PUBLIC FINANCE

Budget & Deficit UNIT

2
Budget at a
Glance (2023-24)
Generic Elective / B.Com / BA / BBE / B.Sc
 Government Budget
In India, Article 112 of the constitution requires the central government to prepare
‘Annual Financial Statement’ for the country as a whole. This is called the ‘Budget of
Central Government’. Or ‘Union Budget’.
Article 202 of the constitution requires every state government to prepare ‘Annual
Financial Statement’ for the state. This is called the ‘Budget of State Government’.

Annual Financial Statement

Consolidated Fund Contingency Fund Public Accounts

The Main budget Only for urgent Govt. acts as a
of Central Govt. unforeseen expenses banker only
Consolidated Fund : All revenues received by the Government, all receipts from the
recoveries of loans given by the govt. and the entire amount of new loans raised by the
government together constitute the consolidated fund. All the expenditure of the
government is incurred from this consolidated Fund. And the Govt. cannot take any
amount from this consolidated fund without authorisation from Parliament. Hence,
consolidated fund effectively is the Budget of the Government.

Contingency Fund : It is the fund for urgent unforeseen expenditures. Govt. can spend
money from the Contingency fund without prior authorisation from Parliament, but it
must be get approved by parliament later.

Public Account : Govt. act as a banker in case of some other transactions. For example,
Provident Fund, Small Savings Collections, other deposits etc. The Money received from
such transactions is kept in Public Account and the related disbursements are also made
from these. Funds kept in public account do not belong to the Government, and the govt.
needs to pay back this money to the person and authorities who deposited them.
Meaning of Govt. Budget
Government budget is a statement showing the estimated receipts and estimated
expenditure of the government during an financial year or Fiscal year. i.e., 1st April to 31st
March.

Components of Govt. Budget

Receipts Expenditure

Revenue Capital Revenue Capital

Receipts Receipts Expenditure Expenditure
Revenue Receipts
• The receipts which neither create any liability nor reduce any assets of the
government, are called Revenue receipts.
• Revenue receipts are receipts of government which are non redeemable, i.e. they
cannot be reclaimed from the government.
• There are two sources of government’s Income (Revenue) : Tax and Non Tax revenues.
Capital Receipts
• All those receipts of the government which either create liabilities or reduce any assets
of the government, are called Capital receipts.
• Capital receipts are classified into three groups:
a. Borrowing : It creates liabilities for the government.
b. Recovery of Loan: It reduces the assets of the Government.
c. Other Receipts (eg. Disinvestment) : It reduce the assets of government
Total Receipts = Revenue Receipts + Capital Receipts
Revenue Expenditure
• Revenue Expenditure refers to the expenditure which neither creates any asset nor
reduce any liabilities of the government.
• These expenditure are incurred for smooth functioning of governments departments
and for day to day expense of the government.
• For example, salaries, pension, subsidies, interest payments, grants to state govt.

Capital Expenditure
• Capital expenditure refers to those expenditure which either creates an asset or
reduce any liabilities of the government.
• It is non recurring or non regular in nature.
• For example, Construction of metro, Repayment of borrowing, Loan and advances
given to state government etc.

Total Expenditure = Revenue Expenditure + Capital Expenditure

Effective Capital Expenditure : It refers to the sum of Capital Expenditure and Grants in
Aid for Creation of capital Assets.
 Deficits in Budget
Revenue Deficit
It is defined as the excess of government’s revenue expenditure over government’s
revenue receipts in a fiscal year. (RD = RE>RR)
It is calculated as the difference between Revenue Expenditure and Revenue Deficit
Revenue Deficit = Revenue Expenditure – Revenue Receipts

It shows that the government’s current expenses are greater than current income. To
fulfill (finance) revenue deficit, government use capital receipts, i.e. Government will
either sell the assets (disinvestment) or will take borrowings. It means revenue deficit
either increases liability or reduce assets. Higher borrowing increase the future burden in
terms of loan amount and interest payments.

