MEANING OF BUDGET-[/b]
An estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.
One of the most important administrative tools, a budget serves also as a (1) plan of action for achieving quantified objectives, (2) standard for measuring performance, and (3) device for coping with foreseeable adverse situations.
Government budget
The budget of a government is a summary or plan of the intended revenues and expenditures of that government. There are three types of government budget: the operating or current budget, the capital or investment budget, and the cash or cash flow budget.
United States
The federal budget is prepared by the Office of Management and Budget, and submitted to Congress for consideration. Invariably, Congress makes many and substantial changes. Nearly all American states are required to have balanced budgets, but the federal government is allowed to run deficits.
India
The budget is prepared by the Budget Division of Department of Economic Affairs of the Ministry of Finance annually. This includes supplementary excess grants and when a proclamation by the President as to failure of Constitutional machinery is in operation in relation to a State or a Union Territory, preparation of the Budget of such State. The railway budget is presented separately.
Philippines
The Philippine budget is considered the most complicated in the world, incorporating multiple approaches in one single budget system: line-item (budget execution), performance (budget accountability), and zero-based (budget preparation). The Department of Budget and Management prepares the National Expenditure Program and forwards it to the Committee on Appropriations of the House of Representative to come up with a General Appropriations Bill (GAB). The GAB will go through budget deliberations and voting; the same process occurs when the GAB is transmitted to the Philippine Senate.
After both houses of Congress approves the GAB, the President signs the bill into a General Appropriations Act (GAA); also, the President may opt to veto the GAB and have it returned to the legislative branch or leave the bill unsigned for 30 days and lapse into law. There are two types of budget bill veto: the line-item veto and the veto of the whole budget.
Personal or family budget
In a personal or family budget all sources of income (inflows) are identified and expenses (outflows) are planned with the intent of matching outflows to inflows (making ends meet). In consumer theory, the equation restricting an individual or household to spend no more than its total resources is often called the budget constraint.
Elements of a personal or family budget usually include fixed expenses, monthly payments, insurance, entertainment, and savings.
TYPES OF BUDGET-
Sales budget – It’s an estimate of future sales often broken down into both units and currency. It is used to create company sales goals.
Production budget – It’s an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. It is created by product oriented companies.
Capital budget -Is used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.
Cash flow/cash budget – It is a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing.
Marketing budget – an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.
Project budget – a prediction of the costs associated with a particular company project. These costs include labour, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. A cost estimate is used to establish a project budget.
Revenue budget – consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies.
Expenditure budget – includes spending data items.
Key Features of Budget
APPROACH TO THE BUDGET
For Indian economy, recovery was interrupted this year due to intensification of
Debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price
and earthquake in Japan.
GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4
per cent in preceding two years.
India however remains front runner in economic growth in any cross-country
Comparison.
Monetary and fiscal policy response for better part of past 2 years aimed at taming
domestic inflationary pressure.
Growth moderated and fiscal balance deteriorated due to tight monetary policy
and expanded outlays.
Indicators suggest that economy is turning around as core sectors and Manufacturing show signs of recovery.
At this juncture, it is necessary to take hard decision to improve macroeconomic
environment and strengthen domestic growth drivers.
Twelfth Five Year Plan to be launched with the aim of “faster, sustainable and
more inclusive growth”. Five objectives identified to be addressed effectively in
Ensuing fiscal year.
If India can build on its economic strength, it can be a source of stability for
world economy and a safe destination for restless global capital.
OVERVIEW OF THE ECONOMY
GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in
comparison to preceding two years is primarily due to deceleration in industrial
growth.
Headline inflation expected to moderate further in next few months and remain
stable thereafter.
Steps taken to bridge gaps in distribution, storage and marketing systems have
helped in more effective management of inflation.
Developments in India’s external trade in the first half of current year have been
encouraging. Diversification in export and import market achieved.
Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital
inflow in the 2nd and 3rd quarters put pressure on exchange rate.
India’s GDP growth is expected to be 7.6 per cent +/- 0.25 per cent.
Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue
and increased subsidies.
FRBM ACT
Introduction of amendments to the FRBM Act as part of Finance Bill, 2012.
Concept of “Effective Revenue Deficit” and “Medium Term Expenditure
Framework statement are two important features of amendment to FRBM Act
in the direction of expenditure reforms.
Effective Revenue Deficit is the difference between revenue deficit and grants
for creation of capital assets. This will help in reducing consumptive component
of revenue deficit and create space for increased capital spending.
“Medium-term Expenditure Framework” statement will set forth a three-year
rolling target for expenditure indicators.
Recommendations of the Expert Committees to streamline and reduce the number
of centrally sponsored schemes and to address plan and non-plan classification
to be kept in view while implementing Twelfth Plan.
Central Plan Scheme Monitoring System to be expanded for better tracking and
utilization of funds.
SUBSIDIES
Some subsidies, while being inevitable, may become undesirable if they
compromise the macroeconomic fundamentals of economy.
Subsidies related to administering the Food Security Act will be fully provided
for.
Endeavour to keep central subsidies under 2 per cent of GDP. Over
next 3 year, to be further brought down to 1.75 per cent of GDP.
Based on recommendation of task force headed by Shri Nandan Nilekani, a
mobile-based Fertilizer Management System has been designed to provide end to-
end information on movement of fertilizers and subsidies.
All three public sector Oil Marketing Companies have launched LPG transparency
portals to improve customer service and reduce leakage.
An estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.
One of the most important administrative tools, a budget serves also as a (1) plan of action for achieving quantified objectives, (2) standard for measuring performance, and (3) device for coping with foreseeable adverse situations.
Government budget
The budget of a government is a summary or plan of the intended revenues and expenditures of that government. There are three types of government budget: the operating or current budget, the capital or investment budget, and the cash or cash flow budget.
United States
The federal budget is prepared by the Office of Management and Budget, and submitted to Congress for consideration. Invariably, Congress makes many and substantial changes. Nearly all American states are required to have balanced budgets, but the federal government is allowed to run deficits.
India
The budget is prepared by the Budget Division of Department of Economic Affairs of the Ministry of Finance annually. This includes supplementary excess grants and when a proclamation by the President as to failure of Constitutional machinery is in operation in relation to a State or a Union Territory, preparation of the Budget of such State. The railway budget is presented separately.
Philippines
The Philippine budget is considered the most complicated in the world, incorporating multiple approaches in one single budget system: line-item (budget execution), performance (budget accountability), and zero-based (budget preparation). The Department of Budget and Management prepares the National Expenditure Program and forwards it to the Committee on Appropriations of the House of Representative to come up with a General Appropriations Bill (GAB). The GAB will go through budget deliberations and voting; the same process occurs when the GAB is transmitted to the Philippine Senate.
After both houses of Congress approves the GAB, the President signs the bill into a General Appropriations Act (GAA); also, the President may opt to veto the GAB and have it returned to the legislative branch or leave the bill unsigned for 30 days and lapse into law. There are two types of budget bill veto: the line-item veto and the veto of the whole budget.
Personal or family budget
In a personal or family budget all sources of income (inflows) are identified and expenses (outflows) are planned with the intent of matching outflows to inflows (making ends meet). In consumer theory, the equation restricting an individual or household to spend no more than its total resources is often called the budget constraint.
Elements of a personal or family budget usually include fixed expenses, monthly payments, insurance, entertainment, and savings.
TYPES OF BUDGET-
Sales budget – It’s an estimate of future sales often broken down into both units and currency. It is used to create company sales goals.
Production budget – It’s an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. It is created by product oriented companies.
Capital budget -Is used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.
Cash flow/cash budget – It is a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing.
Marketing budget – an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.
Project budget – a prediction of the costs associated with a particular company project. These costs include labour, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. A cost estimate is used to establish a project budget.
Revenue budget – consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies.
Expenditure budget – includes spending data items.
Key Features of Budget
APPROACH TO THE BUDGET
For Indian economy, recovery was interrupted this year due to intensification of
Debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price
and earthquake in Japan.
GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4
per cent in preceding two years.
India however remains front runner in economic growth in any cross-country
Comparison.
Monetary and fiscal policy response for better part of past 2 years aimed at taming
domestic inflationary pressure.
Growth moderated and fiscal balance deteriorated due to tight monetary policy
and expanded outlays.
Indicators suggest that economy is turning around as core sectors and Manufacturing show signs of recovery.
At this juncture, it is necessary to take hard decision to improve macroeconomic
environment and strengthen domestic growth drivers.
Twelfth Five Year Plan to be launched with the aim of “faster, sustainable and
more inclusive growth”. Five objectives identified to be addressed effectively in
Ensuing fiscal year.
If India can build on its economic strength, it can be a source of stability for
world economy and a safe destination for restless global capital.
OVERVIEW OF THE ECONOMY
GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in
comparison to preceding two years is primarily due to deceleration in industrial
growth.
Headline inflation expected to moderate further in next few months and remain
stable thereafter.
Steps taken to bridge gaps in distribution, storage and marketing systems have
helped in more effective management of inflation.
Developments in India’s external trade in the first half of current year have been
encouraging. Diversification in export and import market achieved.
Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital
inflow in the 2nd and 3rd quarters put pressure on exchange rate.
India’s GDP growth is expected to be 7.6 per cent +/- 0.25 per cent.
Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue
and increased subsidies.
FRBM ACT
Introduction of amendments to the FRBM Act as part of Finance Bill, 2012.
Concept of “Effective Revenue Deficit” and “Medium Term Expenditure
Framework statement are two important features of amendment to FRBM Act
in the direction of expenditure reforms.
Effective Revenue Deficit is the difference between revenue deficit and grants
for creation of capital assets. This will help in reducing consumptive component
of revenue deficit and create space for increased capital spending.
“Medium-term Expenditure Framework” statement will set forth a three-year
rolling target for expenditure indicators.
Recommendations of the Expert Committees to streamline and reduce the number
of centrally sponsored schemes and to address plan and non-plan classification
to be kept in view while implementing Twelfth Plan.
Central Plan Scheme Monitoring System to be expanded for better tracking and
utilization of funds.
SUBSIDIES
Some subsidies, while being inevitable, may become undesirable if they
compromise the macroeconomic fundamentals of economy.
Subsidies related to administering the Food Security Act will be fully provided
for.
Endeavour to keep central subsidies under 2 per cent of GDP. Over
next 3 year, to be further brought down to 1.75 per cent of GDP.
Based on recommendation of task force headed by Shri Nandan Nilekani, a
mobile-based Fertilizer Management System has been designed to provide end to-
end information on movement of fertilizers and subsidies.
All three public sector Oil Marketing Companies have launched LPG transparency
portals to improve customer service and reduce leakage.