Budget 2024: From fiscal deficit to budget estimate, key terms to know ahead of Sitharaman's speech

Union Budget preparation is a tedious process that takes several months. This important annual financial exercise is carried out under the supervision of senior officials from the finance ministry. The Budget documents contain some complex terms that could be difficult for many to understand.

The finance minister’s Budget speech details the fund allocations for various departments, ministries, and welfare schemes. The minister also estimates receipts and expenditures for the upcoming financial year.

Finance Minister Nirmala Sitharaman will present Budget 2024 in Parliament on July 23. In her budget speech, she is expected to address key financial indicators like fiscal deficit, capital expenditures, and revenue receipts.

A clear understanding of these terms will help provide insight into the government’s spending, taxation, and allocations for various schemes for FY 2024-25.

Here’s a look at 10 key Budget terms:

Annual Financial Statement

The Annual Financial Statement (AFS) is a document consisting of three parts that record the government's receipts and expenditures for a particular financial year. As per Article 112 of the Constitution, the government is mandated to present an AFS every financial year (April 1 to March 31).

The details of the receipts and disbursements are contained in three parts: the Consolidated Fund of India, the Contingency Fund of India, and the Public Account of India.

Economic Survey

The Economic Survey of India is an annual report which is released by the Ministry of Finance ahead of the Budget presentation. The report provides a comprehensive analysis of the country's economic indicators and outlines policy recommendations. The document offers a comprehensive analysis of the previous year's trends and forecasts for the upcoming year and includes important metrics such as GDP growth rates, inflation, fiscal deficit, and current account deficit. The Economic Survey is typically released a day before the Union Budget.

Fiscal Deficit

A fiscal deficit refers to a situation in which the government’s spending is more than the revenue it has accrued during a fiscal year. In case a fiscal deficit happens, it necessitates that the government borrow money to cover the shortfall of funds to meet expenditures. The borrowing of funds increases a country’s national debt.

Finance Bill

A Finance Bill needs to be approved by both houses of Parliament. Under Article 110 (1)(a) of the Constitution, the government must pass the Finance Bill pertaining to the imposition, abolition, remission, alteration, or regulation of taxes proposed in the Budget.

Capital expenditure

Capital expenditure is money allocated by the government for development, such as machinery, equipment, buildings, health facilities, educational institutions, and infrastructure projects. Capital expenditure can also be understood as the government’s investment, as it usually provides long-term benefits.

Budget Estimate

The budget estimate refers to the approximate calculation of the funds that are allocated by the government for various schemes, departments and ministries. The budget estimate is usually presented by the finance minister during the annual Budget speech. The budget estimates outline the various expenditures the government might make during the financial year. The estimates are also revised at later stages depending on the utilisation of funds and various needs of the ministries, departments and schemes.

Divestments

Divestments refer to a process by which the government sells its stake in public sector undertakings (PSUs) or assets to entities from the private sector or to the general public. This is often done to raise additional funds or to reduce the burden of ailing public sector enterprises or assets.

Consolidated Fund of India

The Consolidated Fund of India (CFI) is the total revenue received by the government in the given financial year. It comprises the entire revenue raised by the government, market borrowings, and loan receipts. The government's expenditures come from this fund, apart from the items that are met from the contingency fund.

Direct taxes

The government levies various taxes, cess, and duties to generate revenue. Taxes that are levied directly on the taxpayers are called direct taxes. Examples include income tax and corporate tax.

Public debt

Public debt is the total amount borrowed by the Union and state governments. It is serviced by the Consolidated Fund of India and includes a large internal component and a smaller external component.