The much speculated and talked about event of at the start of every year had to wait for a few more days until it became available for every person in the country to have an opinion about.
The budget for FY 2012-2013 had, contrary to expectations, not much to offer. The Finance Minister, delivering his seventh full length budget, started off with the path of recovery and how it was interrupted. A speech that lasted almost two hours had almost nothing in it about economic reforms. Instead it was more of a melancholy of past events and few not- so- pleasant surprises.
The most important aspect of every budget has been to increase revenue, decrease expenditure and to decrease fiscal deficit.
1. EXPENDITURES
Expenditure basically is the gross amount of money that the government spends every year for various reasons. The total expenditure for FY 2012-13, was budgeted at Rs. 14,90,925 crore. The expenditures are categorized as under
· Defence: The largest expenditure that the government has to deal with is that of defence. Considering the present situation and tensions, the Finance minister, announced more than 17% hike in India's defence expenditure for the financial year 2012-13. It allocated Rs. 1,93,407 crore, up from Rs 1.64 lakh crore in FY 2011-2012.
· Subsidies: The Indian government has been, like many other developing nations, providing subsidies for major necessities of the people. Ex: Fuel (except petrol), and fertilizers. This year, the Budget targets at containing the central subsidies under 2% of GDP in and bringing them down from the current 2.4%. The entry of the food security bill will amount to a minimum of 0.7% of GDP and could be as high as 1.5% of GDP. The government estimates food subsidy Bill at Rs 1.12 lakh crore.
· Interest Payments: Another major expenditure that the government does is that of interest payments on the money that it borrows from World Bank, and other countries. These Interest payments and pre-payment premiums will account for Rs.3,19,759 crore for FY 2012-2013. This figure is even higher than the defence budget and comes under the Non plan Expenditure heads.
· Salaries: the salaries that government employees receive, along with benefits incurs expenditure for the government. However, as compared to the aforementioned three aspects, salaries constitute for lesser money and changes according to the pay commission’s recommendations.
2. REVENUES
Revenues refer to all the money that the government receives in the form of taxes, grants, funds, earnings, exports etc. The revenue/receipts recived by the government is then allocated for certain purposes. Taxes, Disinvestments and interest incomes are the main sources of revenue for the government.
· Taxes: The major income of the government is through taxes which the citizens pay according to their incomes, and thus becomes an important part. There are types of taxes that the government receives. Rs.7,7107 crore have been the tax receipts.
i) Direct Taxes: This tax is levied on citizens on basis of their income. The new Direct taxes code has been published by Finance ministry, which would replace current Income Tax structure from 2011-12. Slabs for this tax have been changed this year. Mukherjee proposed raising the income tax exemption limit for individuals to Rs 2 lakh per annum from Rs 1.80 lakh. He also announced a deduction of upto Rs. 10,000 for interest from savings bank accounts for individual tax payers.
ii) Indirect Taxes: This is a tax that a corporate has to pay on goods and services. This includes excise duty; customs duty etc. for this FY, Standard rate of excise duty has been raised from 10 per cent to 12 per cent, while service tax rates have been raised from 10 per cent to 12 per cent. However, there have been no changes in the customs duty of 10 per cent on non-agricultural goods.
iii) Corporate Taxes: This tax is levied on a company’s income, based on its legal residence. No changes have been made on this tax. However, ways on increasing investments have been worked out. Rate of withholding tax on interest payments on external commercial borrowings is to be reduced from 20 per cent to 5 per cent for three years.
· Interest Incomes: The Public sector units, which get loans from the government, pay an interest amount to the government. However, just as last year, no mention of this revenue was made by the Finance minister.
· Disinvestments: The revenue received by the government by selling its assets for liquidity is called disinvestments. The finance minister has pegged to mop up Rs. 30000 crore through disinvestments in this fiscal year as against Rs.40000 crore last year. He targets Rs. 25000 crore for FY14.
3. FISCAL DEFICIT
We come to the most crucial and most difficult work that the Finance minister of a developing country has to address. The fiscal deficit, in lay man’s terms is the difference between the expenditure and revenue. The When the country’s total expenditure exceeds its revenue, it leads to a fiscal deficit. The Fiscal deficit targeted for this FY is at 5.1 per cent of GDP, as against 5.9 in 2010-2011 which was targeted at 4.6 per cent.
· Trade deficit: When a country’s import exceeds its exports it leads to a trade deficit. A trade deficit represents an outflow of domestic currency to foreign markets. India's trade deficit widens to $15.1 billion in February 2012 from $9.4 billion a year ago.
· Current account deficit: Current account deficit refers to trade in goods and services, as opposed to changes in capital assets (money, stocks, bonds) resulting from trade. A deficit in the current account would mean that in the current time period, the value of imports is higher than the value of exports. This year the current account deficit is pegged at 3.6 per cent of the GDP.
Thus, on the whole the budget does not have much for the common man apart from an increase in prices of lucury commodities and rising of tax slab.
