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Finance Minister Arun Jaitley is going to present the Union Budget for the financial year 2018-19 on February 1, in the Parliament. While the Budget document is very crucial, it can be a tad detailed and hence, be confusing for many. It is easy, however, to understand this complex document through simplest parallels drawn from our daily lives.
Budget is nothing but a detailed list of planned expenses and revenues. The government gives an estimate of its spending, income and resources in the yearly Budget. This is in line with what families draw up for their month’s financial activities: a detailed plan of where to spend and how much to spend, keeping in mind the overall income of the house.
A person’s monthly salary is his income, just as the government’s revenue is through various means, such as tax collection, loans from foreign governments, etc. Expenditure in a household would be for food, water, electricity and other luxuries. The government’s chief expenses are for the economy’s growth, social schemes, security, accommodation and education of its citizens, among many other provisions through projects and schemes.
The consolidated fund is where all the revenue of the government is directed. All the expenditure of the government is made from this fund. It is similar to a person’s bank account, where his monthly salary is credited and all transactions are made from it.
When you borrow money from another entity, it places you in debt. Similarly, when a government borrows money, that debt is called national debt.
At the end of the month, you have earned some money and spent some. If you spend more than your salary by borrowing money from your friends, you have entered a fiscal deficit, same as when a country’s expenses are more than its revenue.
Capital expenditure for the government is spending on land, buildings and machinery, etc. — something which is an asset to them. The same way, a person’s capital expenditure would be buying real estate, home appliances, etc.
Revenue expenditure, which constitutes expenses for normal running of the departments of the government, could be seen as similar to spending on food, clothes, electricity, etc.
These are important terms from the Budget that find parallel in our daily lives. The Union Budget is an annual plan for the government and is much more complicated. This should, however, enable you to understand the basic concepts well.
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