ECONOMIC SURVEY:

Economic Survey is an annual document of the finance ministry, which provides comprehensive details about the state of the Indian economy, and reviews the economic progress made and issues faced in the past year.

The report highlights the performance of the government’s major developmental schemes, policies along with their impact. It also discusses various economic factors in detail such as prices and inflation, key fiscal developments, monetary management and other macroeconomic factors. It also covers the impact of climate change, employment and agriculture on the Indian economy.

A brief history of the Economic Survey:

  • The first Economic Survey was presented in the year 1950-51.
  • Until 1964, it was presented along with the Union Budget, but later it was disjointed from the Union Budget to give a better understanding of the budget proposals.
  • As the Economic Survey contains a detailed analysis of the economic development of the country and a lot of data related to various sectors of the economy, it works as a useful tool providing background knowledge.

The Economic Survey for the fiscal year 2019-2020 will be released on January 31, 2020. The survey will be released a day before the presentation of Union Budget 2020-21 by Finance Minister Nirmala Sitharaman on February 1.

The Economic Survey of India 2019-20- the annual report card of the Indian Economy, will be tabled in both the houses of the Parliament by FM Nirmala Sitharaman. Following the tabling of the Economic Survey, the Government of India’s Chief Economic Advisor Krishnamurthy Subramanian will address a press conference around 1 PM in the afternoon to brief the nation about the state of the Indian economy and the challenges that lie before it.

The annual Economic Survey is the second most important document after the Union Budget that outlines the government’s vision, its plan and the future outlook for the Indian Economy, making it very important for the people of India. On the other hand, being a document with government-approved data about the economic outlook.

The Economic Survey consists of two volumes:

  1. Economic Survey, Volume I: Deals with conceptual and analytical issues.
  2. Economic Survey, Volume II: Deals with the state of economy and sectors of the economy in some detail with more focus on immediate issues and statistics.

UNION BUDGET:

According to Article 112 of the Indian Constitution, the Union Budget of a year, also referred to as the annual financial statement, is a statement of the estimated receipts and expenditure of the government for that particular year.

To complete the process, Parliament’s Budget Session (in a two phases) will be commenced from 31st January 2020. Usually, Budget preparatory work starts well two to three months in advance of prior to presentation of the Budget.

According to Department of Economic Affairs (Budget Division)’s BUDGET CIRCULAR 2020-21 dated 2nd October, 2019, the exercise was commenced on 14th October, 2019.

The ‘Budget Estimates – BE’ for 2020-21 has been provisionally finalised after the Expenditure Secretary completed all his pre-budget discussions with other Secretaries and financial advisers of the Union Government. Article 112 of the Constitution of India dealt with aforesaid ‘AFS’ of the Central Government which mandates the Hon’ble President caused to be laid before the both the Houses of the Parliament before giving His Assent to the Finance Bill of the respective financial year. In addition to Article 112, the Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act, 2003) mandates the Union Government to carry this annual fiscal practice rigorously.

The FRBM Act ensures a strict prudent fiscal policy, accountability, inter- generational- equity in fiscal management and ensures long-term stability in the economy. Key objectives of the Budget can be – to ensure economic growth, to reduce of poverty and unemployment, to ensure efficient allocation of available resources, to reduce wealth and income disparity in the Indian society, to keep a tab on essential commodities prices, to change or bring in suitable changes in ‘Tax Rates’ and among others.

Thus, Union Budget can be termed as a ‘Devise’ having multiple roles as planning tool, fiscal tool, accountability tool and coordination tool between the Union and the States. A Union Budget can be divided as ‘Balanced Budget when Government’s estimated receipts are equal to the estimated expenditure. ‘Unbalanced Budget’ when its estimation is either more or less than the estimated receipts which will be divided further as ‘Surplus Budget’ and ‘Deficit Budget’ as the case may be.

As said above, to complete the annual exercise, the Parliament’s Budget Session has been scheduled in two phases with a short break of about twenty days, first phase will be commenced from 31st January, 2020 to 11th February, 2020 and second phase from 2nd March, 2020 to 3rd April, 2020 i.e. Just starting of the new financial year.

