Union Budget & Fiscal Deficit
Economy Advanced · केंद्रीय बजट और राजकोषीय घाटा
📋Quick Overview
The Union Budget is the Annual Financial Statement of the Government of India, presented under Article 112 of the Constitution. It details the government's revenue and expenditure for the coming financial year. Since 2017, the budget is presented on February 1 (changed from the last working day of February). The budget consists of two parts: Revenue Account and Capital Account.
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Fiscal Deficit = Total Expenditure − Total Receipts (excluding borrowings). India's FD for FY 2024-25 was 5.1% of GDP. FRBM Act 2003 mandates fiscal consolidation targets to reduce deficit over time.
📖Budget Structure — Revenue vs Capital
| Account | Receipts | Expenditure |
|---|---|---|
| Revenue Account | Tax revenue (Direct: IT, Corporate Tax + Indirect: GST, customs) + Non-tax revenue (dividends, fees, grants) | Day-to-day running: salaries, pensions, interest payments, subsidies — does NOT create assets |
| Capital Account | Borrowings (internal + external) + Disinvestment proceeds + Recovery of loans | Asset creation: infrastructure, defence equipment, loans to states — creates long-term assets |
📖Types of Deficits — Key Formulas
| Deficit Type | Formula | Significance | |
|---|---|---|---|
| Revenue Deficit | Revenue Expenditure − Revenue Receipts | Shows govt spending more than it earns on current operations; bad for fiscal health | |
| Fiscal Deficit | Total Expenditure − Total Receipts (excl. borrowings) | Total borrowing requirement of govt; most monitored deficit indicator | |
| Primary Deficit | Fiscal Deficit − Interest Payments | Fiscal deficit adjusted for past debt servicing; true measure of current overspending | |
| Effective Revenue Deficit | Revenue Deficit − Grants for capital assets | Introduced in 2011-12; adjusts for grants given to create capital |
📝FRBM Act & Important Budget Facts
- •FRBM Act 2003 (Fiscal Responsibility and Budget Management): Sets targets for fiscal consolidation; amended multiple times; original target = fiscal deficit ≤3% of GDP; escape clause allows temporary deviation during emergencies
- •Budget presentation change: Changed from last working day of February to February 1 in 2017 by Finance Minister Arun Jaitley; allows earlier implementation before financial year start (April 1)
- •Railway Budget merged with Union Budget from 2017 (on recommendation of Bibek Debroy committee, 2016); earlier presented separately since 1924
- •Article 112 = Annual Financial Statement (budget); Article 113 = procedure for budget voting; Article 116 = Votes on Account