Category: Budget

Second leg of Budget Session

Why in News?

  • The second leg of the Budget session will commence on March 13, 2023 with the government asserting that its priority is to pass the Finance Bill.

What is Budget?

  • Annual Financial Statement is a documents presented to the Parliament in every financial year as a part of the Budget Process under Article 112 of the constitution of India.
  • This document comprises the receipts and expenditures of the government of current year, previous year and budget year in three separate parts viz.
  • Consolidated Fund of India, Contingency Fund of India and Public Account of India. The government has to present a statement of receipts and expenditure for each of these funds.
  • Capital receipt comprises of loans raised by the Government, borrowing from the Reserve Bank of India and loans taken from foreign Governments/institutions.
  • It also embraces recoveries of loans advanced by the Government and sale proceeds of government assets, including those realized from divestment of Government equity in PSUs.

Difference between Annual Financial Statement and Budget:

  • The term budget is used for several documents together including the Annual Financial Statement. The other documents in budget include Demands for Grants (DG); Appropriation Bill; Finance Bill; Memorandum Explaining the Provisions in the Finance Bill; Macro-Economic Framework Statement; Fiscal Policy Strategy Statement; Medium Term Fiscal Policy Statement; Medium Term Expenditure Framework Statement etc.
  • However, Annual Financial Statement distinguishes the expenditure on revenue account from the expenditure on other accounts, as is mandated in the Constitution of India. The Revenue and the Capital sections together, therefore make the Union Budget and that is why, Annual Financial Statements is essentially the Budget of the Government.

Budget Pre Independence:

  • Budget was introduced on 7 April 1860 by the East India Company to the British Crown. It was presented by a Scottish Economist and politician James Wilson.
  • For the first 30 years, the Budget didn’t have the word infrastructure. It was introduced in the Budget in the 1900s.

Budget Post Independence:

  • First Union Budget of Independent India: It was introduced on 26 November 1947. It was present by the first Finance Minister R.K. Shanmukham Chetty. However, it was a review of the Indian economy and no new taxes were proposed. It is to be noted that almost 46% of the Budget or Rs. 92.74 crores were allocated for defence services department.
  • Printing of Budget: The Budget was leaked in 1950, following which the government shifted the printing of budget from Rashtrapati Bhawan to a press at Minto Road. In 1980, it was shifted to a government press in North Block.
  • Introduction of Hindi: Till 1955, the Budget was presented only in the English language. However, from 1955-56, the Budget documents are printed both in English and Hindi.
  • First Prime Minister to present the Union Budget: Former Prime Minister Jawaharlal Nehru was the first PM to present the Union Budget for the FY 1958-1959. The Union Budget is usually presented by the Finance Minister. Other than Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi were the only Prime Ministers to have presented the Budget in their respective administration.
  • First Woman to present the Union Budget: Former Prime Minister Indira Gandhi was the first woman to present the Union Budget for the FY 1970-71. On 5 July 2019, Finance Minister Nirmala Sitharaman became the first full-time woman Finance Minister on India.
  • Maximum Union Budgets by a Minister: Former Finance Minister Moraji Desai presented the Union Budget a record 10 times, followed by former FM P. Chidambaram (9), former FM Pranab Mukherjee (8), former FM Yashwant Sinha (8), and former FM Manmohan Singh (6)
  • Black Budget: For the FY 1973-74, the Budget was presented by the then Finance Minister Yashwantrao B. Chavan and is called as ‘Black Budget’ due to high budget deficit of Rs 550 crores– the maximum until that time. The Budget followed the Indo-Pak war of 1971 and failed the monsoon season.
  • The Epochal Budget: The Budget presented by the then Finance Minister Manmohan Singh for the FY 1991-92 is known as ‘The Epochal Budget’– a budget that changed India forever as it marked the economic liberalisation of the nation.
  • Dream Budget: The Budget presented by the then Finance Minister P. Chidambaram for the FY 1997-98 is known as ‘Dream Budget’ as it proposed to lower the tax slabs of personal and corporate taxes.
  • The Millennium Budget: The Budget presented by the then Finance Minister Yashwant Sinha for the FY 2000-01 is known as ‘The Millennium Budget’– revolutionised India’s IT sector.
  • Change in time: In the year 2001, Finance Minister Yashwant Sinha changed the time for the presentation of Union Budget from 5 p.m. to 11 a.m. on the last working day of February.
  • Merging of Budgets and Change in date: In the year 2017, the Rail Budget was merged with the Union Budget. Also, since the said year, the Budget has been presented on 1 February following the changes introduced by the then Finance Minister Arun Jaitley.
  • Gift Tax: Former Prime Minister Jawaharlal Nehru introduced the Gift Tax in the FY 1958-1959 Budget to make tax evasion more difficult.
  • Goods and Services Tax: On 28 February 2006, Goods and Services Tax was introduced by the then Finance Minister P. Chidambaram in the Budget.
  • Longest Budget speech: Former Finance Minister Arun Jaitley holds the record for delivering the longest Budget speech in 2014– 2.5 hours.
  • Bahi Khata instead of a briefcase: In the year 2019, Finance Minister Nirmala Sitharaman replaced the standard Budget briefcase with the traditional ‘Bahi Khata’ with the National Emblem.
  • Paperless Budget: For the first time in Independent India’s history, the Budget for the FY 2021-22 wass paperless.