India’s Union Budget & 20 Interesting Facts:

1. First Union Budget – Independent India’s first Union Budget was presented on 26th November, 1947 by Sri. R K Shanmukham Chetty, the then or first Finance Minister of India.

2. A Budget speech that inspired to pay .!! – Union Budget for 1951- 52 presented on 28th February, 1951 by Sri. Chintaman Dwarakanath Deshmukh, then Finance Minister was termed as first Union Budget of Republic of India. More interestingly, in his Budget Speech, the Finance Minister has tried to persuade people to pay taxes by quoting a villager’s honest intention to pay taxes though he was not an employer or businessman.

3. People’s Budget – Union Budget for 1968-69 presented on 29th February, 1968 by Sri. Morarji Desai, then Finance Minster was termed as ‘People’s Budget’ due to its ground breaking proposals such as simplified assessment for manufacturers under erstwhile Excise Law regime, abolition of spouse allowance, discontinuance of separate surcharges on earned and unearned incomes, reducing the tax assessment time to two years from 4 years, heavy penalty for tax evaders and among

4. Carrot & Stick Budget – Union Budget for 1986-87 presented on 28th February, 1986 by V.P. Singh, then Finance Minister got this nick name due to its serious attempts to removal of license raj from the administration, long-term fiscal policy in-line with five year plans, a beginning of major indirect tax reforms including Excise laws related proposals, introduction of modified value added tax (MODVAT), etc.

5. New India’s foundation stone laying Budget – Union Budget for 1991 – 92 presented on 24th July, 1991 by Sri. Manmohan Singh, then Finance Minister could be termed as ‘New India’s foundation stone laying ceremony’ due to its path breaking proposals such attempts to overhaul India’s Export & Import policy, trade policy, slashing of import license, promotion of export sector to enable the Indian industry to compete with its global players, increase in foreign investment limits among others have shown a totally new path for the Indian

6. Dream Budget – Union Budget for 1997 – 98 presented on 28th February, 1997 by P. Chidambaram, then Finance Minister was called the Dream Budget due to its significant proposals on personal income tax (PIT) and corporate tax (CT) regime. With respect to PIT, the Finance Minister has brought down the highest PIT rate from 40 percent to 30 percent, done away with number of surcharges, reduced royalty rates which were welcomed by larger section of the society. Another unconventional but path breaking proposal was ‘The Voluntary Disclosure of Income Scheme (VDIS) – 1997’ to allow people to come forward to disclose their undeclared wealth either in the form of cash or shares or gold or real estate assets, held in India or abroad without disclosing its source of funds. Since Scheme allowed to pay barely 30 and 35 percent of tax on such declared income, waiver hefty interest, penalty and immunity under various laws say, the Income tax law, wealth tax law and the foreign exchange law fetched very good response where more than 3,50,000 ordinary Indians came forward to declare their undisclosed income or assets and committed to pay tax about Rs. 7,800 crore. The VDIS Scheme has laid the foundation for many more such schemes down the years.

7. Millennium Budget – Union Budget for 2000-01 presented on 29th February, 2000 by Sri. Yashwant Sinha, then Finance Minister was a first Budget of the millennium. Finance Minister through this budget laid out a path to make India as a software As far as Tax proposals concerned, introduction of Transfer Pricing Regulation under Income Tax Law to curb erosion of tax base India, phasing out of exemptions / subsidies granted for export regime, reduction in customs duty on computers from 20 per cent to 15 percent, mother boards from 20 per cent to 15 per cent to 5 per cent were truly shot in the arm for ever growing software industry.

8. Ordinary Indians Budget – Union Budget for 2005 – 06 was presented 28th February, 2005 by Sri Chidambaram, then Finance Minister due to its pro poor and people oriented proposals known as Ordinary Indians or Aam Aadmi Budget. Hon’ble Finance Minister has presented one of the best union budgets in recent times. Tax proposals including upward changes in tax slabs, lowered corporate tax rates, reduction in customs duty on crude petroleum, collective Fringe Benefit Tax for employees, allowing Minimum Alternate Tax (MAT) Credit, introduction of National Rural Employment Guarantee Act (NREGA) and Right To Information Act (RTI) were truly common man’s needs.

