Financial terms you should know
SUBSIDY: Is a transfer of money from the government to an entity. It leads to a fall in the price of the subsidised product.
Description: The objective of subsidy is to bolster the welfare of the society. It is a part of non-plan expenditure of the government. Major subsidies could be in petroleum subsidy, fertiliser subsidy, food subsidy, interest subsidy, etc.
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Non-tax Revenue: Is the recurring income earned by the government from sources other than taxes.
Description: The most important receipts under this head are interest receipts (received on loans given by the government to states, railways and others) and dividends and profits received from public sector companies.
Various services provided by the government — police and defence, social and community services such as medical services, and economic services such as power and railways — also yield revenue for the government. Though the Railways are a separate department, all their receipts and expenditure are routed through the Consolidated Fund.
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Non-plan Expenditure: This is largely the revenue expenditure of the government, although it also includes capital expenditure. It covers all expenditure not included in the Plan Expenditure.
Description: A major part of the Non-Plan Expenditure is obligatory in nature, like interest payments, pensions, statutory transfers to States.
Non-Plan Expenditure constitutes the biggest proportion of the of the government’s total expenditure.
The biggest items of Non-Plan Expenditure are interest payments and debt servicing, defence expenditure and subsidies. For defence services, both revenue and capital expenditure are incurred.
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Budgetary Deficit: Budgetary deficit is the difference between all receipts and expenses in both revenue and capital account of the government.
Description: Budgetary deficit is the sum of revenue account deficit and capital account deficit. If revenue expenses of the government exceed revenue receipts, it results in revenue account deficit.
Similarly, if the capital disbursements of the government exceed capital receipts, it leads to capital account deficit. Budgetary deficit is usually expressed as a percentage of GDP.
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Capital Budget: Capital Budget consists of capital receipts and payments. It also incorporates transactions in the Public Account.
Description: Capital receipts are loans raised by the government from the public (which are called market loans), borrowings by the government from the Reserve Bank and other parties through sale of treasury bills, loans received from foreign bodies and governments, and recoveries of loans granted by the Central government to state.
Capital payments consist of capital expenditure on acquisition of assets like land, buildings, machinery, and equipment, as also investments in shares, loans and advances granted by the Central government to state and Union Territory governments, government companies, corporations and other parties.