Key Financial Terms of Union Budget 2021

Table of Contents

Annual Financial Statement

Article 112 of the Constitution requires the government to present to Parliament a statement of estimated receipts and expenditure in respect of every financial year – April 1 to March 31.
It is usually a white 10-page document.
It is divided into three parts, consolidated fund, contingency fund and public account.
For each of these funds, the government has to present a statement of receipts and expenditure.

Consolidated Fund

This is the most important of all government funds.
All revenues raised by the government, money borrowed and receipts from loans given by the government flow into the consolidated fund of India.
All government expenditure is made from this fund, except for exceptional items met from the Contingency Fund or the Public
Importantly, no money can be withdrawn from this fund without the Parliament’s approval.

Public Account

This fund is to account for flows for those transactions where the government is merely acting as a banker like- provident funds, small savings and so on.
These funds do not belong to the government. They have to be paid back at some time to their rightful owners.
Because of this nature of the fund, expenditure from it is not required to be approved by the Parliament.

Revenue receipt/Expenditure

All receipts and expenditure that in general do not entail sale or creation of assets are included under the revenue account.
On the receipts side, taxes would be the most important revenue receipt.
On the expenditure side, anything that does not result in creation of assets is treated as revenue expenditure.
Salaries, subsidies and interest payments are good examples of revenue expenditure.

Capital receipt/Expenditure

All receipts and expenditure that liquidate or create an asset would in general be under capital account.
For instance, if the government sells shares (disinvests) in public sector companies, it is in effect selling an asset.
The receipts from the sale would go under capital account.

Revenue Deficit

The excess of disbursements over receipts on revenue account is called revenue deficit.
All expenditure on revenue account should ideally be met from receipts on revenue account; the revenue deficit should be zero.
When revenue disbursement exceeds receipts, the government would have to borrow.
Such borrowing is considered regressive as it is for consumption and not for creating assets.

Fiscal Deficit

When the government’s non-borrowed receipts fall short of its entire expenditure, it has to borrow money from the public to meet the shortfall.
The excess of total expenditure over total non-borrowed receipts is called the fiscal deficit.

Primary Deficit

The primary deficit is the fiscal deficit minus interest payments.
It tells how much of the Government’s borrowings are going towards meeting expenses other than interest payments.

Budget Estimates / Revised Estimates

Amount of money allocated in the Budget to any ministry or scheme for the coming financial year.
Revised Estimates are a mid-year review of possible expenditure.

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