Important Terms in Union Budget 2021

The Budget comprises the finance bill and the appropriation bill. These bills are passed in the Indian Parliament before April 1, after its introduction on February 1 every year. Many difficult terminologies are mentioned in the Budget document; the aspirants often find them difficult to understand. Here are some essential terms concerning the budget document that an aspirant must know while preparing for PCS exams.

What does the term 'Union Budget' mean?

The Union Budget is the most comprehensive report of the Government's finances. According to Article 112 of the Indian Constitution, the Union Budget is a statement of estimated receipts and expenditure for a given fiscal year.
In other words, the union budget reports the Government's finances, including the revenue (from all sources) and outlays (for all activities) consolidated.
The Union Budget also contains estimates of the Government's accounts for the next fiscal year.

Capital Budget

It includes capital receipts and payments.
It includes investments in loans, shares, and advances granted by the central govt to state govt, govt companies and other parties.

Finance Bill

It is the bill produced immediately after the Union Budget presentation.
It details the imposition, alteration, abolition, or regulation of taxes proposed in the union budget.

Vote on Account

The process by which an incumbent government obtains votesfrom Parliament to draw money from India's Consolidated Fund to meet its expenses until the elections are done.

Budget Estimates

It is the amount of money allocated to any ministry or scheme for the coming financial year. It contains estimates of the Govt's accounts for the next fiscal year.

Revised Estimates

A mid-year review of possible expenditure.
As the Parliament does not vote these, they do not provide any authority for expenditure.
Any additional projections made in the Revised Estimates need to be authorized for expenditure through the Parliament's approval or Re-appropriation order.

Cut Motions

Motions for reduction to various Demands are made in the form of Cut Motions seeking to reduce Govt's sum.
It is sought on the grounds of economy or the difference of opinion on policy matters.

Gross Domestic Product (GDP)

GDP provides an economic snapshot of a country, helps estimate the size of an economy and growth rate. It is the monetary value of all finished goods and services made within a country's territory during a specific period.
GDP is a sum of all goods and services produced within a country.
GDP is used to compare economic performance between countries.
GDP can be measured by adding either the consumption or the investment, the value of final goods or total income.

Revenue receipts

Revenue receipts simply defined as those receipts that neither create any liability nor cause any reduction in the Government's assets. The receipts that the Government cannot recover.
Revenue receipts are regular and recurring. The Government receives them in the ordinary course of activities.
It includes the proceeds from taxes and other duties by the centre.

Revenue expenditure

Expenditure incurred by the Government for purposes other than for creating physical and financial assets.
The Government's expenditure does not lead to the creation of fixed assets are regarded as revenue expenditure.
Grants made to state governments and other parties are also treated as revenue expenditures (even though these might be used to create fixed assets).

Direct Taxes

Taxes which are imposed directly on individual and company.
Direct taxes comprise income tax and corporation tax

Indirect Taxes

Taxes that imposed on goods and services. They are paid by consumers when they buy goods and services.
It includes taxes like service tax, excise taxes and customs duties.

Customs Duty

Customs duties are levied on imported or exported goods from the country.
The importer or exporter pays · Customs duties. These are also passed on to the consumer.

Capital Receipt

The receipts that generate liability or decrease the Government's financial assets.
These receipts include borrowings from the banks and other financial institutions; the banks include Reserve Bank of India, and commercial banks and other financial institutions
Capital receipts also include loans received from foreign governments and international organization.

Capital Expenditure

Funds that are used for the development, purchasing, or acquiring fixed assets that may incur gains, in the long run, are regarded as Capital Expenditure.
It includes expenditure on procuring land, infrastructure and spending in shares. It also covers mortgages by the Union govt to public sector undertakings, state, and union territories.

Fiscal Deficit

The total expenditure over total non-borrowed receipts is called the fiscal deficit.
It is the difference between the Government's total expenditure and its total receipts, not including the borrowing.
Note: When govt's non-borrowed receipts fall short of its entire expenditure, it has to borrow money from the public to meet the shortfall.

Revenue Deficit

The additional expenditure of the Government over the revenue receipts. In other words, the difference between revenue expenditure and revenue receipts is known as revenue deficit.
It indicates the shortfall of the Government's current receipts over expenditure.

Primary Deficit

The primary deficit is the fiscal deficit minus interest payments. It indicates how much of the Government's borrowings are going towards meeting expenses other than interest payments.

Fiscal deficit – interest payments = Primary Deficit

Fiscal Policy

The Government's action concerning aggregate levels of revenue spending.
It is implemented through the Budget.
The primary means by which the Government can influence the economy.

Monetary Policy

It includes action taken by the central bank, i.e., Reserve Bank of India (RBI), to regulate liquidity (the level of money) in the economy or change interest rates.