CENTRAL BUDGETING AND

FUNDING
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.

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 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

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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( Changed(
; HUF Artificial 2)009- 20010-
Juridical Person) – 10)lakh 11)lakhs
Basic Tax Exemption s

Limit (in INR- Lacs) Sr.Citizen 2.25 2.40

No Surcharge on Women 1.50 1.80
Personal Income Tax
(to be removed in Others 1.50 1.60
phased manner)
(persons covered:
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’.
 2008-2009 2008-2009 2009-2010
Budget Estimates Revised Estimates Budget Estimates
(In Crore of Rupees)
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