this month because of
the Government coming to power effectively
after the elections in May 2009.
 Budget Nomenclature
• Annual Financial Statement: Government’s receipts and
expenditure presented to the Parliament – Consolidated Fund;
Contingency Fund; and Public Account
– Consolidated Fund: Summation of all revenues, money
borrowed and receipts from loans it has given. All State
expenditure is given from this fund
– Contingency Fund: Any urgent and unforeseen expenditure is
met from this Fund and is at the disposal of the President of
India.
– Public Account: It is a collection of deposits like the Public
Provident Fund.
• Consolidated Fund is split into revenue and capital budgets.
• Revenue Budget consists of all revenue account; Capital budget or
capital account includes non-revenue receipts and expenditure.
• Revenue Account: All receipts like taxes and expenditure like
salaries, subsidies, interest payments that does not involve
creation of any assets
• Capital account: Receipts from liquidating (selling) assets or
shares of a public sector company and spending to create assets
and lending to receive interest.
 Taxes
• Direct Taxes: Taxes that you and I pay to the Government
directly: income tax; wealth tax; Gift tax, Fringe Benefit tax
(FBT), Securities Transaction Tax,etc
• Indirect Tax: It is essentially a tax on our expenditure; like
customs, excise, and service tax
• Corporate tax is the tax that all companies pay on their
profit
• Excise Tax: Tax levied on all manufactured goods
• Minimum Alternate Tax: (MAT) If a company pays less than
10% of its profits as income tax, it has to pay a minimum of
10% on book profits. (2009-10 Budget changed this
percentage)]
• VAT and GST: Value added is a transparent form of tax on
the sales based on the difference between the value of
inputs used to produce particular goods and the output
produced; Goods and Services Tax on the other hand,
contains the entire element of tax borne by a good –
including a Central and State level tax.
• There are also non-tax revenues: Dividends of the PSUs;
revenues from the public services etc.
 Expenditure
A Central Plan is the Government’s expenditure that
includes a five-year road map. This is met both
from budget and non-budgetary sources (State
owned enterprises) Government’s support to the
Central Plan is known as Budget support.
Plan expenditure: It is the amount the centre sets
aside to States and UTs split into revenue and
capital components in addition to the budget
support.
Non-Plan expenditure: All those bills the
government has to pay under the ‘revenue
expenditure’: interest payments, subsidies,
salaries, defense and pension. Most of the capital
expenditure goes for Defense.
 Deficits
• Revenue Deficit: Ideally all revenue expenditure must be
met from revenue receipts. Where it falls short, it has to
raise a debt from the public.
• Primary Deficit: Fiscal Deficit-Interest payments on earlier
borrowings. If this is growing it means that our fiscal
strength is bad.
FRBM Act 2003 specifies that revenue expenditure shall be
met fully out of revenue receipts only. Any borrowing
should be done only to meet capital expenditure. The Act
also mandates 3% fiscal deficit after 2008-09 in order to
maintain fiscal stability. The global financial crisis and our
economy’s melt down has forced to abandon this fiscal
discipline in 2008-09. Now the Fiscal deficit is 4.8% and is
expected to rise to beyond 6%.
• Fiscal Deficit: Living beyond the means –
Non-borrowed receipts-(revenue receipts+ loan
repayments+ miscellaneous capital receipts, primarily
disinvestment proceeds) falling short of expenditure.
The excess of total expenditure over total non-borrowed
receipts is called fiscal deficit.
 Rural and Agriculture
Sectors
• Allocation under NREGP hiked to Rs.39100cr
(144%)
• Target of Farm Credit Rs.3.25cr (up from 2.87cr)
• Allocation for PM Gram Sadak Yojana up by 59%
to Rs.12000cr
• Direct transfer of fertiliser subsidy to farmers
• Accelerated irrigation benefit programme hiked
from interim budget by Rs.1000cr.
• Rural Employment gets a boost
Banking: Focus on Inclusive
Growth
• Rs.100cr to expand rural branches
• No-frills accounts under Financial inclusion to
expand
• SHG-Bank linkage programme to cover 50% of
women in next five years
• Rs.4000cr to SIDBI from RIDF funds for giving
boost to MSME sector.
• First time repayment culture is recognised by the
Government when it extended 1 percent
subvention to farmers who promptly repay their
loans to Banks.
 Infrastructure
• 60% refinancing of PPP projects (financed by the
commercial banks) by the IIFCL;
• 23% increase in National Highways Development
Programme
• Allocation under JNNURM up by 87% to
Rs.12,887cr
• 160%hike in allocation to Accelerated Power
Development and Reform Programme
• REC to accelerate the Rural Gramin Vidyudikaran
Yojana
 Education and Health
• Sectors
National Female Literacy Mission to be launched
• Student Loans to weaker sections: Over 5lakh
students to benefit
• Grants in aid to minority education institutions
and national fellowships for students from the
minority community
• Allocation to Aligarh Muslim University to
establish its branches in WB and Kerala
• Modernization of Employment Exchanges in PPP
mode to ensure job seeker registration on-line
• National Rural Health Mission Interim Budget
outlay of Rs.12070cr hiked by Rs 2057cr.
• National Action Plan on Climate Change would be
launched.
• National Ganga River Basin Authority and
National River and Lake authority allocated
Rs.335cr.
 Personal Direct Tax Proposals
IncomeTax(Individual; Assessees Earlier(2) Changed(2
HUF Artificial Juridical 009- 0010-
Person) – Basic Tax 10)lakhs 11)lakhs
Exemption Limit (in
INR- Lacs) No
Surcharge on Sr.Citizen 2.25 2.40
Personal Income Tax
(to be removed in Women 1.50 1.80
phased manner)
(persons covered: Others 1.50 1.60
Firm and Local
Authority also) (AY
2010-2011) 
 Other Taxes
• MAT increased to 15% from 10%, carry
forward expenditure to 10years
• Fringe Benefit Tax abolished
• Commodity Transaction Tax abolished
• Taxation on LLPs to be same as for
Partnership companies
• Extension of benefits of sunset clause under
Sec 10A and 10B for EOUs and those in Free
Trade Zone
• Deduction in respect of contribution to
political parties
• Tax benefits of New Pension policy available
to private/public employees only
• Service tax coverage extended to Continental
shelf of India and Export Economic Zones
 Estimates
• Fiscal Deficit to be 6.8% of GDP compared to 2.5% last
fiscal
• Total expenditure goes up by 36%
• Food Security Act to be introduced: People below poverty
line to be provided rice and wheat up to 25kg per month.
• Defence outlay hiked to Rs.1,41,703cr from
Rs.1,05,600cr.
• Interest payments would be 36% of non-plan
expenditure. (R.2.25lakh crores)
• Unique Identity Number to be issued to all citizens to
improve access to citizenship services universally in the
next two years. Allotted Rs.500cr.
 Comments
• Budget is one of missed opportunities
• Fillip to investments lacking
• Direct input subsidy other than fertilisers not mentioned
• No strategy to achieve the budgeted agriculture growth of
4% p.a without which the 7.25-7.75 percent growth of
economy cannot be ensured
• Steps for improving manufacturing sector growth are also
found wanting
• The Rs.100 per day minimum wage under NREGS although
welcome from the overall wage security angle, would
increase the farmer’s wage bill
• No measures to contain the ever-rising food bill of the
common man.
• No mention of Bankruptcy Law and other important Laws
affecting the financial and corporate sector to give boost to
reforms.
 Budget Deficits
• Fiscal Deficit :- Rs. 4.01 Trillion