Budgeting process in India:

  • The procedure for presentation of the Budget in and its passing by Lok Sabha is as laid down in articles 112—117 of the Constitution of India, Rules 204—221 and 331-E of the Rules of Procedure and Conduct of Business in Lok Sabha and Direction 19-B of Directions by the Speaker.
  • The Budget goes through six stages:
  • Presentation of Budget.
  • General discussion.
  • Scrutiny by Departmental Committees.
  • Voting on Demands for Grants.
  • Passing of Appropriation Bill.
  • Passing of Finance Bill.

Presentation:

  • The Budget is presented to Lok Sabha on such day as the President may direct.
  • Immediately after the presentation of the Budget, the following three statements under the Fiscal Responsibility and Budget Management Act, 2003 are also laid on the Table of Lok Sabha:
  • The Medium-Term Fiscal Policy Statement;
  • The Fiscal Policy Strategy Statement; and
  • The Macro Economic Framework Statement.

Budget Session of Parliament

Why in News?

  • Parliamentary Affairs Minister Pralhad Joshi has hinted that the first leg of Budget session which is scheduled to end on February 13 is likely to end early.

What is Budget?

  • Annual Financial Statement is a documents presented to the Parliament in every financial year as a part of the Budget Process under Article 112 of the constitution of India.  
  • This document comprises the receipts and expenditures of the government of current year, previous year and budget year in three separate parts viz. Consolidated Fund of India, Contingency Fund of India and Public Account of India. The government has to present a statement of receipts and expenditure for each of these funds. 
  • Capital receipt comprises of loans raised by the Government, borrowing from the Reserve Bank of India and loans taken from foreign Governments/institutions. 
  • It also embraces recoveries of loans advanced by the Government and sale proceeds of government assets, including those realized from divestment of Government equity in PSUs.

Difference between Annual Financial Statement and Budget:

  • The term budget is used for several documents together including the Annual Financial Statement. The other documents in budget include Demands for Grants (DG); Appropriation Bill; Finance Bill; Memorandum Explaining the Provisions in the Finance Bill; Macro-Economic Framework Statement; Fiscal Policy Strategy Statement; Medium Term Fiscal Policy Statement; Medium Term Expenditure Framework Statement etc.
  • However, Annual Financial Statement distinguishes the expenditure on revenue account from the expenditure on other accounts, as is mandated in the Constitution of India. The Revenue and the Capital sections together, therefore make the Union Budget and that is why, Annual Financial Statements is essentially the Budget of the Government.

Budget Pre Independence:

  • Budget was introduced on 7 April 1860 by the East India Company to the British Crown. It was presented by a Scottish Economist and politician James Wilson.
  • For the first 30 years, the Budget didn’t have the word infrastructure. It was introduced in the Budget in the 1900s.

Budget Post Independence:

  • First Union Budget of Independent India: It was introduced on 26 November 1947. It was present by the first Finance Minister R.K. Shanmukham Chetty. However, it was a review of the Indian economy and no new taxes were proposed. It is to be noted that almost 46% of the Budget or Rs. 92.74 crores were allocated for defence services department. 
  • Printing of Budget: The Budget was leaked in 1950, following which the government shifted the printing of budget from Rashtrapati Bhawan to a press at Minto Road. In 1980, it was shifted to a government press in North Block. 
  • Introduction of Hindi: Till 1955, the Budget was presented only in the English language. However, from 1955-56, the Budget documents are printed both in English and Hindi.  
  • First Prime Minister to present the Union Budget: Former Prime Minister Jawaharlal Nehru was the first PM to present the Union Budget for the FY 1958-1959. The Union Budget is usually presented by the Finance Minister. Other than Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi were the only Prime Ministers to have presented the Budget in their respective administration. 
  • First Woman to present the Union Budget: Former Prime Minister Indira Gandhi was the first woman to present the Union Budget for the FY 1970-71. On 5 July 2019, Finance Minister Nirmala Sitharaman became the first full-time woman Finance Minister on India. 
  • Maximum Union Budgets by a Minister: Former Finance Minister Moraji Desai presented the Union Budget a record 10 times, followed by former FM P. Chidambaram (9), former FM Pranab Mukherjee (8), former FM Yashwant Sinha (8), and former FM Manmohan Singh (6)
  • Black Budget: For the FY 1973-74, the Budget was presented by the then Finance Minister Yashwantrao B. Chavan and is called as ‘Black Budget’ due to high budget deficit of Rs 550 crores– the maximum until that time. The Budget followed the Indo-Pak war of 1971 and failed the monsoon season.
  • The Epochal Budget: The Budget presented by the then Finance Minister Manmohan Singh for the FY 1991-92 is known as ‘The Epochal Budget’– a budget that changed India forever as it marked the economic liberalisation of the nation. 
  • Dream Budget: The Budget presented by the then Finance Minister P. Chidambaram for the FY 1997-98 is known as ‘Dream Budget’ as it proposed to lower the tax slabs of personal and corporate taxes. 
  • The Millennium Budget: The Budget presented by the then Finance Minister Yashwant Sinha for the FY 2000-01 is known as ‘The Millennium Budget’– revolutionised India’s IT sector. 
  • Change in time: In the year 2001, Finance Minister Yashwant Sinha changed the time for the presentation of Union Budget from 5 p.m. to 11 a.m. on the last working day of February. 
  • Merging of Budgets and Change in date: In the year 2017, the Rail Budget was merged with the Union Budget. Also, since the said year, the Budget has been presented on 1 February following the changes introduced by the then Finance Minister Arun Jaitley. 
  • Gift Tax: Former Prime Minister Jawaharlal Nehru introduced the Gift Tax in the FY 1958-1959 Budget to make tax evasion more difficult. 
  • Goods and Services Tax: On 28 February 2006, Goods and Services Tax was introduced by the then Finance Minister P. Chidambaram in the Budget. 
  • Longest Budget speech: Former Finance Minister Arun Jaitley holds the record for delivering the longest Budget speech in 2014– 2.5 hours. 
  • Bahi Khata instead of a briefcase: In the year 2019, Finance Minister Nirmala Sitharaman replaced the standard Budget briefcase with the traditional ‘Bahi Khata’ with the National Emblem.
  • Paperless Budget: For the first time in Independent India’s history, the Budget for the FY 2021-22 wass paperless. 