Effective Revenue Deficit

Effective Revenue Deficit is the difference between revenue deficit and grants for creation
of capital assets. The concept of effective revenue deficit has been suggested by the
Rangarajan Committee on Public Expenditure in 2011-12.
Fiscal Deficit
Fiscal deficit is defined as excess of total expenditure over total receipts excluding
borrowings during fiscal year.
Fiscal deficit =Total Expenditure – Total Receipts excluding borrowing
= (Revenue Exp. + Capital Exp.) – (Revenue Rec. + Capital Rec. - Borrowings)
Fiscal deficit equals to borrowing.
Impacts of Fiscal Deficit on Economy
a) Low GDP growth rate: Government will increase taxes, which reduces the disposable
income of people. It reduces aggregate demand in the economy. As a result,
production in the economy will fall.
b) Inflation: If government borrows from RBI to finance its fiscal deficit, RBI prints new
currency notes. This increase the money supply in the economy. Hence, it causes
Inflation.
c) Foreign Dependence: If government borrows from external sources like foreign
government and international financial organization to meet fiscal deficit, it increases
the country’s dependence on other countries.
Primary Deficit
The difference between the fiscal deficit of the current year and interest payment on the
previous borrowings is termed as Primary Deficit.
Primary Deficit = Fiscal Deficit – Interest payment

It shows how much budget expenditure will be invested in economic development and
how much on payment of interest.
A zero primary deficit indicates that government have to borrow only for the payment of
interest on previous borrowings .
 BUDGET AT A GLANCE
2023-2024
Budget at a Glance presents broad
aggregates of the Budget for easy understanding.
This document shows receipts and expenditure as
well as the Fiscal Deficit (FD), Revenue Deficit
(RD, Effective Revenue Deficit (ERD) and the
Primary Deficit (PD) of the Government of India.
It gives an illustrative account of sources of receipts
and their expenditure through graphs and info-
graphics. In addition, the document contains details
with respect to the resources transferred to the States
and UTs with legislature. The document also
encompasses extracts of allocations for programme
and schemes and giving insights on sources of
deficit financing and composition of important
budgetary variables.

2. Fiscal Deficit (FD) is the adverse fiscal

balance which is a difference between the Revenue
Receipts Plus Non-Debt Capital Receipts (NDCR)
i.e. total of the non-debt receipts and the total
expenditure. FD is reflective of the total borrowing
requirement of Government. Revenue Deficit (RD)
refers to the excess of revenue expenditure over
revenue receipts. Effective Revenue Deficit (ERD)
is the difference between Revenue Deficit and
Grant-in-Aid for Creation of Capital Assets.
Primary Deficit is measured as Fiscal Deficit less
interest payments. Effective Capital Expenditure
(Eff-Capex) refers to the sum of Capit al
Expenditure and Grants-in-Aid for Creation of
Capital Assets.

3. The receipts and expenditure depicted in

this document are net of receipts and recoveries as
explained in the reconciliation statements provided
in the Receipt Budget (Annex-3) and Expenditure
Profile Document (Statement No. 17).

` 4. In RE 2022-23, the total expenditure has

been estimated at `41,87,232 crore and is more than
` Actuals of FY 2021-22 by `3,93,431 crore. The total
` capital expenditure in RE 2022-23 is estimated at
`7,28,274 crore.
 ` 5. The total expenditure in BE 2023-24 is
estimated at `45,03,097 crore of which total capital
` expenditure is `10,00,961 crore. Budget 2023-24
reflects continuing strong commitment of the Union
Government to boost economic growth by investing
in infrastructure development leading to an increase
` in capital expenditure by 37.4 per cent over RE
2022-23. Effective Capital Expenditure, at
`13,70,949 crore in BE 2023-24, shows an increase
of 30.1 per cent over RE 2022-23.

6. Total resources being transferred to the

States including the devolution of State’s share,
Grants/Loans and releases under Centrally
` Sponsored Schemes, etc. in BE 2023-24 is
` `17,97,537 crore, which shows an increase of
`1,43,056 crore over Actuals of FY 2021-22.

