Union Budget 2020: Terminology, glossary of frequently used terms

Finance Minister Nirmala Sitharaman is scheduled to present the Budget for the financial year 2020-21 on February 1. This year's budget is expected to focus on boosting demand at a time when India's GDP growth is estimated to have fallen to an 11-year-low in 2019-20. However, the government is expected to announce some tax boosters and sector-specific reforms to improve growth in the next fiscal starting April 1, 2020.

According to the Consumer Electronics and Appliances Manufacturers Association (CEAMA), the industry has largely been stagnant this year and with increased customs duties, global economic changes and fluctuations in currency and commodity, the demand levels for next year are difficult to predict.

While everyone argues on what should be a part of the Union Budget this year, let's start with the basics. The finance minister usually presents a comprehensive statement of the government's finances including spending, revenues, deficit, and debt, etc. on the budget day. Here's a look at the most commonly used terminologies during the presentation of the Budget.

Aggregate Economic Data: It explains total expenditures and total production of goods and services related to the entire economy. In economics, aggregate data or data aggregates are high-level data that are composed from a multitude or combination of other more individual data. Aggregate data refers to numerical or non-numerical information that is collected from multiple sources and/or on multiple measures, variables, or individuals. It also refers to a compilation of data summaries or summary reports, typically for the purposes of public reporting or statistical analysis.

Annual Financial Statement (AFS): Annual financial statements are financial reports based on a 12-month consecutive time period. The most common set of reports issued are the general-purpose financial statements that include a balance sheet, income statement, statement of retained earnings, and statement of cash flows. Under Article 112 of the Constitution, the government requires to present a statement of estimated receipts and expenditure in respect of every financial year in the Parliament.

Appropriation Bill: It is a document that empowers the government to withdraw funds from the Consolidated Fund for meeting its yearly expenses. An appropriation bill, also known as supply bill or spending bill, is a bill that sets money aside for specific spending. In most democracies, approval of the legislature is necessary for the government to spend money.

Balanced Budget: Budgets in which revenues are equal to expenditures are referred to as "balanced budget". It means there is neither a budget deficit nor a budget surplus. Thus, neither a budget deficit nor a budget surplus exists (the accounts "balance"). More generally, it is a budget that has no budget deficit, but could possibly have a budget surplus.

Budget at a Glance: It is a document that shows in brief, receipts and disbursements along with broad details of tax revenues and other receipts.

Budget Cycle: A budget cycle is the life of a budget from creation or preparation, to evaluation. Most small businesses don't use the term “budget cycle” but they use the process and go through each of its four phases — preparation, approval, execution and evaluation. It consists of the major events or stages in making decisions about the budget and implementing and assessing those decisions.

Budgetary Deficit: A budget deficit occurs when expenses exceed revenue and indicate the financial health of a country. The government generally uses the term budget deficit when referring to spending rather than businesses or individuals. Accrued deficits form national debt. It is the difference between all receipts and expenses in both revenue and capital account of the government. It means the government has spent more money that it earned in a financial year.

Balance of Payments: The balance of payments (BOP) is a statement of all transactions made between entities in one country and the rest of the world over a defined period of time, such as a quarter or a year. The term is used to denote the difference in total value between payments into and out of a country over a period.

Central Plan Outlay: It is the division of monetary resources among the different sectors in the economy and the ministries of the government.

Consolidated Budget: The consolidated budgets are those which give a group view of the revenues and expenditures managed by the City Council and its depending entities. According to the current regulations there are different consolidation perimeter (meaning different criteri to define which entities are part of the consolidated budget). Consolidated budget is the presentation of the budget in which revenues from all sources and spending for all activities are included.

Debt: Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. Government debt is the outstanding amount that the government owes to private lenders at any given point in time.

Demands for Grants (DG): Demand for Grants is the form in which estimates of expenditure from the Consolidated Fund, included in the annual financial statement and required to be voted upon in the Lok Sabha, are submitted in pursuance of Article 113 of the Constitution.

