How to READ a Budget?
Andajpatra nee AantiGhunti
Amal Dhru
F. C. A., M. B. A.(IIMA)
Gujarat Vishvakosh Trust
22nd February, 2012
The Simple(?) Expectations
Amal Datt & Associates
 Aren’t we bored of Budgets?
 Why it has lost its credibility?
 What best can we expect from it?
 What is its real impact?
 Is it an opportunity? For whom?
 How to exploit it? Who will exploit it? How?
 Before all that lets look at its format &
content
Amal Datt & Associates
1. Revenue Receipts
2. Tax Revenue
(net to Centre)
3. Non-tax Revenue
4. Capital Receipts (5+6+7)
5. Recoveries of Loans
6. Other Receipts
7. Borrowings and other
Liabilities
8. Total Receipts (1+4)
9. Non-plan Expenditure
10. On Revenue Account of which,
11.
12.
13.
14.
15.
16.
Interest Payments
On Capital Account
Plan Expenditure
On Revenue Account
On Capital Account
Total Expenditure (9+13)
Amal Datt & Associates
In Crore fo Rupees
2009-2010
2010-2011
2010-2011
2011-2012
Budget
Revised
Budget
Actual
Estimates
Estimates
Estimates
572811
682212
783833
789892
456536
534094
563685
664457
116275
451676
8613
24581
148118
426537
5129
40000
220148
432743
9001
22744
125435
467837
15020
40000
418482
1024487
721096
381408
1108749
735657
400998
1216576
821552
412817
1257729
816182
57925
213093
63171
303391
253884
49507
1024487
643599
248664
92058
373092
315125
57967
1108749
726749
240757
94803
395024
326928
68096
1216576
733558
267986
82624
441547
363604
77943
1257729
17. Revenue Expenditure
(10+14)
911809
18. On which, Grant for
creation of Capital Assets
19. Capital Expenditure
(12+15)
20. Revenue Deficit (17-1)
112678
338998
(5.2)
21. Effective Revenue
Deficit (17-18)
22. Fiscal Deficit
{16-(1+5+6)}
23. Primary Deficit (20-11)
418482
(6.4)
205389
(3.1)
958724
1053677
1097162
31317
90792
146853
150025
276512
(4.0)
162899
269844
(3.4)
160567
307270
(3.4)
245195
(3.5)
179052
(2.3)
160417
(1.8)
381408
(5.5)
132744
(1.9)
400998
(5.1)
160241
(2.0)
412817
(4.6)
144831
(1.6)
GDP for BE 2011-2012 has been projected at Rs. 8980860 crore assuming 14% growth over
the advance estimate of 2010-2011 (Rs. 7877947 crore) released by CSO.
Amal Datt & Associates
Some Terminologies
 Revenue Budget
- Revenue Receipt
- Revenue Payment
 Capital Budget
- Capital Receipt
- Capital Payment
 Expenditure
- Plan
Amal Datt & Associates
- Non Plan
Key Indicators
 Revenue Deficit
- Revenue Expenditure
less: Revenue Receipts
 Fiscal Deficit
- Total Expenditure
less: (Revenue Receipt + Loan
Recovery + Other Receipts)
- Fiscal Deficit
less: Interest Payments
 Primary Deficit
Looking at the numbers, it is obvious
that we don’t have enough money to
spend, on so many pressing priorities
Amal Datt & Associates
The huge spending power that we give
through a budget
 Union Budget gives, to the Govt. a spending power of
Rs.12 lakh crores in a year, i.e. Rs.10,000 per head
from each citizen
 A State budget gives, to the Govt. another Rs.10,000
per year per citizen of spending power.
 A Local body, in a city, takes yet another Rs.10,000
per head of spending power.
 These proposals are passed by our Representatives in
a manner which is best known to all.
Amal Datt & Associates
Need to focus also on Expenses
 We are giving huge spending power
 Almost Rs. 12,00,000 Crore at Union Level another





Rs.50,000 Crore at State Level and another Rs. 5000
Crore at Local Body Levels
Please Focus More on the Expenses that are being
budgeted
On Tax issues, People and Press are more vocal
But it is all the more important to understand, in details,
as to how efficiently and effectively the government
intends to spend
It is the media that needs to take a note of this
A lot of Research is required to present Huge Data already
available and present it in a simple manner.
Amal Datt & Associates
Special Place for Budget in India
 Various Announcements are
made in speech!!
 Key Policy issues are laid down
 Direction of Monetary Policy Spelt Out
 Various Schemes are Announced
 Economic Review discussed
 Its Effect on the Share Prices, investment outlook
and so on is well known.
Amal Datt & Associates
The Internal Pressures
 Growth v/s Equal distribution
 Fiscal discipline
 Good economics makes bad politics & vice a versa
 Games F. M’s play
 Over Estimation of Revenue
 Bold statements with promises to perform
 Half conceived proposals
 Sugar coated speech with unpopular Amendments hidden in