Budgeting process in India:

  • The procedure for presentation of the Budget in and its passing by Lok Sabha is as laid down in articles 112—117 of the Constitution of India, Rules 204—221 and 331-E of the Rules of Procedure and Conduct of Business in Lok Sabha and Direction 19-B of Directions by the Speaker.
  • The Budget goes through six stages:
  • Presentation of Budget.
  • General discussion.
  • Scrutiny by Departmental Committees.
  • Voting on Demands for Grants.
  • Passing of Appropriation Bill.
  • Passing of Finance Bill.

Presentation:

  • The Budget is presented to Lok Sabha on such day as the President may direct.
  • Immediately after the presentation of the Budget, the following three statements under the Fiscal Responsibility and Budget Management Act, 2003 are also laid on the Table of Lok Sabha:
  • The Medium-Term Fiscal Policy Statement;
  • The Fiscal Policy Strategy Statement; and
  • The Macro Economic Framework Statement.

Budget Session of Parliament

Why in News?

  • The Budget Session of Parliament has begun and is scheduled to conclude on April 8.

What is Budget?

  • Annual Financial Statement is a documents presented to the Parliament in every financial year as a part of the Budget Process under Article 112 of the constitution of India.
  • This document comprises the receipts and expenditures of the government of current year, previous year and budget year in three separate parts viz. Consolidated Fund of India, Contingency Fund of India and Public Account of India. The government has to present a statement of receipts and expenditure for each of these funds.
  • Capital receipt Comprises of loans raised by the Government, borrowing from the Reserve Bank of India and loans taken from foreign Governments/institutions.
  • It also Embraces recoveries of loans advanced by the Government and sale proceeds of Government assets, including those realized from divestment of Government equity in PSUs.

Difference between Annual Financial Statement and Budget:

  • The term budget is used for several documents together including the Annual Financial Statement. The other documents in budget include Demands for Grants (DG); Appropriation Bill; Finance Bill; Memorandum Explaining the Provisions in the Finance Bill; Macro-Economic Framework Statement; Fiscal Policy Strategy Statement; Medium Term Fiscal Policy Statement; Medium Term Expenditure Framework Statement etc.
  • However, Annual Financial Statement distinguishes the expenditure on revenue account from the expenditure on other accounts, as is mandated in the Constitution of India.
  • The Revenue and the Capital sections together, therefore make the Union Budget and that is why, Annual Financial Statements is essentially the Budget of the Government.

Budget Pre Independence:

  • Budget was introduced on 7 April 1860 by the East India Company to the British Crown. It was presented by a Scottish Economist and politician James Wilson.
  • For the first 30 years, the Budget didn’t have the word infrastructure. It was introduced in the Budget in the 1900s.

Budget Post Independence:

  • First Union Budget of Independent India: It was introduced on 26 November 1947. It was present by the first Finance Minister R.K. Shanmukham Chetty. However, it was a review of the Indian economy and no new taxes were proposed. It is to be noted that almost 46% of the Budget or Rs. 92.74 crores were allocated for defence services department.
  • Printing of Budget: The Budget was leaked in 1950, following which the government shifted the printing of budget from Rashtrapati Bhawan to a press at Minto Road. In 1980, it was shifted to a government press in North Block.
  • Introduction of Hindi: Till 1955, the Budget was presented only in the English language. However, from 1955-56, the Budget documents are printed both in English and Hindi.
  • First Prime Minister to present the Union Budget: Former Prime Minister Jawaharlal Nehru was the first PM to present the Union Budget for the FY 1958-1959. The Union Budget is usually presented by the Finance Minister. Other than Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi were the only Prime Ministers to have presented the Budget in their respective administration.
  • First Woman to present the Union Budget: Former Prime Minister Indira Gandhi was the first woman to present the Union Budget for the FY 1970-71. On 5 July 2019, Finance Minister Nirmala Sitharaman became the first full-time woman Finance Minister on India.
  • Maximum Union Budgets by a Minister: Former Finance Minister Moraji Desai presented the Union Budget a record 10 times, followed by former FM P. Chidambaram (9), former FM Pranab Mukherjee (8), former FM Yashwant Sinha (8), and former FM Manmohan Singh (6)
  • Black Budget: For the FY 1973-74, the Budget was presented by the then Finance Minister Yashwantrao B. Chavan and is called as ‘Black Budget’ due to high budget deficit of Rs 550 crores– the maximum until that time. The Budget followed the Indo-Pak war of 1971 and failed the monsoon season.
  • The Epochal Budget: The Budget presented by the then Finance Minister Manmohan Singh for the FY 1991-92 is known as ‘The Epochal Budget’– a budget that changed India forever as it marked the economic liberalisation of the nation.
  • Dream Budget: The Budget presented by the then Finance Minister P. Chidambaram for the FY 1997-98 is known as ‘Dream Budget’ as it proposed to lower the tax slabs of personal and corporate taxes.
  • The Millennium Budget: The Budget presented by the then Finance Minister Yashwant Sinha for the FY 2000-01 is known as ‘The Millennium Budget’– revolutionised India’s IT sector.
  • Change in time: In the year 2001, Finance Minister Yashwant Sinha changed the time for the presentation of Union Budget from 5 p.m. to 11 a.m. on the last working day of February.
  • Merging of Budgets and Change in date: In the year 2017, the Rail Budget was merged with the Union Budget. Also, since the said year, the Budget has been presented on 1 February following the changes introduced by the then Finance Minister Arun Jaitley.
  • Gift Tax: Former Prime Minister Jawaharlal Nehru introduced the Gift Tax in the FY 1958-1959 Budget to make tax evasion more difficult.
  • Goods and Services Tax: On 28 February 2006, Goods and Services Tax was introduced by the then Finance Minister P. Chidambaram in the Budget.
  • Longest Budget speech: Former Finance Minister Arun Jaitley holds the record for delivering the longest Budget speech in 2014– 2.5 hours.
  • Bahi Khata instead of a briefcase: In the year 2019, Finance Minister Nirmala Sitharaman replaced the standard Budget briefcase with the traditional ‘Bahi Khata’ with the National Emblem.
  • Paperless Budget: For the first time in Independent India’s history, the Budget for the FY 2021-22 wass paperless.

Budgeting Process in India:

  • The procedure for presentation of the Budget in and its passing by Lok Sabha is as laid down in articles 112—117 of the Constitution of India, Rules 204—221 and 331-E of the Rules of Procedure and Conduct of Business in Lok Sabha and Direction 19-B of Directions by the Speaker.
  • The Budget goes through six stages:
  • Presentation of Budget.
  • General discussion.
  • Scrutiny by Departmental Committees.
  • Voting on Demands for Grants.
  • Passing of Appropriation Bill.
  • Passing of Finance Bill.

Presentation:

  • The Budget is presented to Lok Sabha on such day as the President may direct.
  • Immediately after the presentation of the Budget, the following three statements under the Fiscal Responsibility and Budget Management Act, 2003 are also laid on the Table of Lok Sabha:
  • The Medium-Term Fiscal Policy Statement;
  • The Fiscal Policy Strategy Statement; and
  • The Macro Economic Framework Statement.

KERALA SOUGHT RELAXATION OF FRBM RULES

Why in News?

  • To help fund the emergency relief package, Kerala proposes to borrow ₹12,500 crore from the market and has urged the Centre to provide Kerala with flexibility under the Fiscal Responsibility and Budget Management (FRBM) Act.

What is the FRBM Act?

  • The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003, establish financial discipline to Reduce Fiscal Deficit.

What are the objectives of the FRBM Act?

  • The FRBM Act aims to introduce transparency in India’s fiscal management systems.
  • The Act’s long-term objective is for India to achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India.
  • The Act was enacted to introduce more equitable distribution of India’s debt over the years.

How does a relaxation of the FRBM Work?

  • The law does contain what is commonly referred to as an ‘escape clause’.
  • Under Section 4(2) of the Act, the Centre can exceed the annual fiscal deficit target citing grounds that include national security, war, national calamity, collapse of agriculture, structural reforms and decline in real output growth of a quarter by at least three percentage points below the average of the previous four quarters.

Key Features of the FRBM Act:

  • The FRBM Act made it mandatory for the government to place the following along with the Union Budget documents in Parliament Annually:
    • Medium Term Fiscal Policy Statement.
    • Macroeconomic Framework Statement.
    • Fiscal Policy Strategy Statement.
  • The FRBM Act proposed that revenue deficit, fiscal deficit, tax revenue and the total outstanding liabilities be projected as a percentage of gross domestic product (GDP) in the medium-term fiscal policy statement.

What are the Amendments Made?

  • The Act has been amended several times.
  • In 2013, the government introduced a change and introduced the concept of effective revenue deficit. This implies that effective revenue deficit would be equal to revenue deficit minus grants to states for the creation of capital assets.
  • In 2016, a committee under N K Singhwas set up to suggest changes to the Act. According to the government, the targets set under FRBM Act previously were too rigid.

What are the various recommendations made by N.K. Singh Committee?

  • Targets:The committee suggested using debt as the primary target for fiscal policy and that the target must be achieved by 2023.
  • Fiscal Council:The committee proposed to create an autonomous Fiscal Council with a chairperson and two members appointed by the Centre (not employees of the government at the time of appointment).
  • Deviations:The committee suggested that the grounds for the government to deviate from the FRBM Act targets should be clearly specified
  • Borrowings:According to the suggestions of the committee, the government must not borrow from the RBI, except when:
    • The Centre has to meet a temporary shortfall in Receipts.
    • RBI subscribes to government securities to Finance Any Deviations.
    • RBI purchases government securities from the Secondary Market.