Disinvestment: Disinvestment refers to the use of a concerted economic boycott to pressure a government, industry, or company towards a change in policy, or in the case of governments, even regime change. Disinvestment is the action of government selling or liquidating an asset or subsidiary.

Expenditure: Expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture or an automobile is often referred to as an expense. The term refers to government spending (or outlays) made to fulfill a government obligation, generally by issuing a check or disbursing cash.

Expenditure Budget: Expenditure Budget shows the revenue and capital disbursements of various ministries/departments and presents the estimates in respect of each under 'Plan' and 'Non-Plan'. It gives a detailed analysis of various types of expenditure and broad reasons for the variations in estimates.

Expenditure Profile: Expenditure profile is a full compilation of information from all ministries and departments to analyse the Union government's financial performance. It also contains consolidated information about government schemes, such as centrally-sponsored schemes, subsidies, and investment in public-sector undertakings (PSUs). Once the budget is approved, by allocating costs to the activities in a schedule, a profile of expenditure is produced.

Extra-governmental: Or "extra-budgetary", term refers to government transactions that are not included in the annual budget.

Finance Bill: A Finance Bill is a Money Bill as defined in Article 110 of the Constitution. The Finance Bill can be introduced only in Lok Sabha. However, the Rajya Sabha can recommend amendments in the Bill. The bill has to be passed by the Parliament within 75 days of its introduction. It concerns the country's finances — it could be about taxes, government expenditures, government borrowings, revenues, etc. Since the Union Budget deals with these things, it is passed as a Finance Bill.

Fiscal Policy Strategy Statement: The Fiscal Policy Strategy Statement is presented to Parliament as per the FRBM Act. The Strategy Statement outlines the strategic priorities of Government in the fiscal area for the ensuing financial year relating to taxation, expenditure, lending and investments, administered pricing, borrowings and guarantees.

Finance Bill: A Finance Bill is a Money Bill as defined in Article 110 of the Constitution. The Finance Bill can be introduced only in Lok Sabha. However, the Rajya Sabha can recommend amendments in the Bill. The bill has to be passed by the Parliament within 75 days of its introduction. The proposals of the government for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted through the Finance Bill.

Fiscal Deficit: The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government. While calculating the total revenue, borrowings are not included.

Fiscal Envelope: It refers to the aggregate level of expenditures and revenues (and the resulting deficit or surplus) in the budget.

Fiscal Policy: Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply. Fiscal policy is implemented through the budget and is the primary means by which the government can influence the economy.

Fiscal Year: A fiscal year is used by government accounting and budget purposes, which varies between countries. It is also used for financial reporting by businesses and other organizations. It is the government's 12-month accounting period that frequently does not coincide with the calendar year. The fiscal year is named after the calendar year in which it ends.

Gross Domestic Product: Gross domestic product is a monetary measure of the market value of all the final goods and services produced in a specific time period. This is the total value of final goods and services produced in a country during a calendar year. Economic growth is measured by the change in GDP from year to year.

Household Income: Household income refers to the combined gross income of all members of a household, defined as a group of people living together, who are 15 years or older. It is used to determine the economic health of an area or to compare living conditions between geographic regions. This is money received by people that may or may not be earned from productive activities and, after adjusting for taxes, is saved or spent on consumption of goods and services.

Income Tax: It refers to the tax that is levied directly on personal income.

Inflation: It is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

Joint Account: A joint account is a bank account shared by two or more individuals. Any individual who is a member of the joint account can withdraw from the account and deposit to it. Usually, joint accounts are shared between close relatives or business partners. It means that a bank account held in the names of two or more people.

Liquid asset: A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted into cash is similar to cash itself because the asset can be sold with little impact on its value.

Macro-Economic: Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole. It refers to the part of economics that studies the economy as a whole and particularly topics such as gross production, unemployment, inflation, and business cycles.

