Budget, the term itself has built up a perception in the minds of people of being confusing but today we provide you with quick understandings of what all goes into the budget creations and some terms which one needs to know.
Finance Minister Pranab Mukherjee presents the Union Budget on February 28, you might come across a lot of terms that might not be readily understandable.
Make yourself comfortable with the understanding of financial words and phrases linked to the budgetary exercise to help you manoeuvre your way through the maze that is the Budget.
Capital Market - Budget attracts a lot of attention and helps in planning of goals, resources, meeting deadlines and also provides details of government receipts and payments. The taxation policies of the country are also accountable.
Assets with banking system include current account balances with other banks, advances to banks and money at call and short notice of a fortnight or less.
Ad-valorem duties: This is a Latin term and is used to refer to duties that are levied on commodities/products as a certain percentage of their price. These are different from specific excise duties that are levied on products.
Budgetary Deficit: Such a situation arises when the expenses exceed the revenues. Here the entire budgetary exercise falls short of allocating enough funds to a certain area.
Budget Estimates: These estimates contain an estimate of Fiscal Deficit and the Revenue Deficit for the year. The term is associated with the estimates of the Center's spending during the financial year and the income received as proceeds of tax revenues.
Balance of Payment: An overall statement of a country's economic transactions with the rest of the world over some period, often a year. A table of the balance of payments shows amounts received from the rest of the world and amounts spend abroad. The current account includes exports and imports, that is visible trade, and receipts from and spending abroad on services such as tourism.
Bank credit: It includes loans, cash credit and overdrafts, and inland bills and foreign bills purchased and discounted. Bills exclude those rediscounted with RBI and IDBI.
Bank credit to commercial sector It includes credit to commercial sector by RBI and commercial banks. RBI's credit includes advances to and investments in shares and debentures of financial institutions, and land mortgage banks.
Bank Rate: It directly affected other interest rates only when the market needed to borrow from the Bank of England, but changes in bank rate were announced as a means of informing the City of the Bank of England's views on what commercial interest rates should be.
Borrowings by commercial banks from RBI constitute outstandings against refinance schemes, like general refinance, and export credit refinance.
Cash balances with RBI indicate cash balances maintained by scheduled banks with RBI and include these balances under cash reserve ratio (CRR) requirements.
Capital Budget: The word, capital, is long-term in nature. Capital Budget keeps track of the government's capital receipts and payments. This accounts for market loans, borrowings from the Reserve Bank and other institutions through the sale of Treasury Bills, loans acquired from foreign governments and recoveries of loans granted by the Central government to state governments and Union Territories.
Capital Payments Expenses incurred on acquisition of assets are termed capital payments.
CENVAT: This is a replacement for the earlier MODVAT scheme and is meant for reducing the cascade effect of indirect taxes on finished products. The scheme is a more extensive one with most goods brought under its preview.
Custom Duties: These duties are levied on goods whenever they are either brought into the country or exported from the country. The importer or the exporter pays custom duties.
Countervailing Duties: This is levied on imports that may lead to price rise in the domestic market. It is imposed with the intention of discouraging unfair trading practices by other countries.
Consolidated Fund: This is one big reservoir where the government pools all its funds together. The fund includes all government revenues, loans raised and recoveries of loans granted.
Contingency Fund: It is more or less similar to that extra little bit of savings that all mothers set aside in case of an emergency. Likewise, the government has created this fund to help it tide over difficult situations. The fund is at the disposal of the President to meet unforeseen and urgent expenditure, pending approval from Parliament. The amount that is withdrawn from the fund is recouped.
Capital Expenditure: Long-term in nature they are used for acquiring fixed assets such as land, building, machinery and equipment. Other items that also fall under this category include loans and advances sanctioned by the Center to the State governments, union territories and public sector undertakings.
Capital Receipt: Loans raised by the Center from the market, government borrowings from the RBI & other parties, sale of Treasury Bills and loans received from foreign governments all form a part of Capital Receipt. Other items that also fall under this category include recovery of loans granted by the Center to State governments & Union Territories and proceeds from the dilution of the government's stake in Public Sector Undertakings.
Central Plan: It refers to the government's budgetary support to the Plan and the internal and extra budgetary resources raised by the Public Sector Undertakings.
Consumer Price Index: A price index covering the prices of consumer goods. This is contrasted with a more general price index, such as the GDP deflator, which also includes investment and goods purchased by the government.
Corporate Tax: A tax on the profits of firms, as distinct from taxation of the incomes of their owners. There are strong arguments for having separate income tax schemes for firms and individuals, the system of allowances and progressive tax rates appropriate for a tax on individual incomes is quite different from a sensible scheme for taxing firms.
Stay tuned as we keep you posted with simpler glossary for the financial aspects for the budget.