9. Coining of GST word – On 1st January, 2020, India’s GST Laws have completed its 30 months or 900 days of pan-India implementation. It is interesting to know exactly 14 years ago, the Union Budget for 2006-07 tabled on 28th February, 2006, by Sri. P. Chidambaram, then Finane Minister, had mentioned his government’s intention of introducing pan- India integrated Goods & Service Tax and Value Added Tax regime from 1st April, 2010 however, due to political and other administration issues, same was delayed by 7 years 3 months and saw the light of the day on 30th June, 2017 midnight.

10. Roll Back Budget – Union Budget for 2019-20 presented on 5th July, 2019 by Smt. Nirmala Sitharaman, the current and first lady Finance Minister could be termed as ‘Roll Back Budget’ due to withdrawal of number of proposals after getting President’s Assent on the Finance (No.2) Act, 2019, such as Surcharge on long and short-term capital gains for portfolio investors both domestic and foreign, angel tax, Criminalization of CSR violations by companies,

11. Union Budgets & Birthdays – Sri. Morarji Desai, the only Finance Minister to present two Budgets on his Birhtday e. February 29, 1964 and 1968.

12. Highest number of Budget Presentations – Again Sri. Morarji Desai named as highest number with 10 Union Budgets including 02 Interim Budgets followed by Sri. P. Chidambaram’s name for his 09 Union Budgets.

13. 11.00 A.M. or 5.00 P.M. ?! Time Matters..!! – Only from Union Budget for 1999-00, Budget presentations were started at 11.00 a.m. till then i.e. upto 1998-1999, the presentations were happened at 5 p.m. on the last working day of the February. Sri. Yashwant Sinha, then Finance Minister has changed the timings from 5 p.m. to 11.00 a.m.

14. First Day or Last Day of the Month?! Day matters..!! – Up to Union Budget for 2016- 17, the Budgets used to present on the last working day of the February. Late Sri. Arun Jaitley, then Finance Minister changed the tradition in 2017 by presenting his Budget for 2017-18 on 1st February, 2017.

15. The End of 92 years old Practice – Up to Union Budget for 2016- 17, the railway budget was presented a couple of days before the Union budget. However, only from 2017-18, the railway budgets being presented as part of the Union Budget, thus, a 92-year-old practice saw its

16. Interim Budgets – Similar to full-pledged Budget, an Interim Budget (in other words, approval obtained on vote-on-accounts basis) will be presented by an incumbent Government in its last year of the five-year term or few months before the General Elections. Since India’s general elections fall after starting of the new fiscal year, say, during April to June, but to meet the day-to-day expenses and requisite funds to run the economy, the Government shall be allowed to draw the funds from the Consolidated Funds of India. For instance, recently, the previous Government has presented its Interim Budget on 1st February, 2019. Thus, an Interim budget is a temporary measure to the run-up to the General Elections passed by an outgoing Government under the conditions of lack of time and full-fledged Budget by the incoming Government.

17. Economic Survey In 2 Volumes..!! – Since Independence, the Central Government is bringing an ‘Economic Survey’ indicating survey on economic trends of the country. The Survey throw much needed lights on agricultural, industrial production, infrastructure, employment, money supply, prices, imports, exports, foreign exchange reserves and other relevant macro and micro economic factors which have a direct impact on the Union Generally, Economic Survey – in two volumes – will be Budget. This year it is reported that ‘Economic Survey 2020’ will be tabled on 31st January, 2020.

18. Departments and Officials – No doubt, preparing of 6th largest Economy of the World’s ‘Budget Documents’ is tedious and lengthy task which involves hundreds of officials from the Finance and other Central Ministries to name few Industry, Law, Comptroller of Auditor General of India, NITI Aayog and other Administrative Ministries of the Central Government. High- profile team of Union Budget for 2020-21 consist Smt. Nirmala Sitharaman, Hon’ble Finance Minister and Sri. Anurag Thakur, Minister of

