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BUDGET AND ITS IMPACT ON

FISCAL DEFICIT AND


ECONOMY

5 Year Plan
Major bodies behind the making of 5 year plans
i. Planning commission of India
ii.National Planning council
iii.National Development Council and state planning
commissions
Economy of India is based in part on planning
through its 5 year plans
Scope of its work

1.
2.
3.
4.
5.
6.

Planning Commission
Make assessment of will
material, capital, human
resources
Plan for effective and balanced utilization of
countrys resources
Prioritize, define stages and propose allocation of
resources
Indicate factors tending to retards economic
development
Nature of machinery
Appraise from time to time the progress of each
stage and recommend adjustments

BUDGET

Annual financial report

Finance minister seeks Parliaments approval


The formulation
Budget presentation and passage
The Budget papers

How is it prepared?
1.
2.
3.
4.
5.
6.
7.
8.

Ministries indicate their requirements


Preparation of draft
Approval
Summary for the cabinet
FM presents budget in Lok Sabha
Annual financial statement given to Rajya Sabha
Grants approved
Appropriation bill, finance bill introduced in Lok
Sabha.
9. Union budget approved

How is it passed?
2 stage process
1.General discussion
2.Considering of demands by standing committees

About Economic Survey


Finance Ministry
Every year in the parliament
Just before the UNION BUDGET
Ministry's view - annual economic development of the country
Flagship annual document of the Ministry of Finance,
Government of India
Reviews the developments in the Indian economy over the
previous 12 months

Summarizes the performance on major development


programmes
Highlights the policy initiatives of the government
Prospects of the economy in the short to medium term.
Document is presented to both houses of Parliament
during the Budget Session.
Chief Economic Adviser - Ministry of Finance Raghuram G. Rajan

Overview of the
following issues
State of the Indian economy
Challenges, policy responses, and medium-term outlook
Fiscal policy and monetary management
Financial intermediation and the role of markets
External sector, balance of payments, and trade

Agriculture, industrial development and services


sector
Energy, infrastructure, and communications
Human development, climate change and public
programmes
India and the Global Economy

ECONOMIC SURVEY
FOR
BUDGET 13-14

Survey sees economy picking


up the pace
Projected growth of GDP 6.1-6.7%
...And this is how
Fiscal consolidation lower inflation and current account
deficit
RBI in a position to cut interest rates
Monetary easing & reforms will drive investments

Ways to get there


Ease regulatory & bureaucratic impediments to
investments
Encourage spending shift from consumption to investments
Increase government savings by cutting wasteful subsidies
Incentivise financial savings through higher real returns

.But a few risks to recovery


Global economy does not recover as anticipated
Crude prices spike because of geopolitical risks
Risk tolerance of international investors declines

Fiscal
Deficit

What is Fiscal deficit?


Govt. Expenditure > Govt. Revenue
Can be measured with or without including interest
payment on debt
Deficits help countries climb out of economic
recession.- Economist John Maynard Keynes
Governments should avoid deficits in favour of a
balanced budget policy.- fiscal conservatives.

Why Fiscal deficit?


To calculate the fiscal gap
The fiscal gap can be interpreted as the
percentage increase in revenues or reduction of
expenditures necessary to balance spending
and revenues in the long run

How to reduce Fiscal


deficit?
Poverty alleviation ensuring high levels of
employment, rising productivity and real
jobs.
Thus providing the poor with real incomes.
Also, cutting subsidies and spending the
money instead on infrastructure investment.
Can be a game changer

Mind the GAP


Global rating agency warn India could lose
its investment grade status
To revive growth - allow greater FDI
increased prices of diesel
Planned spending on long-term
development programs is also being
deferred to next fiscal year

Disinvestment : Stake sale in PSUs


SMEs - Deferring investment plan & Shaky
confidence of investors
Measures or sheer assumptions ?

A deficit of 5.3 percent of GDP would remain


the widest spending gap among the BRICS
group of major emerging nations
India is prone to wide external deficits because
it imports nearly 80 percent of its oil need

Food Bill Subsidy & Impacts

Expected Subsidy was 1,30,000 crore as on


28th Feb,2013.
Provision for Rs 90,000 crore under the Food
Subsidy Bill.
Food Subsidy was lowered from 85,000(BE)
crore to 80,000 (RE) in 2012-1013

Deregulation of Oil Prices &


Impacts
Partial deregulation of oil prices by hiking diesel prices time

to time and to recover Rs 9.60 per litre loss they incur on the
fuel.

Rs 94,000 crore diesel subsidies per annum.


In the short term, we may expect a spike in inflation,
however, in the long term, due to reduction of subsidy bills
the fiscal deficit will be narrowed.
The entire sector (oil and gas) would expect re-ratings and
this will pay off well in the long run.
The move will boost investor (FIIs) confidence and also
influence markets and rating agencies.

FMCG Budget and


impact
The Union Budget 2013 offered minor benefits to the FMCG
industry.
However, its impact is likely to be offset by high fuel costs and
food inflation that has been hovering in double-digits.
The income tax benefits have not been substantial to stem the
slowdown in the sales of discretionary goods.
Therefore, going ahead we expect FMCG companies trying hard to
maintain their earnings momentum.