Source: http://www.rediff.com/business
Finance Minister Pranab Mukherjee presents the Union Budget on February 28, you might come across a lot of terms that might not be readily understandable.
Make yourself comfortable with the understanding of financial words and phrases linked to the budgetary exercise to help you manoeuvre your way through the maze that is the Budget.
Capital Market - Budget attracts a lot of attention and helps in planning of goals, resources, meeting deadlines and also provides details of government receipts and payments. The taxation policies of the country are also accountable.
Assets with banking system include current account balances with other banks, advances to banks and money at call and short notice of a fortnight or less.
Ad-valorem duties: This is a Latin term and is used to refer to duties that are levied on commodities/products as a certain percentage of their price. These are different from specific excise duties that are levied on products.
Budgetary Deficit: Such a situation arises when the expenses exceed the revenues. Here the entire budgetary exercise falls short of allocating enough funds to a certain area.
Budget Estimates: These estimates contain an estimate of Fiscal Deficit and the Revenue Deficit for the year. The term is associated with the estimates of the Center's spending during the financial year and the income received as proceeds of tax revenues.
Balance of Payment: An overall statement of a country's economic transactions with the rest of the world over some period, often a year. A table of the balance of payments shows amounts received from the rest of the world and amounts spend abroad. The current account includes exports and imports, that is visible trade, and receipts from and spending abroad on services such as tourism.
Bank credit: It includes loans, cash credit and overdrafts, and inland bills and foreign bills purchased and discounted. Bills exclude those rediscounted with RBI and IDBI.
Bank credit to commercial sector It includes credit to commercial sector by RBI and commercial banks. RBI's credit includes advances to and investments in shares and debentures of financial institutions, and land mortgage banks.
Bank Rate: It directly affected other interest rates only when the market needed to borrow from the Bank of England, but changes in bank rate were announced as a means of informing the City of the Bank of England's views on what commercial interest rates should be.
Borrowings by commercial banks from RBI constitute outstandings against refinance schemes, like general refinance, and export credit refinance.
Cash balances with RBI indicate cash balances maintained by scheduled banks with RBI and include these balances under cash reserve ratio (CRR) requirements.
Capital Budget: The word, capital, is long-term in nature. Capital Budget keeps track of the government's capital receipts and payments. This accounts for market loans, borrowings from the Reserve Bank and other institutions through the sale of Treasury Bills, loans acquired from foreign governments and recoveries of loans granted by the Central government to state governments and Union Territories.
Capital Payments Expenses incurred on acquisition of assets are termed capital payments.
CENVAT: This is a replacement for the earlier MODVAT scheme and is meant for reducing the cascade effect of indirect taxes on finished products. The scheme is a more extensive one with most goods brought under its preview.
Custom Duties: These duties are levied on goods whenever they are either brought into the country or exported from the country. The importer or the exporter pays custom duties.
Countervailing Duties: This is levied on imports that may lead to price rise in the domestic market. It is imposed with the intention of discouraging unfair trading practices by other countries.
Consolidated Fund: This is one big reservoir where the government pools all its funds together. The fund includes all government revenues, loans raised and recoveries of loans granted.
Contingency Fund: It is more or less similar to that extra little bit of savings that all mothers set aside in case of an emergency. Likewise, the government has created this fund to help it tide over difficult situations. The fund is at the disposal of the President to meet unforeseen and urgent expenditure, pending approval from Parliament. The amount that is withdrawn from the fund is recouped.
Capital Expenditure: Long-term in nature they are used for acquiring fixed assets such as land, building, machinery and equipment. Other items that also fall under this category include loans and advances sanctioned by the Center to the State governments, union territories and public sector undertakings.
Capital Receipt: Loans raised by the Center from the market, government borrowings from the RBI & other parties, sale of Treasury Bills and loans received from foreign governments all form a part of Capital Receipt. Other items that also fall under this category include recovery of loans granted by the Center to State governments & Union Territories and proceeds from the dilution of the government's stake in Public Sector Undertakings.
Central Plan: It refers to the government's budgetary support to the Plan and the internal and extra budgetary resources raised by the Public Sector Undertakings.
Consumer Price Index: A price index covering the prices of consumer goods. This is contrasted with a more general price index, such as the GDP deflator, which also includes investment and goods purchased by the government.
Corporate Tax: A tax on the profits of firms, as distinct from taxation of the incomes of their owners. There are strong arguments for having separate income tax schemes for firms and individuals, the system of allowances and progressive tax rates appropriate for a tax on individual incomes is quite different from a sensible scheme for taxing firms.
Stay tuned as we keep you posted with simpler glossary for the financial aspects for the budget.
Source: http://www.rediff.com/business
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