How to READ a Budget Andajpatra nee Aanti

How to READ a Budget? Andajpatra nee Aanti. Ghunti Amal Dhru F. C. A. , M. B. A. (IIMA) Gujarat Vishvakosh Trust 22 nd 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

2009 -2010 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. Interest Payments 12. On Capital Account 13. Plan Expenditure 14. On Revenue Account 15. On Capital Account 16. Total Expenditure (9+13) Amal Datt & Associates In Crore fo Rupees 2010 -2011 -2012 Budget Revised Budget Actual Estimates 572811 682212 783833 789892 456536 534094 563685 664457 116275 148118 220148 125435 451676 426537 432743 467837 8613 5129 9001 15020 24581 40000 22744 40000 418482 381408 400998 412817 1024487 1108749 1216576 1257729 721096 735657 821552 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) 18. On which, Grant for creation of Capital Assets 911809 19. Capital Expenditure (12+15) 20. Revenue Deficit (17 -1) 21. Effective Revenue Deficit (17 -18) 22. Fiscal Deficit {16 -(1+5+6)} 23. Primary Deficit (20 -11) 418482 (6. 4) 205389 (3. 1) 1097162 90792 146853 150025 276512 (4. 0) 162899 269844 (3. 4) 160567 307270 (3. 4) 245195 (3. 5) 112678 338998 (5. 2) 1053677 31317 958724 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 § Fiscal Deficit § Primary Deficit - Revenue Expenditure less: Revenue Receipts - Total Expenditure less: (Revenue Receipt + Loan Recovery + Other Receipts) - Fiscal Deficit less: Interest Payments 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, 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 n 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 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 announced Amal Datt & Associates

SWOT of the Indian Economy Strength 1. Democracy 2. Independence of ØElection Commission ØApex 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 Opportunity 1. Untapped Resources 2. Weak US & Europe 3. Positive World Attitude 4. Huge Customer Base 5. Powerful Image 6. Huge Growth Potential Amal Datt & Associates Weakness 1. Corruption / Vested Interest 2. Inactive fatalist population 3. Lack of Confident Leadership 4. Bad Implementation/ Management 5. Poor Education ( job oriented) 6. Indecisive & inactive Governance 7. Lack of Innovation 8. Poor Infrastructure and Distribution Setup 9. Rising Political and Social Conflicts 10. Coalition Governance Threat 1. Inequality 2. Growing Impatience, Unemployed Youth 3. Corruption /Vested Interest 4. Wrong Priorities & lack of vision from Politicians 5. Fast Erosion of Moral Value 6. Bad relation with neighbors 7. Internal Law and Order / Terrorism 8. Population Growth

SWOT Analysis for a Budget Strength 1. Annual Basis 2. Highly Respected and accepted, still 3. Openness to improve 4. Awareness about Corruption Opportunity 1. Change the Momentum 2. Take a firm step 3. Election Year !! Amal Datt & Associates Weakness 1. Non Imaginative / Monotonous 2. Lack of a firm Resolve/ Goal/ ambition 3. Outcomes Forgotten 4. Corruption 5. Inflation 6. Poor Implementation Threat 1. Election Year !! 2. Growing Impatience 3. Corruption/ Vested Interests 4. Lack Of Appreciating International Responsibility

Outcomes / Results 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. amaldatt. com Copyrights: Amal Dhru