Amal DhruF. C. A., M. B. A.(IIMA)

Gujarat Vishvakosh Trust 22nd February, 2012

How to READ a Budget?

Andajpatra nee AantiGhunti

The Simple(?) Expectations

2

3

Aren’t we bored of Budgets? Why it has lost its credibility?What best can we expect from it?What is its real impact?Is it an opportunity? For whom?How to exploit it? Who will exploit it? How? Before all that lets look at its format &

content

4

      In Crore fo Rupees

 2009-2010 2010-20112010-20112011-2012

  ActualBudget

EstimatesRevised

EstimatesBudget

Estimates1.    Revenue Receipts 572811 682212 783833 7898922.    Tax Revenue 456536 534094 563685 664457      (net to Centre)        3.    Non-tax Revenue 116275 148118 220148 1254354.    Capital Receipts (5+6+7) 451676 426537 432743 4678375.    Recoveries of   Loans 8613 5129 9001 150206.    Other Receipts 24581 40000 22744 400007.    Borrowings and other               Liabilities 418482 381408 400998 4128178.    Total Receipts  (1+4) 1024487 1108749 1216576 12577299.    Non-plan Expenditure 721096 735657 821552 81618210.   On Revenue Account  of which, 57925 643599 726749 73355811.   Interest  Payments 213093 248664 240757 26798612.   On Capital Account 63171 92058 94803 8262413.   Plan Expenditure 303391 373092 395024 44154714.   On Revenue Account 253884 315125 326928 36360415.   On Capital Account 49507 57967 68096 7794316.   Total Expenditure (9+13) 1024487 1108749 1216576 1257729

GDP for BE 2011-2012 has been projected at Rs. 8980860 crore assuming 14% growth over the advance estimate of 2010-2011 (Rs. 7877947 crore) released by CSO.

5

17.   Revenue Expenditure (10+14) 911809 958724 1053677 109716218.   On which, Grant for creation of Capital Assets   31317 90792 14685319.   Capital Expenditure (12+15) 112678 150025 162899 16056720.   Revenue Deficit (17-1) 338998 276512 269844 307270  (5.2) (4.0) (3.4) (3.4)21.   Effective Revenue Deficit (17-18)   245195 179052 160417    (3.5) (2.3) (1.8)22.   Fiscal Deficit {16-(1+5+6)} 418482 381408 400998 412817  (6.4) (5.5) (5.1) (4.6)23.  Primary Deficit (20-11) 205389 132744 160241 144831  (3.1) (1.9) (2.0) (1.6)

Some Terminologies

6

Revenue Budget- Revenue Receipt - Revenue Payment

Capital Budget- Capital Receipt - Capital Payment

Expenditure- Plan - Non Plan

Key Indicators Revenue Deficit - Revenue Expenditure

less: Revenue Receipts Fiscal Deficit - Total Expenditure

less: (Revenue Receipt + Loan Recovery + Other Receipts)

Primary Deficit - Fiscal Deficit less: Interest Payments

Looking at the numbers, it is obvious that we don’t have enough money to spend, on so many pressing priorities

7

The huge spending power that we give through a budget

8

Union Budget gives, to the Govt. a spending power of Rs.12 lakh crores in a year, i.e. Rs.10,000 per head from each citizen

A State budget gives, to the Govt. another Rs.10,000 per year per citizen of spending power.

A Local body, in a city, takes yet another Rs.10,000 per head of spending power.

These proposals are passed by our Representatives in a manner which is best known to all.

Need to focus also on Expenses

9

We are giving huge spending powerAlmost Rs. 12,00,000 Crore at Union Level another

Rs.50,000 Crore at State Level and another Rs. 5000 Crore at Local Body Levels

Please Focus More on the Expenses that are being budgeted

On Tax issues, People and Press are more vocal But it is all the more important to understand, in details,

as to how efficiently and effectively the government intends to spend

It is the media that needs to take a note of this A lot of Research is required to present Huge Data

already available and present it in a simple manner.

Special Place for Budget in India

10

Various Announcements are made in speech!!Key Policy issues are laid down Direction of Monetary Policy Spelt Out Various Schemes are AnnouncedEconomic Review discussedIts Effect on the Share Prices, investment outlook

and so on is well known.