(ii)
 1

` Budget at a Glance

2021-2022 2022-2023 2022-2023 2023-2024

Actuals Budget Revised Budget

Estimates Estimates Estimates
1. 1. Revenue Receipts 2169905 2204422 2348413 2632281
2. 2. Tax Revenue (Net to 1804793 1934771 2086662 2330631
¹ Centre)1
3. 3. Non Tax Revenue 365112 269651 261751 301650

4. 4. Capital Receipts 1623896 1740487 1838819 1870816

5. 5. Recovery of Loans 24737 14291 23500 23000
6. 6. Other Receipts 14638 65000 60000 61000
7. ² 7. Borrowings and Other 1584521 1661196 1755319 1786816
Liabilities2

8. 1+4) 8. Total Receipts (1+4) 3793801 3944909 4187232 4503097

9. (10+13) 9. Total Expenditure (10+13) 3793801 3944909 4187232 4503097

10. 10. On Revenue Account 3200926 3194663 3458959 3502136
of which
11. 11. Interest Payments 805499 940651 940651 1079971
12. 12. Grants in Aid for creation 242646 317643 325588 369988
of capital assets
13. 13. On Capital Account 592874 750246 728274 1000961
14. 12+13) 14. Effective Capital Expenditure 835520 1067889 1053862 1370949
(12+13)
15. (10-1) 15. Revenue Deficit (10-1) 1031021 990241 1110546 869855
(4.4) (3.8) (4.1) (2.9)
16. 16. Effective Revenue Deficit 788375 672598 784958 499867
(15-12) (15-12) (3.3) (2.6) (2.9) (1.7)
17. 17. Fiscal Deficit 1584521 1661196 1755319 1786816
[9-(1+5+6)] [9-(1+5+6)] (6.7) (6.4) (6.4) (5.9)
18. (17-11) 18. Primary Deficit (17-11) 779022 720545 814668 706845
(3.3) (2.8) (3.0) (2.3)
1
- RE 2022-23 is reduced by `32,607 crore on account of net
` amount payable by Centre for prior years. Growth in BE 2023-
- - % 24 over RE 2022-23 is 10% excluding prior year adjustments.
2
Includes drawdown of Cash Balance.
: Notes:
(i) - ` (i) Nominal GDP for BE 2023-2024 has been projected at
% `3,01,75,065 crore assuming 10.5 % growth over the
- ` estimated Nominal GDP of `2,73,07,751 crore as per the
First Advance Estimates of FY 2022-23.

(ii) - (ii) Individual items in this document may not sum up to the
totals due to rounding off.

(iii) (iii) Figures in parenthesis are as a percentage of GDP.

2

Rupee Comes From

( Budget 2023-24)
Budget ( 2-23)

15 [ p.]

35
[ p.]
15
[ p.]

5 [ p.]

[ p.] 2
5 7 [ p.]
[ p.] 16 [ p.]

Corporation-tax 15 [ p.]

Borrowings & Other

liabilities 34
[ p.]

Income-tax 15 [ p.]

-
- Customs 4 [ p.]

Non-debt Capital
receipts 2 [ p.] -
- Non-tax Union Excise Duties
receipts 6 [ p.] 7 [ p.]
Goods & Service Tax
& Other taxes 17 [ p.]

:-

Notes :- 1. Total receipts are inclusive of States' share of taxes and duties which have been netted in the table on page 1.
2. Figures have been rounded off.
 3

Rupee Goes To
( Budget 2023-24)
Budget ( 2-23)

9
[ p.] 15 [ p.]
9
[ p.]

4
[ p.]
20
[ p.]
17
[ p.]

8 [ p.]
10
8
[ p.]
[ p.]

Centrally Sponsored Central Sector

Scheme 9 [ p.] Scheme (excluding
Capital Outlay on
Defence and Subsidy)
7 [ p.]
Other Expenditure 8
[ p.]

Pensions 4
[ p.]

Interest Payments
20 [ p.]

States Share of Taxes

duties 8
[ p.]

Defence 8 [ p.]

Finance Commission
& Other transfers 9 [ p.] Subsidies 7 [ p.]

:-

Notes :- 1. Total expenditure is inclusive of States' share of taxes and duties which have been netted against receipts in the table on page 1.
2. Figures have been rounded off.