INVESTMENT IN RESEARCH AND DEVELOPMENT (R&D)

Why in News?

  • In an effort to stimulate investment in research and development (R&D), the Department of Science and Technology is mooting a fund that will match the contributions made by private companies in R&D.

About:

  • The idea is to pool funds from a group of companies willing to invest in fundamental research, such as quantum computers or artificial intelligence, and whatever is invested government will match that.
  • The scheme will be coordinated through the department’s Science and Engineering Research Board, which funds a variety of basic science projects in several universities.
  • Public sector institutions form the lion’s share of India’s investment in R&D. In 2004-2005, private sector accounted for 28% of India’s research spend and in 2016-17 this increased to 40%. In most advanced economies, private R&D accounts for the bulk of investment in R&D.
  • It is well below that in major nations such as the U.S. (2.8), China (2.1), Israel (4.3) and Korea (4.2), according to a 2019 report by the Economic Advisory Council to the Prime Minister.

What is the Concern?

  • As a lower middle-income country, it is not surprising that India’s spending on R&D lags upper-middle income and high-income countries such as China, Israel, and the U.S.
  • However, it currently under spends even relative to its income level.
  • In fact, in 2015, there was a sizeable decline in R&D spending even as GDP per capita continued to Rise.

Budget 2020-21 – Social Sector and Infrastructure

Why in News?

  • The Union Budget 2020-21 has been presented in the parliament recently. The key provisions related to the Social Sector and infrastructure sector has been discussed in brief below.
  • 1. Agriculture Sector:
    • Agri-credit availability set at ₹15 lakh crore for 2020-21.
    • A budget allocation of ₹2.83 lakh crore for 16 action points.
    • The action points include measures to provide farmers access to faraway markets by running trains (Kisan Rail) and flights (Krishi Udaan) and providing relief to farmers from water shortage.
    • It will also include ‘One-Product One-District’for better marketing and export in the Horticulture sector. The scheme is already functional in Uttar Pradesh.
    • The focus is also on Jaivik Kheti Portal(online national organic products market), Zero-Budget Natural Farming, PM-KUSUM.
  • 2.Health Sector:
    • An allocation of ₹69,000 crore for the health sector.
    • Proposal to set up hospitals in Tier-II and Tier-III cities with the private sector using PPP model.
    • Expansion of Jan Aushadhi Kendra Scheme to all districts by 2024.
    • A task force to be appointed to recommend regarding steps required to lower the Maternal Mortality Rate (MMR) and Improving Nutrition.
  • 3. Education:
    • An amount of ₹99,300 crore has been allocated for the education sector and about ₹3,000 crore for skill development respectively.
    • Degree-level full-fledged online education programmes by institutions ranked in the top 100 in NIRF rankings, especially to benefit underprivileged students.
    • Urban local bodies to provide internship to young engineers for a year.
    • Proposal to set up National Police University and a National Forensic Science University.
    • IND SAT exam for students of Asia and Africa to promote “study in India” programme.
  • 4. Infrastructure:
    • Rs. 103 lakh crore’s for National Infrastructure Pipeline projects announced.
    • An international bullion exchange to be set up at GIFT City.
    • The budget has also announced that proceeds from divestment will go only into capital expenditure and not revenue expenditure.

Transport:

  • Budget proposes to provide ₹1.7 lakh crore for transport infrastructure in 2021.
  • National Logistics Policy to be released soon.
  • Chennai-Bengaluru Expressway to be started.

Railways

  • Aims to achieve electrification of 27,000 km of railway lines.
  • Plan to have a large solar power capacity for Indian Railways.
  • 100 more airports will be developed by 2024 to support UDAN.
  • 5 new smart cities in public-private partnership mode.
  • 5. Culture and Tourism
    • Five Archaeological Sites to be developed as Iconic Sites:

    a)Rakhigarhi (Haryana)
    b)Hastinapur (Uttar Pradesh)
    c)Shivsagar (Assam)
    d)Dholavira (Gujarat)
    e)Adichanallur (Tamil Nadu)

    • Proposal to Establish:

    a)Indian Institute of Heritage and Conservation.
    b)Maritime museum at Lothal (Gujarat).
    c)Tribal Museum in Ranchi
    d)A museum on Numismatics and Trade.

FINANCE COMMISSION

Why in News?

  • The report of the Fifteenth Finance Commission, along with an Action Taken Report, was tabled in Parliament. The Commission, headed by N.K Singh, had submitted its Report to the President in December 2019.

Highlights:

  • Article 280 of the Constitution requires that a Finance Commission be constituted to recommend the distribution of the net proceeds of taxes between the Centre and states, and among the states.
  • Parliament may by law determine the requisite qualifications for appointment as members of the commission and the procedure of selection.
  • Every member will be in office for the time period as specified in the order of the President, but is eligible for reappointment provided he has, by means of a letter addressed to the president, resigned his office.

Functions:

  • The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds;
  • The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India;
  • The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;
  • Any other matter referred to the Commission by the President in the interests of sound Finance.

