India’s finance minister Nirmala Sitharaman will be presenting the Union Budget for the upcoming year on Saturday, February 1, 2025. All eyes are on the what she has to offer salaried employees, corporates and entrepreneurs. The Budget Session 2025 will kick off on January 31 with President Droupadi Murmu addressing a joint Parliamentary session of both Lok Sabha and Rajya Sabha and will conclude on February 13. Here are some key glossary words to understand the Budget.
Union Budget
The Union Budget is a statement outlining the government’s estimated receipts and expenditures for a specific year, also known as the Annual Financial Statement.
Gross Domestic Product (GDP)
GDP is a key term in the budget. Gross Domestic Product (GDP) represents the total market value of all final goods and services produced within a country during a specific period.
In most countries, GDP is the standard for measuring economic conditions. GDP can be calculated on an annual or quarterly basis. In India, the Central Statistical Office (CSO) under the Ministry of Statistics and Programme Implementation calculates the country’s GDP by accumulating data from central government and state government-run agencies.
Direct and Indirect Taxes
Tax is the primary source of income for the government – Direct tax and Indirect tax.
Direct tax is the tax paid by an individual directly to the government. This includes income tax and corporate tax. Wheras, Indirect tax is produced by the people to a person/entity with the burden of paying the tax to the government.
Goods and Services Tax (GST)
GST, or Goods and Services Tax, is applied to most goods and services sold in India. It’s an indirect tax, meaning the consumer pays it, but the business collects and passes the amount on to the government. This tax helps contribute to the government’s income.
Vote On Account
Once the Union Budget is announced, the government must start the Parliamentary approval process.
Under Article 116 of the Indian Constitution, a vote on account is a provisional grant given to the Central government to cover short-term expenses until the start of the new financial year. This is also known as the Interim Budget.
Capital Expenditure
Capital expenditure refers to the government’s investment in building and upgrading infrastructure, including machinery, equipment, buildings, healthcare facilities, and educational institutions. It also includes costs for acquiring fixed assets like land and making investments that are anticipated to yield future profits or dividends.
Revenue expenditure
The money that government spends on the daily operations of its departments and services. This also includes interest payments on debt and the provision of subsidies.
Fiscal deficit
A fiscal deficit happens when the government’s spending exceeds its total revenue. This gap is typically covered through borrowing.
Revenue Account
A revenue account keeps track of the income or revenue generated from business or government transactions.
Capital Account
Also referred to as the capital and financial account, it tracks the net inflow or outflow of investments within an economy.
Plan Expenditure
Plan expenditure includes funds designated for developmental initiatives such as electricity generation, infrastructure projects, education, and other productive sectors.
Non-plan expenditure
This includes spending on essential services such as interest payments, debt servicing, defence, and subsidies.
BOP (Balance of Payments)
The Balance of Payments (BOP) tracks the difference between a country’s incoming and outgoing funds, covering transactions related to trade, investments, and financial transfers.
Consolidated fund
This is one of the most critical government accounts. The Consolidated Fund of India includes the revenues received and expenses made by the government. Most government expenditure is met from this fund except for some items from the Contingency Fund. Withdrawal from this fund can only happen with the Parliament’s approval.
Contingency fund
The Contingency Fund is a reserve set aside for handling national emergencies. Managed by the President of India, it is utilized during crises. The Union Government maintains a Contingency Fund of ₹500 crore.
Disinvestment
Disinvestment refers to the government’s process of selling its shares in a public sector company. As a shareholder, the government can sell these shares to generate funds for managing expenditures.
