Indian Economy and Budget 2025 PDF

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. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Economy as a stream Economy – Adam Smith (Scotland). c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A Microeconomics – Ragner Frisch (Norway) 6D rs 9J4B5K p r a Macroeconomics – Ragner frisch o T tr-5U5T4N6Q9S 4P5N. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Types of economies Capitalism (Market economy) Capitalism is an economic system in which private individuals or businesses own capital goods. The production of goods and services is based on supply and demand in the general market—. c o m known as a Market Economy—rather than through k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D central planning—known as a planned economy n rs 9J4B5K r a or Command Economy o p T tr-5U5T4N6Q9S 4P5N  Communism : Communism is based on the goal of eliminating socioeconomic class struggles by creating a classless society in which everyone shares the benefits of labour. c o m and the state controls all property and wealth n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N  Mixed (capitalism + communism) A mixed economic system is a system that combines aspects of both Capitalism and Communism. A mixed economic system protects private property and allows a level of economic. c o m freedom in the use of capital, but also allows for k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K governments to interfere in economic activities in order to n r achieve social aims. o p a T tr-5U5T4N6Q9S 4P5N Factors of production and circular flow Factors of production 1. Land : rent. c o m 2. 3. Labor : wages n Capital : interestk e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K 4. p r a Entrepreneurs : profit o T tr-5U5T4N6Q9S 4P5N Circular flow. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N GDP, GNP, NNP, NI by CSO 1951. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Budget According to Article 112 of the Indian Constitution, the Union Budget of a year is referred to as the Annual Financial Statement (AFS). It is a statement of the estimated receipts and expenditure of the Government in a financial year (which begins on 01 April of the current year and ends on 31 March of the following year).. c o m Changes Introduced in 2017 k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K Advancement of Budget presentation to February 1 (earlier presented n o p a on the last working day of February), r Merger of Railway Budget with the General Budget(Ackworth T Committee and Bibek Debroy Committee), and Doing away with plan and non-plan expenditure. tr-5U5T4N6Q9S 4P5N Other types of budget Zero Based Budgeting: Zero-based budgeting is a method of budgeting in which all expenses are evaluated each time a Budget is made and expenses must be justified for each new period. Outcome Budget: Outcome Budget analyses the progress of each o m ministry and department and what the respected ministry has done. c e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A rs with its Budget outlay. It measures the development outcomes of all government programs. It was first introduced in the year 2005. n k 6D9J4B5K o p r a Gender Budgeting: The gender-budgeting is defined as “gender-based assessment of Budgets, incorporating a gender perspective at all levels T of the budgetary process and restructuring revenues and expenditures in order to promote gender equality”. It is actually budgeting for gender equity. tr-5U5T4N6Q9S 4P5N In Parliament Ø6 stages: Presentation of Budget General discussion Scrutiny by Departmental Committees. c o m n k e tr-5U5T4N6Q9S Voting on Demands for Grants 4P5Ntr-5H5D4A Passing an Appropriation Bill 6D rs 9J4B5K p r a Passing of Finance Bill o T The first Budget of Independent India was presented in 1947. tr-5U5T4N6Q9S 4P5N. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N  Fiscal Deficit = Total expenditure – (Revenue receipts + Non- debt creating capital receipts). Revenue Deficit = Revenue expenditure – Revenue receipts Primary deficit = Fiscal deficit – Interest payments. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Interim Budget vs Full Budget. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Vote on Account. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Money taken Dept of Economic Affairs Prepare and North Block Article 112-117 – deals with financial matters. c o m Article 114(3)-Appropriation Bill- no money to be withdrawn without parliamentary approval k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K Article 266 – Parliamentary approval required to take money out of n r a Consolidated Fund of India. o p T tr-5U5T4N6Q9S 4P5N Some Facts about Budget Longest in words budget speech- Manmohan Singh ji 1991(18,650) Longest in Duration – Nirmala Ji 2020(2.42 Hrs) Max – Morarji Desai 10. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Part B. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Inflation 1.Disinflation: Reduction in the rate of inflation 2.Deflation: Persistent decrease in the price level (negative inflation). c o m k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 3.Creeping inflation – If the rate of inflation is low (upto 3%) 9J4B5K 4.Walking/Trotting inflation – Rate of inflation is moderate (3- n 7%) o p r a T 5.Running/Galloping inflation – Rate of inflation is high (>10%) 6.Runaway/Hyper Inflation – Rate of inflation is extreme tr-5U5T4N6Q9S 4P5N 1.Inflationary gap: Aggregate demand > Aggregate supply 2.Deflationary gap: Aggregate supply > Aggregate demand 3.Core inflation. c o m 4.Headline inflation n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K 5.Structural inflation: Due to structural problems like p r a infrastructural bottlenecks. o T 6.Stagflation: Inflation + Stagnation (Unemployment) tr-5U5T4N6Q9S 4P5N Inflation and RBI RBI: Formed in 1935 by RBI Act ,1934 Recommendation: Hiltton Young Comission Head Office: Kolkata shifted Mumbai First Governor: Sir Osborne Smith. c o m k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A First Indian Governor: C.D. Deshmukh n 6D rs 9J4B5K p r a Current Governor: Shaktikanta Das (25th) o T tr-5U5T4N6Q9S 4P5N Functions of RBI Issue of Bank Notes: Except coins and Rs.1note Banker to Government Custodian of Cash Reserves of Commercial Banks. c o m n k e Custodian of Country's Foreign Currency Reserves tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p a Lender of Last Resort r Central Clearance and Accounts Settlement: NPCIL T Controller of Credit: MPC tr-5U5T4N6Q9S 4P5N CPI It measures price changes from the perspective of a retail buyer. It is released by the NSO. Four types of CPI are as follows: o m üCPI for Industrial Workers (IW),CPI for Agricultural Labourer (AL),CPI for Rural. c Labourer (RL),CPI (Rural/Urban/Combined). e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A rs üOf these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. n k 6D9J4B5K p r a üFourth is compiled by the NSO in the Ministry of Statistics and Programme o Implementation. T Base Year for CPI is 2012 Recently, the Ministry of Labour and Employment released the CPI- tr-5U5T4N6Q9S 4P5N IW with base year 2016. Quantitative methods and Qualitative methods. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Definitions SLR: SLR, statutory liquidity ratio is the amount of money that is invested in certain specified securities.(18) CRR: Under CRR a certain percentage of the total bank deposits has to be kept in the current account. c o m with RBI.(4.5) n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a Bank rate: Bank Rate is charged against loans offered by the central bank to commercial banks(6.5) T tr-5U5T4N6Q9S 4P5N  Repo rate: it simply means Repo Rate is the rate at which RBI lends money to commercial banks against the pledge of government securities for a short term.(6.25) MSF: MSF(Marginal standing facility) rate is the rate at which banks borrow funds overnight from the Reserve Bank of India (RBI) against approved. c o m n k e tr-5U5T4N6Q9S government securities. 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r g-sec(bonds) by RBI. a OMO (open market operation): sale and purchase of T tr-5U5T4N6Q9S 4P5N Un-employement 1. Cyclical Unemployment 2. Frictional Unemployment 3. Structural Unemployment. c o m 4. Seasonal Unemployment 5. Underemployment n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a 6. Disguised Unemployment T tr-5U5T4N6Q9S 4P5N Planning commission to NITI Aayog Planning commission: Since Independence, the Indian economy has been premised on the concept of planning. This has been carried through the Five-Year Plans, developed, executed, and monitored by the. c o m k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs Planning Commission. With the Prime Minister as the ex-officio 9J4B5K Chairman, the commission has a nominated Deputy Chairman, n r a who holds the rank of a Cabinet Minister o p T Planning in India derives its objectives from directive principles of states policy(DPSP) tr-5U5T4N6Q9S 4P5N Economic planning is in concurrent list of constitution schedule NITI Aayog Planning Commission was replaced by a new institution – NITI AAYYOG on January 1, 2015 with emphasis on ‘Bottom –Up’ approach to envisage the vision of Maximum Governance, Minimum Government, echoing the spirit of ‘Cooperative Federalism’. Chairperson: Prime Minister c o m Vice-Chairperson: To be appointed by Prime-Minister –Suman Bery. Territories. n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs Governing Council: Chief Ministers of all states and Lt. Governors of Union 9J4B5K o p r a Ex-Officio membership: Maximum four from Union council of ministers to be nominated by Prime minister. T Chief Executive Officer: Appointed by Prime-minister for a fixed tenure, in rank of Secretary to Government of India.-B.V.R. Subrahmanyam tr-5U5T4N6Q9S 4P5N Taxation in India Direct tax: Direct taxes cannot be passed onto a different person or entity; the individual or organization upon whom or which the tax is levied is responsible for the fulfillment of the full tax payment. Example: c o m Indirect tax: Indirect taxes can be defined as taxation on an individual or. k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs entity, which is ultimately paid for by another person. 9J4B5K Progressive taxation: A progressive tax is a tax in which the tax rate n o p a increases as the taxable amount increases. r Regressive taxation: A regressive tax is a tax applied uniformly, taking a T larger percentage of income from low-income earners than from high- income earners. Laffer curve: The Laffer Curve is a theory developed by supply-side tr-5U5T4N6Q9S 4P5N economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments.. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Taxation Advolerem tax: An Ad Valorem refers to tax based on the value assessed for an item. Examples include real estate or personal property. Specific tax: A per unit tax, or specific tax, is a tax that is defined as a fixed amount for each unit of a good or service sold, such as cents per kilogram.. c o m e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A rs Surcharge: Surcharge is a charge on any tax, charged on the tax already paid. As the name suggests, surcharge is an additional charge or tax. The n k 6D9J4B5K main surcharges are that on personal income tax (on high income slabs p r a and on super rich) and on corporate income tax. o T Cess: A cess imposed by the central government is a tax on tax, levied by the government for a specific purpose. Generally, cess is expected to be levied till the time the government gets enough money for that purpose. tr-5U5T4N6Q9S 4P5N GST (1 st in world France) It is a destination-based taxation system. It has been established by the 101st Constitutional Amendment Act. One Tax” to make India a unified market.. c m It is an indirect tax for the whole country on the lines of “One Nation o k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs It is a single tax on supply of Goods and Services in its entire product 9J4B5K cycle or life cycle i.e. from manufacturer to the consumer. n services. o p r a It is calculated only in the “Value addition” at any stage of a goods or T The final consumer will pay only his part of the tax and not the entire supply chain which was the case earlier. tr-5U5T4N6Q9S 4P5N There is a provision of GST Council(Art.279A) to decide upon any matter related to GST whose chairman in the finance minister of India. Finance Commission The Finance Commission (FC) is a constitutional body, that determines the method and formula for distributing the tax proceeds between the Centre and states, and among the states as per the constitutional arrangement and present requirements.. c o m k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs Under Article 280 of the Constitution, the President of India is required to 9J4B5K constitute a Finance Commission at an interval of five years or earlier. n p r a The 15th Finance Commission was constituted by the President of India in o T November 2017, under the chairmanship of NK Singh.(KC Neogy ) Its recommendations will cover a period of five years from the year 2021-22 to 2025-26. tr-5U5T4N6Q9S 4P5N DFI’s The development finance institutions or development finance companies are organizations owned by the government or charitable institution to provide funds for low-capital projects or where their borrowers are unable to get it from commercial lenders.. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs financial as well as the technical support to various sectors 9J4B5K r a DFIs do not accept deposits from people o p T They raise funds by borrowing funds from governments and by selling their bonds to the general public tr-5U5T4N6Q9S 4P5N Industry IFCI – ü 1st DFI in India. Industrial Corporation of India was established in 1948. ICICI – ü Industrial Credit and Investment Corporation of India Limited established in 1955 by an initiative of the World Bank.. c m ü It established its subsidiary company ICICI Bank limited in 1994. o ü In 2002, ICICI limited was merged into ICICI Bank Limited making it the first universal bank of the country. IDBI – n k e tr-5U5T4N6Q9S rs 4P5Ntr-5H5D4A 6D9J4B5K ü Industrial Development Bank of India was set up in 1964 under RBI and was granted autonomy in 1976 o p r a ü It is responsible for ensuring adequate flow of credit to various sectors ü It was converted into a Universal Bank in 2003 IRCI – T ü Industrial Reconstruction Corporation of India was set up in 1971. tr-5U5T4N6Q9S ü It was set up to revive weak units and provide financial & technical assistance. 4P5N  SIDBI – üSmall Industries development bank of India was established in 1989. üIt was granted autonomy in 1998 Foreign Trade üEXIM Bank – Export-Import Bank was established in January 1982 and is the apex institution in the area of foreign trade investment. Agriculture Sector NABARD –. c o m e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A rs üNational Bank for Agriculture and Rural Development was established in July 1982 n k 6D9J4B5K Housing o p a üIt was established on the recommendation of the Shivraman Committee r T üNHB- National Housing Bank was established in 1988. üIt is the apex institution in Housing Finance üAspirants can also read about micro-finance at the linked article. tr-5U5T4N6Q9S 4P5N Balance of Payment Balance of Payment is systematic record of overall economic transaction during specific time period Consists of Current account payments & Capital account payments. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N Current Account Balance of Trade/Visible Also known as balance on merchandising goods. c o m Records all transactions of foreign currencies on account of export & import of goods only k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K BOT is always deficit in India means import >> export n p r a Means insufficiencies of foreign currency through export to pay for o T critical imports tr-5U5T4N6Q9S 4P5N Capital Account Foreign investment in India (FDI,FII Direct purchase of land or assets) External commercial borrowing (IMF, WB, ADB etc.), External assistance & Grants etc. o m Indian Diaspora maintain deposits in foreign currency in India known as NRI. c deposits n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K Overall BOP cannot tell the health of an economy, weather there is CAD or matched o p r a CAS but what is important is the manner in which inflow & outflow are T As CAD can be fulfilled by ECB (external borrowings)/RBI (internal borrowings) in capital account of BOP tr-5U5T4N6Q9S 4P5N The true picture can be seen from current account of BOP. c o m n k e tr-5U5T4N6Q9S 4P5Ntr-5H5D4A 6D rs 9J4B5K o p r a T tr-5U5T4N6Q9S 4P5N