Appointment Criteria:

  • As per the provisions contained in the Finance Commission [Miscellaneous Provisions] Act, 1951 and The Finance Commission (Salaries & Allowances) Rules, 1951, the Chairman of the Commission is selected from among persons who have had experience in public affairs, and the four other members are selected from among persons who:
  • are, or have been, or are qualified to be appointed as Judges of a High Court; or have special knowledge of the finances and accounts of Government;
  • or have had wide experience in financial matters and in administration;
  • or have special knowledge of economics.

Powers:

  • Have all powers of a civil court as per the Civil Procedure Code, 1908.
    • Can summon and enforce the attendance of any witness or ask any person to deliver information or produce a document, which it deems relevant.
    • Can ask for the production of any public record or document from any court or office
    • Shall be deemed to be a civil court for purposes of Sections 480 and 482 of the Code of Criminal Procedure, 1898

Removal:

  • A member may be Disqualified If:
    • He is mentally unsound;
    • He is an undischarged insolvent;
    • He has been convicted of an immoral offence;
    • His financial and other interests are such that it hinders the smooth functioning of the commission.

DIVIDEND DISTRIBUTION TAX (DDT)

Why in News?

  • Finance Minister announced abolition of DDT to be paid by companies in her budget speech.

DDT:

  • A dividend is a return given by a company to its shareholders out of the profits earned by the company in a particular year.
  • Dividend constitutes income in the hands of the shareholders which ideally should be subject to income tax.
  • However, the income tax laws in India provide for an exemption of the dividend income received from Indian companies by the investors by levying a tax called the DDT on the company paying the dividend.

Who were required paid DDT?

  • Any Domestic Company which is declaring/distributing dividend is required to pay DDT at the rate of 15% on the gross amount of dividend as mandated under Section 115O of the Income Tax Act.
  • DDT was also applicable on Mutual Funds.

Why it is Scrapped?

  • Every MNE investing in India is faced with the question of tax-efficient repatriation of profits that accumulate here.
  • The dividend that the holding company would receive would have already suffered substantial tax in India, although indirectly.
  • The foreign company would normally be required to pay tax on the dividend so received in its home jurisdiction.DDT being a tax in the Indian company and the foreign company not paying taxes directly on such Dividend Income in India, it would not be able to claim foreign tax credit in its Home Jurisdiction.
  • This resulted in a double whammy for foreign companies as, at a group level, they suffered Double Taxation.

FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT (FRBM)

Why in News?

  • States’ gross fiscal deficit (GFD) has remained within the Fiscal Responsibility and Budget Management Act (FRBM) threshold of 3% of gross domestic product (GDP) during 2017-18 and 2018-19, a Reserve Bank of India report on State Finances said.

FRBM Act:

  • Fiscal Responsibility and Budget Management (FRBM) Act enacted in 2003 by the Indian parliament aims at bringing financial discipline on government expenditure.
  • Aimed primarily to bring a check on revenue deficit, the act strives to improve the overall management of public finance by controlling unchecked borrowings and imparting financial discipline.
  • When it was introduced for the first time, its target was to bring down the fiscal deficit to 3 percent of the GDP by 2008.
  • However, the act suffered several challenges, such as the global financial crisis of 2007, when it came to implementation due to several reasons.
  • On more than one occasion, the target planned to be achieved was relaxed or time frame was extended.

NK Singh Committee:

  • A committee was set up under NK Singh in 2016 to review the act.
  • The committee on its part recommended that the government should target a fiscal deficit that is 3 percent of the GDP by 2020 and bring it down to 2.5 percent by 2023.

Report Highlights:

  • “States’ gross fiscal deficit (GFD) has remained within the FRBM threshold of 3 per cent of gross domestic product (GDP) during 2017-18 and 2018-19. This has, however, been achieved by sharp retrenchment in expenditures, in particular, capital expenditure.
  • For 2019-20, states have budgeted for a consolidated GFD of 2.6 per cent of GDP with a marginal revenue surplus (as against revenue deficits in the previous three years).
  • The report said sharp reduction in capital expenditure by states has potentially adverse implications for the pace and quality of economic development, given the large welfare effects of a much wider interface with the lives of people at the federal level.
  • “Currently, states employ about five times more people and spend around one and a half times more than the Centre. Moreover, public expenditure by states influences the quality of physical and social capital infrastructure of the economy
  • “States’ revenue prospects are confronted with low tax buoyancies, shrinking revenue autonomy under the GST framework and unpredictability associated with transfers of IGST and grants.

Budget Special – 2019

Interim Budget:

  • An Interim Budget usually doesn’t list out new schemes or doesn’t unveil any policy measures. The government will present the vote on account for the next four-to-five months. A full-fledged Budget will be presented after the House reassembles after the general election.
  • India to become a USD 5-trillion economy in the next five years and aspires to become a USD 10-trillion economy in the next 8 years.
    • Fiscal deficit for 2018/19 seen at 4% of GDP
    • FY20 total expenditure seen at ₹84 trillion rupees
    • FY20 capital expenditure seen at ₹3,36,292 crore
    • Central schemes to get ₹3,27,679 crore FY20
    • Recovered ₹3 lakh crore via bankruptcy code
    • Current account deficit for 2018/19 seen at 5% of GDP
    • Bank of India, Bank of Maharashtra and Oriental Bankno more under RBI’s prompt corrective action.

