07A. Government Budgeting

1. Is the word Budget mentioned in consti?

2. What is it mentioned?

1. No

2. Annual Financial Statement

Types of budgeting

1. Line item budgeting (this is about presentation )

2. Programme budgeting (this is about presentation )

3. Performance budgeting based on output

4. Performance budgeting based on output

5. Zero based budgeting

6. Gender budgeting

1. Simply list the items of each category (detailed)

2. On each scheme

3. This is on how to budget next year for each scheme etc - this uses performance of last year and decides how much to give to all - based on output - ex: 80 physical centres were constituted on money given

4. Here dont see how many centres were built , just see how many lives saved, how many operations it did etc

5. Dont take reference of last eyar, just see goals of this year and calculate money needed for it and give

6. When there are making choices between 2 things (street lights vs better roads) then use that money on street lights because it will stop eve-teasing , harrasment etc + also it includes money on women schemes

On 1st Feb 2026 what all years will be presented during then

1. Estimated budget of 2026-2027

2. Revised Estimate of 2025-2026

3. Actuals of 2024-2025

What kinds of account are in Budget

1. Revenue account (Expenditure + receipts)

2. Capital account (Expenditure + Receipts)

Is gvt spending money on road construction capital or revenue receipts?

Capital account becuase it is an asset, infra spending is capital expenditure

What is counter cyclical fiscal policy

It says that economy goes in boom and low and the gvt should tackle this by contractionary and expansionary fiscal policy

What is

1. Partial disinvestment

2. Strategic disinvestment

3. Full disinvestment

1. Gvt sells minority shares

2. Gvt sells majority shares

3. Gvt sells completely

What are capital non debt receipts

Like selling shares, selling assets which does not create any debt

What are central sector schemes

1. Which schemes (which list)

2.Who pays

1. These are generally schemes of central sector that is union list in schedule 7

2. Completely centre

What are centrally sponsored schemes

1. Which schemes

2. Who pays

1. Genrally from State list of Schedule 7 but since center has lot of money so it sponsors the scheme

2. State + Centre

Funding pattern of core schemes of centrally sponsored (which states should adopt)

1. 8 NE and 3 himalayan states

2. Other states

3. UTs

4. is this loan or grant

1. 90:10

2. 60:40

3. 100

4. loan

Funding pattern of optional schemes of centrally sponsored (which states should adopt)

1. 8 NE and 3 himalayan states

2. Other states

3. UTs

4. is this loan or grant

1. 80:20

2. 50:50

3. 100

4. loan

What is Special category status states

1. present SCS states

1. the above will not be loan i will be grant

2. No SCS now

Lets see different deficits

1. Revenue Receipts components

2.Capital Receipts components

1. Tax receipts and Non Tax receipts

2. Debt receipts and Non-Debt receipts

Revenue Deficit

Revenue expenditure - Revenue receipts

Fiscal deficit (assuming total exependiture = total receipts, true now)

1. Is equal to

2. Formula

1. It is the debt-receipts (or the money borrowed as loan)

2. Total expenditure - Revenue receipts - nondebt capital receipts

Net Fiscal Deficit

Net Fiscal deficit = Fiscal deficit - Lending by the gvt

Primary Deficit

Primary deficit = Fiscal deficit - Interest payments

Effective revenue deficit

Generally the vertical devolution of taxes from central to state gvt will be in revenue expenditure of centre but centre said that some of the money they give to states will be spend in infra building thus capital exepnditure so effectively all the money centre giving states is not revenue expenditure

Effective revenue deficit = Revenue deficit - money spent by states in capital expenditure

Budget in deficit (before 1997)

1. Monetizing the deficit

1A. Why didn't gvt sell those bonds in the market

2. What did gvt and RBI do for this

1. At that time Expenditure > Revenue (even after including loans(debt receipts)). The govt used to print bonds worth the deficit and forced RBI to buy these bonds. This is called monetizing the deficit

1A. they are very low interest bonds. Interest rate is 0.001%

2. They signed Ways and Means Advances Bill to stop this

Ways and Means Advance Bill

1. What is it

2. What in Ways and Means Advance

3. Types of WMA

1. Gvt and RBI agreed that they wont make RBI buy bonds forcefully, gvt has to sell bonds to Public and banks

2. RBI will provide money for short term mismatch but not for longterm

3. Without interest and security (some part)

- with security and interest = lower interest rate (reporate -1%) + Normal WMA (afetr special is exhausted)(repo rate) + Some overdraft (repo rate +1)

Ways and means to

1. centre

2. States

What was the issue after Ways and Means (after 1995)

Gvt started issuing Bonds a lot for money but this wil be an issue after long time. so in 2003 FRBM act is brought in

Fiscal Responsibility and Budgetary Management act, 2003

1. Fiscal deficit

2. Debt to GDP

3. Revenue Deficit

1. Said that fiscal dficit must be less than 3%

2. less than 60%

3. should be 0 by 2009