Many Indians living in rural areas keep large amounts of cash at home because of a lack of banks. Photograph: (Getty)
The Government of India has made several changes in its Annual Financial Statement, commonly referred to as budget
The Government of India has made several changes in its Annual Financial Statement, commonly referred to as budget. Some of these changes are:
What does each one of them mean?
The budget is represented under two accounts: revenue account and capital account. The revenue account means day to day running of the various government departments and services, interest payments etc.
Capital account involves long-term investments such as machinery, plants, etc.
Till this year’s budget, revenue expenditure and capital expenditure were further divided into plan expenditure and non-plan expenditure.
Plan expenditure: means the expenditure done under the five year plans, that is decided beforehand during the planning process.
Non-plan expenditure: means expenditure that lies outside the plan and for which no provision can be made as it is largely unforeseen, unpredictable and contingent on circumstances. E.g. expenditure on repairs and maintenance of assets, unfinished schemes, defence, law and order, etc.
From next year, the expenditure under both the accounts will not be divided into plan and non-plan as the premier economic planning institution, Planning Commission of India, no longer exists. It has been replaced by NITI Aayog, a think tank.
From next year, the expenditure under revenue account and capital account will not be divided into plan and non-plan.
The 12th five year plan will end in 2017 and after that, there will be no five year plans, thus redefining the Indian Economy textbooks.
If not five year plans, then what?
The NITI Aayog will be preparing a 15-year vision document aligned with the country’s social goals and sustainable development targets. The first 15-year vision document will start from 2017-18. Aayog will also prepare a seven-year National Development Agenda which will lay down the schemes, programmes and strategies to be reviewed after every three years.
The vision document is similar to the Directive Principles of the State Policy of the Constitution, guiding where India should be heading but not enforceable by law.
At the same time, one should be looking at the documents laid before Parliament under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003:
Concerns with merger of railway budget with general budget
The proposal to merge the two budgets was given by the Bibek Debroy Committee at NITI Aayog. It is said that after the merger, Indian Railways will save around $1.5 billion every year by not paying the dividend it has to pay for gross budgetary support from the Indian government.
Indian economist Bibek Debroy, in an interview, has raised four concerns regarding this merger that still need to be addressed by the railway ministry and finance ministry:
Why does the budget needs to be presented earlier than usual?
At present, the budget is presented on 28th February every year. The budget session of Parliament is divided into two parts: the first is held between last week of February to middle of March and the second session is held from last week of April to middle of May.
Usually, the budget gets passed in the second part of the session. After that, the country experiences monsoon season for 3 to 4 months hampering the infrastructure spending.
Also, unlike India, most countries around the world have their fiscal year as the calendar year.
With the Goods and Services tax scheduled to be rolled out next year, it is not certain whether the Indian government would table its Annual Financial Statement on a different date.