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. Continuation of the glossary of Part I we give you some of more finance related technical terms for better understanding of the Union budget which will be released by the Finance Minister Pranab Mukherjee on February 28.
Crowding Out: The possibility that an increase in one form of spending may cause another form to fall. This could happen in various ways. Suppose for example that government spending on public work rises. This might use scarce resources, such as skilled engineers, diverting them from alternative investment projects, which are thus delayed.
Total crowding out occurs if other spending falls by 100 per cent of the rise in public works. Partial crowding out occurs if other spending falls. It is possible that crowding in may occur, that is, other spending is actually increased, if conditions are such that the Keynesian multiplier works, or through favourable effects of an overall rise in spending on the confidence of private investors.
The currency liability of central government constitutes small coins and other commemorative coins issued by the government mints.
Current Account: Transactions where the payments are income for the recipient. A country's balance of payments on current account includes trade in goods, or visibles; trade in services, or invisibles; payments of factor incomes, including dividends, interests, migrants remittances from earnings abroad; and international transfers, that is gifts.
Current account is contrasted with capital account, where transactions do not give rise to incomes, but represent changes in the form in which assets are held.
Current Account Deficit: An excess of expenditure over receipts on current account in a country's balance of payments.
Current Account Surplus: An excess of receipts over expenditure on current account in a country's balance of payments.
Direct Taxes: Taxes imposed directly on the customers such as the Income Tax and the Corporate Tax fall under this category.
Divestment: The dilution of the government's stake in Public Sector Undertakings is called as divestment.
Demand for grants: It is a statement of estimate of expenditure from the Consolidated Fund. This requires the approval of the Lok Sabha.
Demand deposits: It include current deposits, demand liabilities portion of savings bank deposits, overdue deposits and cash certificates, outstanding telegraphic and mail transfers and margins against letter of credit/guarantees.
Deposit money: It consists of demand deposits with commercial and cooperative banks. It also includes current deposits portion of savings bank deposits. These deposits do not earn any interest.
Excise Duty: A tax levied on the consumption of particular goods. These may be levied to raise government revenue, and are often levied at higher rates on goods whose consumption is believed to have adverse effects on public health, public order, or the environment. Excise duties on alcoholic drinks, tobacco, and petrol are widely used for both purposes.
Food credit: by banks indicates bank credit to Food Corporation of India, State governments and State cooperative agencies for food procurement.
Foreign Direct Investment: The acquisition by residents of a country of real assets abroad. This may be done by remitting money abroad to be spent on acquiring land, constructing buildings, mines, or machinery, or buying existing foreign business.
Inward foreign direct investment similarly is acquisition by non-residents of real assets within a country. Once a country has real assets abroad, if these make profits which are ploughed back into expanding enterprises, this would ideally be shown in the balance of payments as receipts on current account balanced by an outflow on capital account.
Finance Bill: The government's proposals for the imposition of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by the Parliament.
Fiscal Deficit: It is the difference between the Revenue Receipts and Total Expenditure.
Gross National Product: Total market value of the finished goods and services manufactured within the country in a given financial year, plus income earned by the local residents from investments made abroad, minus the income earned by foreigners in the domestic market.
Gross Domestic Product: One of the main measures of economic activity. 'Gross' indicates that it is calculated without subtracting any allowance for capital consumption; 'domestic' that it measures activities located in the country regardless of their ownership.
Gross Investment: Spending on creating new capital goods, before making any allowance for capital consumption. Gross investment consists of gross fixed investment, plus net investment in stocks and work in progress. Gross investment is distinguished from net investment, which measures the change in the capital stock after allowing for capital consumption.
Income Tax: A tax on income. Income tax is normally zero on some bands of small incomes, both on equity grounds and because of the expense of collecting tiny amounts of tax. It is then normally proportional up to some upper limit; income beyond this is taxed at higher rates.
Thus income tax is usually progressive. An individual's taxable income is calculated after deducting various allowances, in respect of assorted items which may include mortgage interest payable, charitable donations, responsibility for dependents, age allowances, medical insurance, and superannuation contributions. Income for tax purposes may include or exclude imputed items such as the value of the services of owner-occupied houses.
Inflation: A persistent tendency for prices and money wages to increase. Inflation is measured by the proportional changes over time in some appropriate index, commonly a consumer price index, or a GDP deflator.