Macro-Economic Framework Statement: The Macro-Economic Framework Statement was presented to Parliament as per the Fiscal Responsibility and Budget Management Act, 2003. The Framework Statement contains assessment regarding the GDP growth rate, fiscal balance of the Central Government and the external sector balance of the economy. It comprises an assessment of the overall growth prospects of the economy with specific underlying assumptions.

Medium Term Fiscal Policy Statement (MTFP): The Medium-term Fiscal Policy Statement maintains a balance between revenue receipts and revenue expenditure and the use of capital receipts including market borrowings for generation of productive assets. It is a statement that is presented in the Parliament under Section 3(2) of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003.

Medium Term Expenditure Framework Statement: The medium-term expenditure framework (MTEF) statement sets a three-year rolling target for expenditure indicators, along with specifications of underpinning assumptions and risks. This statement is presented in Parliament under Section 3 of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. This document sets forth a three-year rolling target for the expenditure indicators with specification of underlying assumptions and risks involved.

Memorandum Explaining the Provisions in the Finance Bill: It deals with information to facilitate understanding of the taxation proposals in the Finance Bill.

Micro-Economic: Microeconomics is a branch of economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

Non-plan expenditure: Non-plan revenue expenditure is accounted for interest payments, subsidies (mainly on food and fertilisers), wage and salary payments to government employees, grants to States and UTs governments, pensions, police, economic services in various sectors, other general services such as tax collection, social services, and grants to foreign governments.

Outcome Budget: The Outcome Budget is a progresscard on what various Ministries and Departments have done with the outlays in the previous annual budget. It measures the development outcomes of all government programs and whether the money has been spent for the purpose it was sanctioned including the outcome of the fund usage. It is a budgeting technique that entails ministries preparing their budget and submitting it to the Ministry of Finance before the Annual Budget is presented.

Opportunity Cost: When an option is chosen from alternatives, the opportunity cost is the "cost" incurred by not enjoying the benefit associated with the best alternative choice. The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen. The highest valued alternative foregone in the pursuit of an activity.

Output/Outcomes: The performance of government programs is assessed by examining whether they have delivered the desired outputs and outcomes.

Plan Expenditure: Plan expenditure are the expenses that form a part of the government's five year plan and comprise salaries, subsidies and pension. Plan expenditures are estimated after discussions between each of the ministries concerned and the Planning Commission.lan expenditure forms a sizeable proportion of the total expenditure of the Central government.

Quarterly Report: A quarterly report is a set of financial statements issued by a company every three months. Public companies in the United States file this report via the Securities and Exchange Commission (SEC) Form 10-Q. It is a set of financial statements issued by a company every three-month providing details about the firm's financial health.

Receipts Budget: This provides an analysis of estimates of receipts included in the AFS.

Resources: This term is often used in a budgetary sense to mean the amount of funds available to the government to spend. Resources generally will come either from revenues or borrowing.

Revenue: In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover. Some companies receive revenue from interest, royalties, or other fees. The annual income collected from taxes by the government as a result of its sovereign powers.

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Subvention: Government sometimes asks financial institutions to provide loans to farmers at below market rates. The loss is usually made good through subventions.

Tax Revenue: Tax revenue is defined as the revenues collected from taxes on income and profits, social security contributions, taxes levied on goods and services, payroll taxes, taxes on the ownership and transfer of property, and other taxes. It gives a detailed report on revenue collected from different items. Taxes collected from both direct and indirect tax are considered in tax revenue.

Value-Added Tax (VAT): VAT helps avoid cascading of taxes as a product passes through different stages of production/value addition. The tax is based on the difference between the value of the output and inputs used to produce it. VAT brings in transparency to commodity taxation.

Zero-based budgeting: Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a "zero base," and every function within an organization is analyzed for its needs and costs. A budgeting technique that begins at zero and justifies every expenditure.

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