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Government Terms

Equitable Distribution​

Fiscal policy is done by the government through spending. Monetary policy is done by the central bank through interest rates.

DPG - Digital Public Goods​

  • UPI (Unified Payments Interface)
  • Aadhaar, DBT (Direct Benefit Transfer)
  • ONDC (Open Network for Digital Commerce)
  • Government e Marketplace (GeM)
ExcludableNon-Excludable
RivalrousPrivate Goods - food, clothing, cards, personal electronics - Not available to everyone and also competitiveCommon Goods - fish, stocks, timber, coal - Available to everyone but competitive
Non-RivalrousClub Goods - cinemas, private parks, satellite tv - Aren't available to all, but aren't competitivePublic Goods - air, national defense - Available to everyone and not competitive

Bureaucracy​

  • A system of government in which most of the important decisions are taken by state officials rather than by elected representatives.
  • Excessively complicated administrative procedure.

RedTape​

Excessive bureaucracy or adherence to official rules and formalities.

early 18th century: so named because of the red or pink tape used to bind official documents.

Budgeted estimates (BE)​

These are the budget allocations announced at the beginning of each financial year. They comprise of the estimated receipts and expenditure of the Government that the Finance Minister (FM) brings out in the Annual Budget every year in the Parliament.

Revised Estimates (RE)​

These are the mid-year estimates of projected amounts of receipts and expenditure until the end of the financial year taking into account the trends of the Government's income & expenses for the year.

Revenue Receipts​

All receipts of the Government that are routine & recurring in nature and that do not involve the sale of any asset are called revenue receipts. They include the following:

Tax Revenue​

As the name suggests, these are the net tax receipts of the Government. This head includes the proceeds of both direct taxes (Income Tax, Corporate Tax etc.) and indirect taxes (GST, customs duty etc.) after deducting the refunds paid.

Non-Tax Revenue​

This head includes interest payments (received on loans given by the Centre to states, railways and others) and dividends and profits received from Public Sector Enterprises. Some services provided by the Government like railways, police, medical services etc. also earn revenue for the Government.

Capital Receipts​

Capital receipts are generated when the Government liquidates an asset (disinvestment) or recovers loans given to states and the like. Also called non-debt capital receipts, they are non-recurring and non-routine in nature. For example, the Government announces a disinvestment target every year during the Budget in which it outlines the Public Sector Enterprises in which it intends to sell a stake and the estimated proceeds it hopes to generate from the exercise.

Devolution to states​

Based on a formula prescribed the Finance Commission (a constitutional body formed every five years), the Centre devolves a fixed percentage of its tax revenue to the states. The 14thFinance Commission recommended increasing the tax devolution of the divisible pool to states to 42% (from 32% earlier) for the years 2015 to 2020, the single largest increase ever recommended.

Revenue Expenditure​

Expenses like salaries, subsidies and interest payments on loans which are regular and recurring in nature form the revenue expenditure of the Government. A major contributor to this head is subsidies that Government provides in various sectors & products like fertilizers, LPG, food etc.

Capital Expenditure​

Expenditure made for acquiring and creating assets like land, buildings, equipment (including defence) etc. forms part of capital expenditure. It also includes the Government's investments and loans given that are expected to yield future income. If you observe closely, Government's capital expenditure as a percentage of total expenditure has been showing a downward trend which reflects the fact that the less productive revenue expenditure has been eating into the potential asset creation funds of the Government.

Revenue Deficit​

The excess of expenditure over receipts under the revenue head is called the revenue deficit. That this deficit exists reflects that the Government does not generate enough revenue receipts to pay for its revenue expenditure. In an ideal world, this should be a surplus or at least be zero.

Fiscal Deficit​

This is the term we most often hear in the media. It is simply the shortfall of the Government's total income against its total expenditure. It is usually financed through borrowing, either from the RBI or from the capital market by issuing instruments like treasury bills and bonds. Since the capital markets have limited funding available, excessive Government borrowing from the market not only weakens the financial health of the country but also crowds out the market for private-sector borrowing. In Budget 2019, the FM had proposed issuing overseas bonds to finance its fiscal deficit by tapping the global markets. That plan, however, had to be put on the backburner mostly because of the domestic slowdown and perceived forex risks with a weakening rupee.

Primary Deficit​

It is simply the Fiscal Deficit minus interest payments.

AE= advanced economy;EMDE= emerging market and developing economy, low income (LIC) and lower middle-income (LMIC), EMEA - Europe, Middle East and Africa

Subvention - Subvention refers to a grant of money in aid or support, mostly by the government​

Government asks financial institutions to provide loans to farmers at below market rates.

https://freefincal.com/government-spending-2019-20

DRT and NCLT​

The Debt Recovery Tribunal (DRT) and the National Company Law Tribunal are the two adjudicating bodies which are looking into the matters of debt recovery and govern the Bankruptcy Code. The powers of the two Tribunal have been separated so that they do not overlap. The DRT will look into the cases of individual bankruptcy while the NCLT will look into matters of the insolvency of limited liability partnerships, companies, and corporates.