Stay tuned as we keep you posted with simpler glossary for the financial aspects for the budget.
Source: http://www.rediff.com/business
Crowding Out: The possibility that an increase in one form of spending may cause another form to fall. This could happen in various ways. Suppose for example that government spending on public work rises. This might use scarce resources, such as skilled engineers, diverting them from alternative investment projects, which are thus delayed.
Total crowding out occurs if other spending falls by 100 per cent of the rise in public works. Partial crowding out occurs if other spending falls. It is possible that crowding in may occur, that is, other spending is actually increased, if conditions are such that the Keynesian multiplier works, or through favourable effects of an overall rise in spending on the confidence of private investors.
The currency liability of central government constitutes small coins and other commemorative coins issued by the government mints.
Current Account: Transactions where the payments are income for the recipient. A country's balance of payments on current account includes trade in goods, or visibles; trade in services, or invisibles; payments of factor incomes, including dividends, interests, migrants remittances from earnings abroad; and international transfers, that is gifts.
Current account is contrasted with capital account, where transactions do not give rise to incomes, but represent changes in the form in which assets are held.
Current Account Deficit: An excess of expenditure over receipts on current account in a country's balance of payments.
Current Account Surplus: An excess of receipts over expenditure on current account in a country's balance of payments.
Direct Taxes: Taxes imposed directly on the customers such as the Income Tax and the Corporate Tax fall under this category.
Divestment: The dilution of the government's stake in Public Sector Undertakings is called as divestment.
Demand for grants: It is a statement of estimate of expenditure from the Consolidated Fund. This requires the approval of the Lok Sabha.
Demand deposits: It include current deposits, demand liabilities portion of savings bank deposits, overdue deposits and cash certificates, outstanding telegraphic and mail transfers and margins against letter of credit/guarantees.
Deposit money: It consists of demand deposits with commercial and cooperative banks. It also includes current deposits portion of savings bank deposits. These deposits do not earn any interest.
Excise Duty: A tax levied on the consumption of particular goods. These may be levied to raise government revenue, and are often levied at higher rates on goods whose consumption is believed to have adverse effects on public health, public order, or the environment. Excise duties on alcoholic drinks, tobacco, and petrol are widely used for both purposes.
Food credit: by banks indicates bank credit to Food Corporation of India, State governments and State cooperative agencies for food procurement.
Foreign Direct Investment: The acquisition by residents of a country of real assets abroad. This may be done by remitting money abroad to be spent on acquiring land, constructing buildings, mines, or machinery, or buying existing foreign business.
Inward foreign direct investment similarly is acquisition by non-residents of real assets within a country. Once a country has real assets abroad, if these make profits which are ploughed back into expanding enterprises, this would ideally be shown in the balance of payments as receipts on current account balanced by an outflow on capital account.
Finance Bill: The government's proposals for the imposition of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by the Parliament.
Fiscal Deficit: It is the difference between the Revenue Receipts and Total Expenditure.
Gross National Product: Total market value of the finished goods and services manufactured within the country in a given financial year, plus income earned by the local residents from investments made abroad, minus the income earned by foreigners in the domestic market.
Gross Domestic Product: One of the main measures of economic activity. 'Gross' indicates that it is calculated without subtracting any allowance for capital consumption; 'domestic' that it measures activities located in the country regardless of their ownership.
Gross Investment: Spending on creating new capital goods, before making any allowance for capital consumption. Gross investment consists of gross fixed investment, plus net investment in stocks and work in progress. Gross investment is distinguished from net investment, which measures the change in the capital stock after allowing for capital consumption.
Income Tax: A tax on income. Income tax is normally zero on some bands of small incomes, both on equity grounds and because of the expense of collecting tiny amounts of tax. It is then normally proportional up to some upper limit; income beyond this is taxed at higher rates.
Thus income tax is usually progressive. An individual's taxable income is calculated after deducting various allowances, in respect of assorted items which may include mortgage interest payable, charitable donations, responsibility for dependents, age allowances, medical insurance, and superannuation contributions. Income for tax purposes may include or exclude imputed items such as the value of the services of owner-occupied houses.
Inflation: A persistent tendency for prices and money wages to increase. Inflation is measured by the proportional changes over time in some appropriate index, commonly a consumer price index, or a GDP deflator.
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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