The Internal Pressures

11

Growth v/s Equal distributionFiscal disciplineGood economics makes bad politics & vice a versaGames F. M’s play

Over Estimation of RevenueBold statements with promises to performHalf conceived proposalsSugar coated speech with unpopular Amendments hidden in

the fine line Convenient Assumptions onCollection Efficiency of RevenueActual Growth In EconomyMoney Supply and Financial StabilityEconomic Environment viz. Global & DomesticOverall Stability And Security

12

We need a budget that has an IMPACTBudget is beyond & much much beyond mere tax proposalsWe need to Concentrate, Debate & Act towards

performance/outcome budgeting Current system concentrates on expenditure rather than outcomeIncreased expenditure may not necessarily mean improved

performance, in fact the same output in lesser expenditure can point to higher efficiency

No indicators to gauge whether the output of activities and programs lead to concrete outcomes for achieving the objectives

Value of each rupee being spent is not fully realized in such a mechanism

Key performance Indicators, should be identified and announced

SWOT of the Indian Economy

13

Strength1.Democracy2.Independence of Election Commission Apex judiciary / Legal set-up3.Restrained Defense Forces4.Peace Loving, God Fearing, Law abiding people5.Huge And Ambitious Middle Class6.Robust Civil Society & cultural heritage 7.Young Population8.IT – English

Weakness1.Corruption / Vested Interest2.Inactive fatalist population3.Lack of Confident Leadership4.Bad Implementation/ Management5.Poor Education ( job oriented)6.Indecisive & inactive Governance7.Lack of Innovation 8.Poor Infrastructure and Distribution Setup9.Rising Political and Social Conflicts10.Coalition Governance

Opportunity1.Untapped Resources2.Weak US & Europe3.Positive World Attitude4.Huge Customer Base5.Powerful Image6.Huge Growth Potential

Threat1.Inequality2.Growing Impatience, Unemployed Youth3.Corruption /Vested Interest4.Wrong Priorities & lack of vision from Politicians5. Fast Erosion of Moral Value6.Bad relation with neighbors7.Internal Law and Order / Terrorism8.Population Growth

SWOT Analysis for a Budget

14

Strength1.Annual Basis2.Highly Respected and accepted, still3.Openness to improve4.Awareness about Corruption

Weakness1.Non Imaginative / Monotonous2.Lack of a firm Resolve/ Goal/ ambition3.Outcomes Forgotten4.Corruption5.Inflation6.Poor Implementation

Opportunity1.Change the Momentum2.Take a firm step3.Election Year !!

Threat1.Election Year !!2. Growing Impatience3.Corruption/ Vested Interests4.Lack Of Appreciating International Responsibility

15

Eliminate / Dilute Weaknesses through StrengthConvert Threats into OpportunitiesExploit Opportunities through Strengths to achieve

Results

Strengths Weakness

Opportunities Threats

Need for Awareness / A Bottom Up Approach

16

Outcome Reducing Disparity Increase in Per Capita Income

Planned Outputs ( Activities) Education Banking Reach Rural Push Urban Poverty Health Infrastructure Power Agriculture Banking Sector

Inputs Expenses Effective Implementation NOW , PLAN THE REVENUES WITHIN FISCAL DISCIPLINE

A Typical Outcome Budget Approach Education Sector

17

Objective – Increasing the spread of education so that maximum number of people can read and write

Program – Primary School developmentOutlay – Rs.100 croreOutput – Opening up of 20,000 new schools; 2,000 training for

teachers and staff; 5,000 orientation and awareness drives for parents

Outcome – Increase in literacy level from 52% to 58% (primary education)

Key Performance Indicator – Number of children enrolled in primary school

Suggestions

18

Decentralize and MonitorReview of Scheme. Provide at least 10% of expense for thisQuarterly Review of Budget OutcomesConcentrate on

R & D Education-Job orientedHealth CareSmall and Medium IndustriesAgro industryLaw & Order

Administrative Reforms

Suggestions

19

Provide strong leadership Keep International Focus – GlobalizationExpedite Reforms Install effective MIS and Control System Educate Masses and Political LeadersControl corruption with effective and timely controls and

punishments , with confidenceNo Raid Raj or License Raj, again, please. Speed up action & no backlog in approvals/ decisionsPut up a big mission statement, have clearly spelt out GoalsBudget & Act accordingly

Amal Datt & AssociatesE-mail Id: - amaldhruv@gmail.com,

amaldatt@gmail.comThis presentation is also available on www. financefundas.com, www.amaldatt.com

Copyrights: Amal Dhru

Thank You!