the fine line
Convenient Assumptions on
 Collection Efficiency of Revenue
 Actual Growth In Economy
 Money Supply and Financial Stability
 Economic Environment viz. Global & Domestic
 Overall Stability And Security
Amal Datt & Associates
We need a budget that has an IMPACT
 Budget is beyond & much much beyond mere tax proposals
 We need to Concentrate, Debate & Act towards





performance/outcome budgeting
Current system concentrates on expenditure rather than outcome
Increased expenditure may not necessarily mean improved
performance, in fact the same output in lesser expenditure can
point to higher efficiency
No indicators to gauge whether the output of activities and
programs lead to concrete outcomes for achieving the objectives
Value of each rupee being spent is not fully realized in such a
mechanism
Key performance Indicators, should be identified and announced
Amal Datt & Associates
SWOT of the Indian Economy
Strength
1. Democracy
2. Independence of
 Election Commission
 Apex judiciary / Legal set-up
3. Restrained Defense Forces
4. Peace Loving, God Fearing, Law abiding
people
5. Huge And Ambitious Middle Class
6. Robust Civil Society & cultural heritage
7. Young Population
8. IT – English
Weakness
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Opportunity
1.
2.
3.
4.
5.
6.
Untapped Resources
Weak US & Europe
Positive World Attitude
Huge Customer Base
Powerful Image
Huge Growth Potential
Amal Datt & Associates
Corruption / Vested Interest
Inactive fatalist population
Lack of Confident Leadership
Bad Implementation/ Management
Poor Education ( job oriented)
Indecisive & inactive Governance
Lack of Innovation
Poor Infrastructure and Distribution Setup
Rising Political and Social Conflicts
Coalition Governance
Threat
1.
2.
3.
4.
5.
6.
7.
8.
Inequality
Growing Impatience, Unemployed Youth
Corruption /Vested Interest
Wrong Priorities & lack of vision from
Politicians
Fast Erosion of Moral Value
Bad relation with neighbors
Internal Law and Order / Terrorism
Population Growth
SWOT Analysis for a Budget
Strength
1.
2.
3.
4.
Annual Basis
Highly Respected and accepted, still
Openness to improve
Awareness about Corruption
Opportunity
1. Change the Momentum
2. Take a firm step
3. Election Year !!
Amal Datt & Associates
1.
2.
3.
4.
5.
6.
Weakness
Non Imaginative / Monotonous
Lack of a firm Resolve/ Goal/ ambition
Outcomes Forgotten
Corruption
Inflation
Poor Implementation
Threat
1.
2.
3.
4.
Election Year !!
Growing Impatience
Corruption/ Vested Interests
Lack Of Appreciating International
Responsibility
Strengths
Weakness
Opportunities
Threats
 Eliminate / Dilute Weaknesses through Strength
 Convert Threats into Opportunities
 Exploit Opportunities through Strengths to achieve
Results
Amal Datt & Associates
Need for Awareness / A Bottom Up Approach
 Outcome
Reducing Disparity
 Increase in Per Capita Income
 Planned Outputs ( Activities)
 Education
 Banking Reach
 Rural Push
 Urban Poverty
 Health
 Infrastructure
 Power
 Agriculture
 Banking Sector
 Inputs
 Expenses
 Effective Implementation
 NOW , PLAN THE REVENUES WITHIN FISCAL DISCIPLINE

Amal Datt & Associates
A Typical Outcome Budget Approach Education
Sector
 Objective – Increasing the spread of education so that





maximum number of people can read and write
Program – Primary School development
Outlay – Rs.100 crore
Output – Opening up of 20,000 new schools; 2,000 training for
teachers and staff; 5,000 orientation and awareness drives for
parents
Outcome – Increase in literacy level from 52% to 58% (primary
education)
Key Performance Indicator – Number of children enrolled in
primary school
Amal Datt & Associates
Suggestions
 Decentralize and Monitor
 Review of Scheme. Provide at least 10% of expense for this
 Quarterly Review of Budget Outcomes
 Concentrate on
R&D
 Education-Job oriented
 Health Care
 Small and Medium Industries
 Agro industry
 Law & Order
 Administrative Reforms
Amal Datt & Associates
Suggestions
 Provide strong leadership
 Keep International Focus – Globalization
 Expedite Reforms
 Install effective MIS and Control System
 Educate Masses and Political Leaders
 Control corruption with effective and timely controls and




punishments , with confidence
No Raid Raj or License Raj, again, please.
Speed up action & no backlog in approvals/ decisions
Put up a big mission statement, have clearly spelt out Goals
Budget & Act accordingly
Amal Datt & Associates
Thank You!
Amal Datt & Associates
E-mail Id: - amaldhruv@gmail.com, amaldatt@gmail.com
This presentation is also available on
www. financefundas.com, www.amaldatt.com
Copyrights: Amal Dhru