Direct Tax proposals:

No income tax for earnings up to 5 lakhs

  • Individuals with gross income of up to ₹6.5 lakh need not pay any tax if they make investments in provident funds and prescribed equities.
  • More than Rs. 23,000 crore tax relief to 3 crore middle class taxpayers
  • Standard tax deduction for salaried persons raised from ₹40,000 to ₹50,000
  • TDS threshold to be raised from Rs. 10,000 to Rs. 40,000on interest earned on bank/post office deposits
  • I-T processing of returns to be done in 24 hours
  • Within the next 2 years, all verification of tax returns to be done electronically without any interface with the taxpayer
  • Existing rates of income tax to continue
  • Tax exempted on notional rent on a second self-occupied house
  • Housing and real estate sector to get boost-
    • TDS threshold on rental income increased from 8 lakh to 2.4 lakh.
    • Benefit of rollover of capital gains increased from investment in one residential house to two residential houses for capital gains up to Rs. 2 crores.
    • Tax benefits for affordable housing extended till 31st March, 2020 under Section 80-IBA of Income Tax Act
    • Tax exemption period on notional rent, on unsold inventories, extended from one year to two years
  • Direct tax collections from 6.38 lakh crore rupees in 2013-14 to almost 12 lakh crore rupees; tax base up from Rs 3.79 crore to Rs 6.85 crore. 99.54% returns have been accepted without any scrutiny. In January 2019, GST collections has crossed 1 lakh crore rupees.

Farmers:

  • Under Pradhan Mantri Kisan Samman Nidhi(PM-KISAN), 6000 rupees per yearfor each farmer, in three installments, to be transferred directly to farmers’ bank accounts, for farmers with less than 2 hectaresland holding.
    • This initiative is likely to benefit 12 crore small and marginal farmers, at an estimated cost of Rs 75,000 crore for FY 2019-20 with additional Rs. 20,000 crores in RE 2018-19.
  • Outlay for Rashtriya Gokul mission increased to Rs 750 crore.
  • Rashtriya Kamdhenu Ayog to be setup for sustainable genetic up-gradation of the Cow resources.
  • New separate Department of Fisheries for welfare of 1.5 crore fishermen.
  • 2% interest subvention to Farmers for Animal husbandry and Fisheries activities; additional 3% in case of timely repayment.
  • Interest subvention of 2% during disaster will now be provided for the entire period of reschedulement of loan.
  • Decision taken to increase MSP (minimum support price) by 1.5 times the production cost for all 22 crops.

Labour:

  • Pradhan Mantri Shram Yogi Mandhan scheme to provide assured monthly pension of 3000 rupees per month, with contribution of only Rs 100/55 per month, for workers in unorganised sector after 60 years of age.
    • This will benefit 10 crore workers in unorganized sector & become the world’s biggest pension scheme for unorganized sector in five years.
  • New Pension Scheme (NPS) had been increased 10% to 14%with effect from April 1, 2019.
  • Gratuity limit payment increased from Rs. 10 lakhs to Rs. 20 lakhs
  • ESI Cover limit increased to ₹ 21,000. Minimum pension also increased to ₹

Health:

  • 22nd AIIMSto be setup in Haryana
  • National Health Mission budget estimates were hiked from Rs 30,634 crore to Rs 32,251 crore from the previous fiscal.

North East:

  • Allocation to be increased by 21% to Rs. 58,166 croresin 2019-20 BE(Budget Estimates) over 2018-19 BE
    • Arunachal Pradesh came on the air map recently
    • Meghalaya, Tripura and Mizoram came on India’s rail map for the first time
    • Container cargo movement through improved navigation capacity of the Brahmaputra.

Defence:

  • Defence budget hiked to over Rs 3 lakh crorefor first time ever

Railways:

  • Capital support of 64,587 croreproposed in 2019-20 (BE) from the budget
  • Overall capital expenditure programme to be of Rs. 1,58,658 crores
  • Operating Ratio expected to improve from 98.4% in 2017-18
    • to 96.2% in 2018-19 (RE) and to 95% in 2019- 20 (BE)
  • Safest year’ for railways in its history
  • All Unmanned Level Crossings on broad gauge network eliminated.
  • Semi high-speed “Vande Bharat Express” introduced – first indigenously developed and manufactured.

Major Fund Allocations:

  • Rural Development: increased by 6 per cent to Rs 1.18-lakh crorefor the next financial year as compared to Rs 1.12-lakh crore in the current fiscal.
  • 60, 000 crore allocation for MGNREGAin 2019-20 BE(Budget Estimates).
    • For fiscal year 2018-19, NREGS was allocated Rs 55,000 crore.
    • Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) promises unskilled manual work to every adult for at least 100 days in rural parts of the country. It was introduced in 2005.
  • PMAY-G, the allocation is less at Rs 19,000 crorefrom Rs 21,000 crore in 2018-19.
  • PMGSYstands at Rs 19,000 crore for 2019-20, same as in 2018-19.
  • Rs 93,847.64 crore allocated for education sector for 2019-20, an increase of over 10 per cent from Rs 85,010 crore 2018-19
    • Rs 37,461.01 crore has been allocated for higher education, Rs 56,386.63 crore has been earmarked for school education.
  • Job and Skill Development from Rs 5,071 crore to Rs 7,511 crore 2019-20.
  • Urban Rejuvenation Mission AMRUT and Smart Cities Mission: BE were increased from Rs 12,169 to Rs 13,900 crore for the 2019-20 fiscal year.
  • Food subsidy to Food Corporation of India under National Food Security Act: increased from Rs 1,38,123 crore to Rs 1,51,000 crore.
  • Space Technology:increased from Rs 6,576 crore to Rs 7,483 crore.
  • National Highways Authority of India: increased from Rs 29,663 crore to Rs 36,691 crore.
  • Direct Benefit Transfer: increased from Rs 16,478 crore to Rs 29,500 crore.
  • Urea subsidiary: raised from Rs 45,000 crore to Rs 50, 164 crores.
  • Sports Budget:increased from Rs 2002.72 (2018-2019) crore to Rs 2216.92 crore.
  • Allocation for Integrated Child Development Scheme (ICDS) increased by over 18% to Rs. 27,584 crores in BE 2019-20
  • Substantial increase in allocation for the Scheduled Castes and Scheduled Tribes –
    • Allocation for SCs increased by 35.6% – from Rs. 56,619 crores in BE 2018-19 to Rs. 76,801 crores in BE for 2019-20
    • Allocation for the STs increased by 28% – from 39,135 crore in BE 2018-19 to Rs. 50,086 crores in 2019-20 BE

