Union Budget 2024: Finance Bill to fiscal deficit, key terms you should know

FM Nirmala Sitharaman to present the 2024 interim budget on Febraury 1

The preparation and presentation of the Union Budget is one of the most important exercises for the central government. The Union Budget gives a financial roadmap and indicates the health of the economy of the country.

Finance Minister Nirmala Sitharaman will present the Interim Budget 2024 in the Parliament on February 1. This year, the government will present an Interim Budget as the Lok Sabha elections are scheduled in April-May. The full Budget is expected to be presented in July after the new government comes to power following the general elections.

The Interim Budget is presented to meet the expenditures in the transition period until a new government takes over.

The Union Budget gives a roadmap for implementation of different welfare schemes, allocations for various ministries and departments as well as the government’s policies on revenue and taxation.

The Union Budget comes with many jargons and it could be difficult for a layperson to decipher the details. It’s important to understand key terms like fiscal deficit, revenue budget, Finance Bill and budget estimates, among others, to decode the nuances of this annual financial exercise of the Union government.

Here we have put together a list of key terms ahead of the presentation of the Interim Budget.

Finance Bill: Each year, the government introduces the Finance Bill in the Parliament to implement the Budget proposals. The Finance Bill lays out the government’s fiscal strategies. The Finance Bill contains the details on taxation, revenue, expenditure and borrowings, for the upcoming financial year. The Finance Bill provides the legislative backing to the tax proposals of the government. Any proposal on modification to the existing tax rates or introduction of any new tax is contained in the Finance Bill.

Budget Estimates: While presenting the Union Budget, the government allocates funds for various projects, welfare schemes, ministries and department. The allocations listed here are budget estimates. They are not the government’s final commitment, they are called estimates. They indicate the maximum amount of money the government will spend on the specified project, ministry, department or the scheme. Later, the government presents revised estimates detailing out the money allocated for a particular scheme, department or ministry.

Revised Estimates: Compared to Budget estimates, some ministries or departments may require more money than expected as the financial year progresses. This needs a modification to the allocations announced in the Union Budget. This is called revised estimates, where the government reviews and modifies the allocations as needed.

Economic Survey: The Economic Survey provides an overview of the state of the economy during the current financial year and establishes the framework for the presentation of the budget for the following fiscal year. Generally, the Economic Survey is presented a day before the Union Budget.

Gross Domestic Product (GDP): The total market value of all finished products and services produced in a country within a financial year indicates the Gross Domestic Product (GDP). It’s the benchmark used in most countries to assess economic conditions.  The GDP number is a key indication of the economic condition of the country.

Inflation: A sustained rise in the average level of prices within an economy is referred to as inflation. It also refers to a currency’s gradual decline of purchasing power over time. To put it more simply, there are certain products and services that you can purchase with say an amount of Rs 5,000 today. After 5 years, this same amount will, however, yield fewer goods and services.

Direct Tax: These include corporate tax and income tax that are levied directly on the taxpayers. Direct taxes constitute a major part of the government revenue.

Indirect Tax: These taxes are levied on consumption of goods and services. The Goods and Services Tax (GST) constitutes a major part of the revenue from indirect taxes for the Union government. The other indirect taxes are customs duty, excise duty and VAT.

Capital Expenditure: Capital Expenditure, or Capex, is the government’s expenditure on various infrastructure projects, upgradation of physical assets and purchase of new equipment. It also covers the costs incurred by the government to purchase fixed assets like land and investments that will yield earnings or dividends in the future.

Fiscal Deficit: To put it simply, the gap between the government’s revenue and its expenditures is known as the fiscal deficit. The fiscal deficit arises when the government expenditure exceeds the total receipts in a financial year. The fiscal deficit is an indicator of the amount of money the government may need to borrow to meet the spendings for the given financial year.

Disinvestment: Disinvestment is the sale of stakes in public sector companies by the government to the private players.  The government divests its stake in the public sector entities and assets to generate revenue. In the Union Budget, every year the government announces the divestment target.