Budget Explained: Key terms you must know

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Budget 2024 Key Term Explained: Finance Minister Nirmala Sitharaman will present the interim Budget for 2024 in Parliament on February 1, 2024—the last Union Budget before the country goes into general elections, due in April-May 2024.

Before the big day, here are some of the important terms you should understand to be able to follow Budget announcements clearly: 

Economic Survey

A flagship document summarising the performance of the economy in the ongoing financial year, the Economic Survey is presented every year typically on the eve of the presentation of Budget in Parliament. The Economic Survey provides context to the Budget for the next financial year as it details activity in the various sectors of the economy in detail along with the status of major development programmes. It also serves as a report card of the performance of the government’s development schemes. 

Annual Financial Statement (AF) 

This is a crucial document that highlights the receipts and expenditures of the government during the financial year. It is presented among the Budget documents in Parliament every year.

Consolidated Fund

All of the revenue raised by the government, market borrowings, and receipts from loans are part of the Consolidated Fund of India. All of the government's expenditure comes out of this fund, barring items met from the Contingency Fund or the Public Account. Money can only be withdrawn from this fund with prior Parliamentary approval.

Contingency Fund

This is a corpus set aside for any unforeseen events. The Contingency Fund is at the disposal of the President. Any money withdrawn from this fund, with prior approval of Parliament, is repaid from the Consolidated Fund.

Public Account 

This account contains the amount of money used for transactions where the government merely acts as a banker. All the money received by or on behalf of a central or state government is credited to this account. Simply put, this money does not belong to the government and is meant to be paid back at some time to their rightful owners. 

Inflation

The rate of increase in prices of goods and services is known as inflation. It can also be understood as the rate at which the power to purchase a defined set of goods and services weakens.

Direct taxes

These are taxes that are levied directly from taxpayers, such as income tax and corporate tax. These form one of the most important components of the Budget. 

Indirect taxes

These are taxes that are levied indirectly from taxpayers, such as GST, VAT, customs and excise duties, and service tax.

Fiscal policy

It is an essential instrument meant to monitor the domestic economic position. Simply put, an estimate of taxation and government spending is known as fiscal policy. 

Fiscal deficit

A fiscal deficit is a situation wherein the government’s expenditure exceeds its revenue, excluding market borrowings. Calculated as a percentage of the GDP, it is the gap between the government's total spending and the sum of its total receipts.

Finance Bill

It is a bill used by the government to propose the levy of new taxes, alterations in the tax structure, or even the continuance of the existing tax structure. 

Budget Estimate

These are a set of estimates of fiscal and revenue deficits for the next financial year. Simply put, Budget Estimates represent the monetary value assigned to the government's ambitions. 

Monetary policy

These are the various measures that are at the disposal of the central bank to regulate the level of flow of money in the economy and the banking system.

Divestment

The process of the sale of existing assets is known as disinvestment or divestment. Typically, it is meant to raise revenue or to pare losses from non-performing assets. 

Revenue receipt (expenditure)

A crucial portion of the Budget, the revenue receipt contains anything and everything that does not lead to the creation of assets, such as salaries, subsidies, and interest payments.

Revenue Deficit

A revenue deficit is a situation when the government’s total revenue expenditure exceeds its total revenue receipts. In simple terms, a revenue deficit means that the government is overspending from its regular income. 

Capital expenditure (capex)

The total amount of money that the government spends towards the development, acquisition, or degradation of machinery or assets.