Image Source : ANI/X Finance Minister Nirmala Sitharaman
Union Budget 2025: The wait is almost over! Finance Minister Nirmala Sitharaman will present the Union Budget in Parliament at 11 am today, with several major announcements are expected. If you are also palnning up to listen to the budget speech, it is important to understand some key terms. Knowing their meanings will help you grasp the details of the budget more easily. Let’s explore some important terms commonly used in the budget and their definitions.
Key terms to understand
To better understand the budget speech, here’s a simple explanation of some key terms often used in budget presentations:
1. Gross Domestic Product (GDP)
Gross Domestic Product (GDP) refers to the total value of “final” goods and services produced within a country’s geographical boundaries over a specified period, such as a quarter or a year. This includes not only goods and services produced for sale but also non-market production like government-provided services in defense, education, and healthcare. However, GDP does not account for unpaid work (such as voluntary domestic work) or activities in the black market.
2. Nominal and Real GDP
Nominal GDP reflects the current value of goods and services in an economy, without accounting for inflation or deflation. On the other hand, Real GDP adjusts for inflation or deflation, providing a more accurate representation of a country’s economic growth or contraction over time, by removing the distortions caused by price changes.
3. Finance Bill
The Finance Bill, presented along with the annual financial statement, details the imposition, abolition, exemption, alteration, or regulation of taxes proposed in the Union Budget. It also contains other provisions related to the budget that can be classified as a money bill.
4. Capital and Revenue Receipts
Capital receipts refer to the funds received by the government that lead to a reduction in its assets, such as market borrowings, loans, and proceeds from disinvestment. On the other hand, revenue receipts mainly consist of tax and non-tax revenues, which do not result in a reduction of the government’s assets but are used to meet its regular expenditures.
5. Capital Expenditure
This creates or decreases the assets/liabilities of the government, and includes expenditure on the acquisition of assets such as land, buildings, machinery, equipment, as well as investments in shares, etc., and loans and advances given by the Centre to the states/UTs. As per budget estimates, FY25 capital expenditure is Rs 11.1 trillion (3.4% of GDP), while in FY24 (revised estimates) it was Rs 9.5 trillion (3.2%).
6. Gross Fiscal Deficit
The Gross Fiscal Deficit is the gap between the government’s total expenditure (including revenue, capital, and debt after repayments) and its receipts (revenue receipts and non-borrowed capital receipts). It reflects the total borrowing requirements of the government, indicating how much the government needs to borrow to meet its expenses.
7. Revenue Deficit/Surplus
The revenue deficit occurs when a government’s revenue expenditure exceeds its revenue receipts. Conversely, if the receipts surpass the expenditure, it results in a revenue surplus. A revenue deficit indicates that the government is borrowing to cover its expenses, while a surplus signifies more income than expenses.
8. Public debt
Public debt refers to the total debt accumulated by both the central and state governments, including both internal and external borrowings. A significant portion of this debt is internal, while the external debt constitutes a smaller portion. The debt is repaid from the Consolidated Fund of India in the case of the central government. A government-appointed panel had recommended a debt-to-GDP ratio of 60% (40% for the Centre and 20% for states) by FY23, but the actual ratio was 89% in FY21 and 81.6% in FY24.
9. Direct and Indirect Tax
Taxes that are directly levied on income or profits, such as income tax or corporate tax are direct tax, while taxes that are added to the cost of goods or services, like the Goods and Services Tax (GST) are indirect tax.
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