Digital Villages:

  • The Government to make 1 lakh villages into Digital Villagesover next five years

Women:

  • 1330 Crore allocate for the Mission for Protection and Empowerment for Women.
  • Maternity leave of 26 weeksand Pradhan Mantri Matru Vandana Yojana for pregnant women in work.
  • More than 70% of the beneficiaries of Pradhan Mantri MUDRA Yojana are women.
  • 6 crore free LPG connections under the Ujjawala Yojana.

MSME and Traders:

  • 2% interest subvention on an incremental loan of Rs 1 crore for GST registered SMEs
  • Atleast 3% of the 25% sourcing for the Government undertakings will be from women owned SMEs
  • Renewed Focus on Internal trade; DIPP renamed to Department for Promotion of Industries and Internal trade

Fiscal Programme:

  • Fiscal deficit pegged at 3.4% of GDP for 2019-20
  • Target of 3% of fiscal deficit to be achieved by 2020-21.
  • Fiscal deficit brought down to 3.4% in 2018-19 RE from almost 6% seven years ago
  • Total expenditure increased by over 13% to Rs.27,84,200 crore in 2019-20 BE
  • Capital Expenditure for 2019-20 BE estimated at Rs. 3,36,292 crores
  • Centrally Sponsored Schemes (CSS) allocation increased to Rs. 3,27,679 crores in BE 2019-20
  • Government confident of achieving the disinvestment target of 80,000 crore
  • Focus now on debt consolidation along with fiscal deficit consolidation programme.

Entertainment Industry:

  • Indian filmmakers to get access to Single window clearance as well for ease of shooting films
  • Regulatory provisions to rely more on self-declaration
  • To introduce anti-camcording provisions in the Cinematograph Act to control piracy

Others:

  • New National Artificial Intelligence portal to support National Program on Artificial Intelligence
  • A new committee under NITI Ayog to identify all the remaining De-notified nomadic and semi-Nomadic tribes.
  • New Welfare development Board under Ministry of social justice and empowerment for development and welfare of De-notified nomadic and semi nomadic tribes

Vision 2030 in Budget:

Ten dimensions of Vision for India of 2030:

  1. Next Generation Infrastructure – to provide an “ease of living”.
  2. Digital India – reached every corner of the economy and every citizen.
  3. Clean and Green India – Making India pollution free by leading transport revolution with Electric Vehicles and focus on Renewables.
  4. Rural Industrialization – using modern digital technologies to generate massive employment
  5. Clean Rivers – safe drinking water to all Indians using micro-irrigation techniques.
  6. Oceans and Coastlines – scaling up of Sagarmala
  7. Space Programme – India becoming a launchpad of the world by placing an Indian astronaut in space by 2022
  8. Self-Sufficient – in food and improving agricultural productivity with emphasis on organic food
  9. Healthy India – with a distress-free and comprehensive wellness system for all
  10. Minimum Government, Maximum Governance – with proactive, responsible, friendly bureaucracy and electronic governance.

What is a vote on Account?

  • A vote on account essentially means that the government seeks the approval of Parliament for meeting expenditure— paying salaries, ongoing programmes in various sectors etc — with no changes in the taxation structure, until a new government takes over and presents a full Budget that is revised for the full fiscal.

Why present a vote on Account?

  • The reasoning is that there is little time to get approvals from Parliament for various grants to ministries and departments, and to debate these as well as any provisions for changes in taxation.
  • More importantly, the reasoning is that it would be the prerogative of the new government to signal its policy direction, which is often reflected in the Budget.

Difference between Full Budget and Vote on Account:

  • Full Budget deals with both expenditure and revenue side but Vote-on-account deals only with the expenditure side of the government’s budget.
  • The vote-on-account is normally valid for two months but full budget is valid for 12 months (a financial year).
  • As a convention, a vote-on-account is treated as a formal matter and passed by Lok Sabha without discussion. But passing for budget happens only after discussions and voting on demand for grants.

What’s an Interim Budget?

  • An Interim Budget is not the same as a ‘Vote on Account’. While a ‘Vote on Account’ deals only with the expenditure side of the government’s budget, an Interim Budget is a complete set of accounts, including both expenditure and receipts. An Interim Budget gives the complete financial statement, very similar to a full Budget.

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