i. Rajiv Kumar, Finance Secretary,

ii. Ajay Bhushan Pandey, Revenue Secretary,

iii. Atanu Chakraborty, Economic Affairs Secretary

iv. Tuhin Kanta Pandey, DIPAM Secretary,

v. TV Somanathan, Expenditure Secretary

vi. Sanjeev Sanyal, Principal Economic Adviser,

vii. Krishnamurthy Subramanian, Chief Economic Adviser,

viii. Pramod Chandra Mody, CBDT Chairman,

ix. John Joseph, CBIC’s Interim – Chairman / filled upon Sri. Pranab Kumar Das, immediate past Chairman’s voluntary retirement effectuated on 31st December, 2019,

x. Sri. . . . . . . . . . . . . . . . . Joint Secretary (Budget), though most important person involved in the Budgetary Exercise, his or her position remains vacant as of 10th January, 2020.

19. Halwa Ceremony – Post pre-budget consultations, the printing of ‘Budget Documents’ starts with ‘Halwa Ceremony (this year the ceremony is likely to be held on 21st or 22nd January, 2020). In the ceremony, the Hon’ble Finance Minister himself / herself will attend and serve the ‘Halwa or Sweet Dish’ to the finance ministry officials who are involving in the preparation and printing of the Budget Documents.

20. Secrecy and Security at Highest Level..!! – The special ‘Printing Press’ with all the modern security features to maintain the highest level of ‘secrecy’ is located in the basement of North Block, the Seat of India’s Finance Ministry. According to media reports, post ‘Halwa ceremony’, the officials (more than 100) are kept in total isolation to maintain the secrecy of finalised Budget proposals.

Even the Hon’ble Finance Minister also not allowed to carrying his/ her own smartphones..!. Only after 11.00 am on the Budget day, the Officials will be allowed to communicate with their dear ones and outside world. Even though very ‘Secretive Document of the Season’ it is appropriate to mention here, a secret sheet called ‘Blue Sheet’ will be maintained throughout the Budget process which normally starts in the first week of December of the previous year and thereafter the entire North Block will be in ‘Quarantine’ or no access to Press’ till 1st Feburary, 2020 at 11.00 a.m.

The Blue Sheet contains all the significant numbers, figures and statistics of the Indian economy. The sole guardian of the ‘Blue Sheet’ is entrusted with Joint Secretary of the Finance Minister. On the Budget day, the Finance Minister with his/ her team first visits the Rashtrapati Bhawan to brief the significant points to the Hon’ble President. Then in the Cabinet, the Finance Minister repeats the same process with the Hon’ble Prime Minister and his Cabinet Ministers. From Cabinet, the Finance Minister accompanied by the Prime Minister will visit the Lok Sabha to present the Budget.

Budget Documents & Its list – Besides the Finance Minister’s Budget Speech, there will be a set of Documents which also presented in the Parliament. They are –

i. Annual Financial Statement (AFS)

ii. Demands for Grants (DGs)

iii. Finance Bill of the coming Financial year

iv. Statements mandated under FRBM Act-

v. Macro-Economic Framework Statement

vi. Fiscal Policy Strategy Statement

vii. Medium Term Fiscal Policy Statement

viii. Expenditure Budget

ix. Receipts Budget

x. Memorandum Explaining the Provisions in the Finance Bill

xi. Budget at a Glance

xii. Outcome Budget

xii. Economic Survey

Important Economic Terms Related Union Budget & Their Meanings

The table below will bring to you a list of all the important terms that are related to and also used in Union Budget:

Economic Term Meaning
Annual Financial Statement It encompasses the receipt and expenditure of the Indian government. The information on the Consolidated Fund of India, Contingency Fund of India and Public Accounts is provided.
Revenue – Receipt & Expenditure
  • Revenue Receipt:
    • The receipts received which cannot be recovered by the government
    • It comprises income raised by the Government through taxes and non-tax sources like interest, dividends on investments.
  • Revenue Expenditure:
    • Expenditure incurred by the Union Government for purposes other than for the creation of physical or financial assets.
    • It includes those expenditures incurred for the usual functioning of the government departments, grants given to state governments and interest payments on the debt of the Union Government etc.
Capital – Receipt & Expenditure
  • Capital Receipt:
    • Receipts which generate liability or decrease the financial assets of the government
    • It includes borrowings from the Reserve Bank of India and commercial banks and other financial institutions
    • It also consists of loans received from foreign governments and international organization and repayment of loans granted by the Union government
  • Capital Expenditure:
    • Spending incurred by the government which results in the formation of physical or financial possessions of the Union government or decrease in financial liabilities of the Union Government.
    • It contains expenditure on procuring land, equipment, infrastructure, expenditure in shares.
    • It also includes mortgages by the Union government to Public Sector Undertakings, state and union territories
Corporation Tax
  • Tax on profits of companies
Direct Tax
  • Taxes which are imposed directly on individual and company
  • It comprises income tax and corporation tax
Indirect Tax
  • Taxes which are imposed on goods and services
  • It comprises taxes like GST, Excise Duties, VAT, Custom Duties etc.
Fiscal Policy
  • The policy of the government
  • Fiscal policy is the means by which a government adjusts its expenditure levels and tax rates to monitor and influence a country’s economy.
Revenue Deficit
  • It is the additional expenditure of government over revenue receipts
Fiscal Deficit
  • It is the difference between the total expenditure of the government and its total receipts, not including the borrowing.
Primary Deficit
  • Fiscal deficit – interest payments= Primary Deficit
Non-Tax Revenue
  • Government revenue not generated from taxes.
  • Examples of non-tax revenue:
    • Aid from another level of government ((intra-governmental aid): in the United States, federal grants may be considered non-tax revenue to the receiving states, and equalization payments; Aid from abroad (foreign aid) etc
Gross Domestic Product (GDP) Monetary value of all finished goods and services made within a country during a specific period
Statutory Liquid Ratio (SLR) Reserve requirement that commercial banks are required to maintain in the form of cash, gold reserves, Reserve Bank of India- approved securities before providing credit to the customers
Cash Reserve Ratio (CRR) Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country
Marginal Cost of Fund based Lending Rate (MCLR) Marginal Cost of Funds based Lending Rate (MCLR) is the minimum lending rate below which a bank is not permitted to lend
Repo Rate (RR) Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds.
Reverse Repo Rate (RRR) Reverse Repo rate is the rate at which the Reserve Bank of India borrows funds from the commercial banks in the country
Wholesale Price Index (WPI) An index that measures and tracks the changes in the price of goods in the stages before the retail level – that is, goods that are sold in bulk and traded between entities or businesses instead of consumers.
Consumer Price Index  (CPI) Measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
Foreign Institutional Investor An investor or investment fund registered in a country outside of the one in which it is investing
Manufacturing Activity Manufacturing, processing, testing, packaging, storing and other activities undertaken or required to be undertaken by CRL or its suppliers in order to manufacture and supply Client with the Drug Product
Foreign Direct Investment An investment in the form of a controlling ownership in a business in one country by an entity based in another country
Monetary Policy Policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability and general trust in the currency
Base Effect Distortion in a monthly inflation figure that results from abnormally high or low levels of inflation in the year-ago month
Liquidity Adjustment Facility (LAF) A tool used in monetary policy, primarily by the Reserve Bank of India (RBI), that allows banks to borrow money through repurchase agreements (repos) or for banks to make loans to the RBI through reverse repo agreements.
Marginal Standing Facility (MSF) The penal rate at which banks can borrow money from the central bank over and above what is available to them through the LAF window.
Index of Industrial Production (IIP) Index for India which details out the growth of various sectors in an economy such as mineral mining, electricity and manufacturing.

Union Budget 2020 – Key Expectations: Finance Minister Nirmala Sitharaman will present her second Union Budget in the Parliament on February 1, 2020. There are heavy expectations from Union Budget 2020 to salvage India’s stagnating economic growth and tackle the declining demand, faltering of domestic sectors such as the automobile and real estate sector and the ongoing job and employment crisis and bring the economy back on track of reaching USD 5 Trillion, as envisioned by PM Modi-led central government.

Author – CA Chelladurai M., a practicing Chartered Accountant from Thane, Mumbai and can be reached at Email – durai_123@hotmail.com

CA Chelladurai M. has more than 8 years of professional experience in taxation, auditing, accounting, and consulting profession.

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