Budget spending in FY23 to exceed BE by Rs 2 trillion
- October 31, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Budget spending in FY23 to exceed BE by Rs 2 trillion
Subject: Economy
Details:
- Extra expenditure will be funded through additional tax revenue receipts, while keeping the fiscal deficit within the targeted level of 6.4% of the Gross Domestic Product (GDP) and below 4.5% by FY26
- Budget estimate (BE)- Rs 39.5 trillion of expenditure for FY23.
- Additional expenditure on:
- 2.6 trillion on food, fertilisers and fuel subsidies to insulate people from elevated global commodity prices (expected to increase further).
- Reduction on expenditure estimated around Rs 70,000-80,000 crore from:
- Central sponsored schemes and central sector schemes as the government has tightened the rules for the release of funds and linked them to either utilisation or return of the unspent funds.
- grants for urban local bodies as many have not undertaken the mandatory reforms
- grants for the health sector as infrastructure creation is taking time.
- Revenue-tax revenues are expected to rise while non-tax revenue might fall.
- Total expenditure contracted by 3% in August 2022 as revenue expenditure declined by 4% whereas capital expenditure displayed a marginal rise of 1%.
Concept:
Components of the Budget: There are three major components—expenditure, receipts and deficit indicators.
Expenditure
- Capital expenditure is incurred with the purpose of increasing assets of a durable nature or of reducing recurring liabilities.All these are classified as capital expenditure as they lead to creation of new assets.
- It consists of: (i) the long-term investments by the government on creating assets such as roads and hospitals, and (ii) the money given by the government in the form of loans to states or repayment of its borrowings.
- Revenue expenditure involves any expenditure that does not add to assets or reduce liabilities.
- Expenditure on the payment of wages and salaries, subsidies or interest payments would be typically classified as revenue expenditure.
Receipts
The receipts of the Government have three components —revenue receipts, non-debt capital receipts and debt-creating capital receipts.
- Revenue receipts involve receipts that are not associated with increase in liabilities and comprise revenue from taxes and non-tax sources.
- Non-tax revenue consists mainly of interest receipts on loans to States and UnionTerritories, dividends and profits from Public Sector Enterprises including surplus of Reserve Bank of India transferred to Government of India, and external grants and receipts for services provided by the Central Government. These services include fiscal services like currency, coinage and mint, general services such as Public Service Commission and police, social services like education and health, and economic services like irrigation, transportation and communication.
- Non-debt receipts are part of capital receipts that do not generate additional liabilities.
- Recovery of loans and proceeds from disinvestments would be regarded as non-debt receipts since generating revenue from these sources does not directly increase liabilities, or future payment commitments.
- Debt-creating capital receipts are ones that involve higher liabilities and future payment commitments of the Government.
Deficits
- Fiscal deficit by definition is the difference between total expenditure and the sum of revenue receipts and non-debt receipts. It indicates how much the Government is spending in net terms.Since positive fiscal deficits indicate the amount of expenditure over and above revenue and non-debt receipts, it needs to be financed by a debt-creating capital receipt.
- Primary deficit is the difference between fiscal deficit and interest payments.
- Revenue deficit is derived by deducting capital expenditure from fiscal deficits.