• Fiscal Deficit :- 6.08 % of GDP

• Revenue Deficit :- Rs. 2.83 Trillion

• Revenue Deficit :- 4.83 % of GDP

 For 2009-10

Revenue receipts expected to be in line with budgeted

estimates for current year Rs. 609551 crores
compared to Rs. 602935 crores.

Tax revenue projected lower than current year’s

budgeted estimates, but higher than the revised
estimates.
There has been growth in non-tax revenue in 2008-09,
this is assumed to continue in the year ahead, this
includes interest on loans, dividends and profits of
PSUs, royalty on offshore crude oil and gas production,
charges for services provided by govt etc.

Huge borrowing continues.

Receipts and expenditures estimated to be 6%
higher than the revised estimates for 2008-09.
 
Fiscal deficit therefore estimated at 5.5% of GDP
and revenue deficit at 4% of GDP
 
Stress in budget speech on social sector, rural
development, infrastructure, highways etc.

BUT No major change in social sector spending

from last year – despite budget speech claims
 What about the Fiscal Deficit
worry?
It remains – such high fiscal deficit numbers will
impact economic growth down the road.
Flip side is the expenditure on infrastructure and
rural development can work to providing incomes
and employment potential for growth.
Govt. should concentrate on more effective
utilization of funds.
Why has the stock market
reacted unfavourably?

Stock market reaction unreal…. plunges 3% as

‘budget disappoints’

But, there was no need to raise expectations for

anything very different – as Pranab Mukherjee says,
‘There is no mandate to tweak taxes.. I can’t indulge
in reckless borrowing’.
   (In Crore of Rupees) 2008-2009 2008-2009 2009-2010 Budget Estimates
Budget Estimates Revised Estimates

1.    Revenue Receipts                  602,935                       562,173                        609,551 

2.    Tax Revenue(net to Centre) 507,150 465,970 497,596
3.    Non-tax Revenue 95,785 96,203 111,955
4.    Capital Receipts (5+6+7)$                    147,949                       338,780                        343,680 
5.    Recoveries of Loans 4,497 9,698 9,725
6.    Other Receipts 10,165 2,567 1,120
7.    Borrowings and other Liabilities $ 133,287 326,512 332,835
8.    Total Receipts  (1+4)$                  750,884                       900,953                        953,231 
9.    Non-plan Expenditure                         507,498                       617,996                        668,082 
10.   On Revenue Account of which, 448,352 561,790 599,736
11. Interest Payments 190,807 192,694 225,511
12. On Capital Account 59,146 56,206 68,346
13.   Plan Expenditure                  243,386                       282,957                        285,149 
14. On Revenue Account 209,767 241,656 248,349
15. On Capital Account 33,619 41,301 36,800
16.   Total Expenditure                  750,884                       900,953                        953,231 
17. Revenue Expenditure 658,119 803,446 848,085
18. Capital Expenditure 92,765 97,507 105,146
19.   Revenue Deficit (17-1)                    55,184                       241,273                        238,534 
% of GDP 1.0 4.4 4.0
20.   Fiscal Deficit                  133,287                       326,515                        332,835 
% of GDP 2.5 6.0 5.5
STATISTICS
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Is this a ‘Good’ Budget?

Given the circumstances, it is a sensible

budget.. major changes can be made in
June, with revised numbers depending on
the scenario as it unfolds.

Full scale budget in a few months – that’s

where the action should be, if at all
This is a Rs.10lakh crores and
above Budget, the largest
since independence.
THANK YOU