Glossary Terms Related to Budget

Following are some of the commonly used terms in connection with the Indian Budget.

Ad- Valorem Duties :- Defined as those duties that are established as a certain percentage of the price of the product.

Appropriation Bill :- It is a bill that authorizes payment and appropriation of expenses from the Consolidated Fund. This bill is introduced only after the general discussion on budget proposals and the completion of voting on grants. The procedure to pass the bill in parliament is like other money bills.

Bill :- It is a well drafted legislative proposal that later becomes an Act on being approved by both the Lok Sabha and Rajya Sabha.

Budget/ Annual Financial Statement :- According to the section – 112 of the Indian Constitution, the government presents a statement of estimated receipts, expenditure and a detailed plan that is presented for every financial that is for 1st of April to 31st March of each year.

There are usually three divisions of budget and for each of them a statement of expenditure & receipts are presented. These three divisions include – Contingency Fund, Consolidated Fund and Public Account.

Budget Estimates :– These are assessment of expenditure by the government for a year. This also includes the estimate of Revenue Deficit and Fiscal Deficit for the year.

Budget Deficit :- When the expenditure becomes more than revenues, then the budgetary exercise is considered a failure as there is shortage of funds. Such a situation is said to be a 'Budget Deficit'.

Capital Budget :- This budget comprises of loans & advances that are granted to Union & State territory by the Union government, corporations, government companies and other parties. Capital budget also includes capital receipts and payments by the government.

Capital Expenditure :- The total expenditure by the government on acquiring any asset that may include investment in shares, machinery, building or land. The scope of capital expenditure extends to payments, advancements or loans that are approved or sanctioned to the State governments, union territories, public sector undertakings by the Central government.

Countervailing Duties :- These duties are imposed on all imports inorder to thwart any kind of unfair trading practices carried by the foreign countries.

Consolidated Fund :- This fund is made of the revenues that is received by Government plus the loans that is raised by this revenue as well as the receipts from recoveries of loans granted by it.

Contingency Fund :- The fund that is used by the government in order to meet the unforeseen expenditure or incase to meet emergencies. The contingency fund is generally used when the government cannot wait for long for the parliament to authorise the expenses on the expenditure.

CENVAT :- This scheme is implied for most of the goods and reduce the cascading effect of indirect taxes on finished products.




Current Account Deficit :- This deficit is determined on finding the difference between the nation's exports and imports.

Custom Duties :- These are levies that are incurred from the goods exported from or imported to the country.

Direct Taxes :- These are taxes that are implied directly on the individuals or customers. Corporate tax and Income tax are direct taxes.

Disinvestment :- Government makes a number of investment in public sector undertakings. But when it dilutes its stake in these undertakings, it is defined as disinvestment.

Excise Duties :- The foods manufactured within the country are imposed with some duties. Those duties are known as Excise duties.

Fiscal Deficit :- The sum found on calculating the difference of Revenue Receipts and Total Expenditure.

Finance Bill :- It is a bill that is passed to the Parliament by the government. This bill is government's plan for imposing new taxes beyond the period. The plans may include continuation of present tax structure or modifications in the it. The finance bill seeks approval from by the Parliament.

Gross Domestic Product :- The domestic goods & services produced in a financial year have a total market value.

Gross National Product :- The gross value determined of the finished goods & services that are produced in the country in a financial year and the total income of the citizens from investments that are made abroad. This value does not include the foreigners' income in the domestic market.

Indirect Taxes :- Taxes imposed on goods that are manufactured, imported or exported. Eg. Excise Duties, Custom Duties etc.

Monetised Deficit :- This deficit is the help extended to the Central government's borrowing programme by the Reserve Bank of India.

National Debt :- The term National Debt is the amount borrowed the central government. This debt is a taken in order to finance the budget deficits.

Non-Plan Expenditure :- This expenditure is a combination of expenses like capital expenditure, revenue expenditure on interest payments, postal deficit, pensions, economic services, defence expenditure and subsidies. Non-plan expenditure also includes expenditure on police, loans & grants to public sector, governments whether State or foreign and Union territories.

Peak Rate :- The term peak rate is common in Indian Budget and refers to the maximum rate of customs duty which is applied on any item.

Performance Budget :- The compiled form of varied activities of various departments and ministries is termed as Performance Budget.

Plan Expenditure :- Money provided for the execution of Central Plan. This monetary aid is given from the government's account and consists of expenditure both capital & revenue and Central assistance to Union territories & States.

Primary Deficit :- The amount determined on calculation of subtracting the interest payments from the Fiscal deficit is the Primary Deficit.

Progressive Tax :- Progressive tax is a tax where the wealthy have to give more income tax as compared to the poor.

Revenue Deficit :- This budget related term is the difference between Revenue Expenditure and Revenue Receipts.

Subsidies :- The Central Government extends monetary aid either to a group of individuals or individual in order to enhance their business skills.

Twin Deficits :- Deficits that include both the government budget deficit and trade deficit.

Value-Added Tax :- It is a tax that is imposed on a company or firm in respect of the percentage of its value added. This tax is implied to prevent the increasing effects of taxes through the different production processes. The sum determined by finding the difference between value of inputs and outputs is the basis of the value-added tax.