FRDMA (Fiscal Responsibility and Budget Management Act, 2003)​

TheFiscal Responsibility and Budget Management Act, 2003(FRBMA) is an Act of the Parliament of India to institutionalize financial discipline, reduce India's fiscal deficit, improve macroeconomic management and the overall management of the public funds by moving towards a balanced budget and strengthen fiscal prudence. The main purpose was to eliminate revenue deficit of the country (building revenue surplus thereafter) and bring down the fiscal deficit to a manageable 3% of the GDP by March 2008. However, due to the 2007 international financial crisis, the deadlines for the implementation of the targets in the act was initially postponed and subsequently suspended in 2009. In 2011, given the process of ongoing recovery, Economic Advisory Council publicly advised the Government of India to reconsider reinstating the provisions of the FRBMA.N. K. Singh is currently the Chairman of the review committee for Fiscal Responsibility and Budget Management Act, 2003, under the Ministry of Finance (India), Government of India.

The main objectives of the act were:

  1. to introduce transparent fiscal management systems in the country
  2. to introduce a more equitable and manageable distribution of the country's debts over the years
  3. to aim for fiscal stability for India in the long run

Additionally, the act was expected to give necessary flexibility to Reserve Bank of India(RBI) for managing inflation in India.

Content​

Since the act was primarily for the management of the governments' behaviour, it provided for certain documents to be tabled in the parliament annually with regards to the country's fiscal policy. This included the following along with the Annual Financial Statement anddemands for grants:

  1. a document titledMedium-term Fiscal Policy Statement-- This report was to present a three-year rolling target for thefiscal indicators with any assumptions, if applicable. This statement was to further include an assessment of sustainability with regards torevenue deficitand the use of capital receipts of the Government (including market borrowings) for generating productive assets.

  2. a document titledFiscal Policy Strategy Statement-- This was a tactical report enumerating strategies and policies for the upcoming Financial Year including strategic fiscal priorities, taxation policies, key fiscal measures and an evaluation of how the proposed policies of the Central Government conform to the 'Fiscal Management Principles' of this act.

  3. a document titledMacro-economic Framework Statement-- This report was to contain forecasts enumerating the growth prospects of the country. GDP growth, revenue balance, gross fiscal balance and external account balance of the balance of payments were some of the key indicators to be included in this report.

The Act further required the government to develop measures to promotefiscal transparency and reduce secrecyin the preparation of the Government financial documents including the Union Budget.

https://en.wikipedia.org/wiki/Fiscal_Responsibility_and_Budget_Management_Act,_2003

Economic Advisory Council​

Economic Advisory Councilto the Prime Minister(PMEAC) is a non-constitutional, non-permanent and independent body constituted to give economic advice to the Government of India, specifically the Prime Minister.The council serves to highlight key economic issues facing the country to the government of India from a neutral viewpoint.It advises the Prime Minister on economic issues like inflation, microfinance, and industrial output.

Functions​

Terms of reference as defined by the PMEAC are as follows:

  1. Analyzing any issue, economic or otherwise, referred to it by the Prime Minister and advising him thereon;
  2. Addressing issues of macroeconomic importance and presenting views thereon to the Prime Minister. This could be either suo-moto or on a reference from the Prime Minister or anyone else:
  3. Submitting periodic reports to the Prime Minister on macroeconomic developments and issues with implications for economic policy;
  4. Attending to any other task as may be desired by the Prime Minister from time to time.

The primary role of the PMEAC is to give a neutral viewpoint on economic policy matters that are referred to it by the Prime Minister.Additionally it prepares a monthly report of economic developments that need to be highlighted to the PM. For this purpose it closely monitors national and international economic developments and trends and develops appropriate policy responses for the PM. It publishes reports on the annualEconomic OutlookandReview of the Economyof India.

https://en.wikipedia.org/wiki/Economic_Advisory_Council

OECD​

The Organisation for Economic Co-operation and Development (OECD) is an intergovernmental economic organisation with 36 member countries, founded in 1961 to stimulate economic progress and world trade. It is a forum of countries describing themselves as committed to democracy and the market economy, providing a platform to compare policy experiences, seek answers to common problems, identify good practices and coordinate domestic and international policies of its members. Most OECD members are high-income economies with a very high Human Development Index(HDI) and are regarded as developed countries. As of 2017, the OECD member states collectively comprised 62.2% of global nominal GDP(US$ 49.6 trillion) and 42.8% of global GDP (Int$ 54.2 trillion) at purchasing power parity.OECD is an official United Nations observer.

https://en.wikipedia.org/wiki/OECD

Fiscal​

relating to government revenue, especially taxes.

Fiscal Policy​

In economics and political science, fiscal policy is the use of government revenue collection (mainly taxes) and expenditure(spending) to influence the economy. Fiscal policy is often used to stabilize the economy over the course of the business cycle.

Changes in the level and composition of taxation and government spending can affect the following macroeconomic variables, amongst others:

Fiscal policy can be distinguished from monetary policy, in that fiscal policy deals with taxation and government spending and is often administered by an executive under laws of a legislature, whereas monetary policy deals with the money supply and interest rates and is often administered by a central bank.

https://en.wikipedia.org/wiki/Fiscal_policy

Fiscal Deficit​

A fiscal deficit occurs when a government's total expenditures exceed the revenue that it generates, excluding money from borrowings. Deficit differs from debt, which is an accumulation of yearly deficits.

https://en.wikipedia.org/wiki/Government_budget_balance

NBFC (Non-Banking Financial Company) & MFI (Micro Finance Institutions)​

A Non Banking Financial Company (NBFC) isa company registered under the Companies Act, 2013 of India, engaged in the business of loans and advances, acquisition of shares, stock, bonds, hire-purchase insurance business or chit-fund business, but does not include any institution whose principal business is that of agriculture, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.

https://en.wikipedia.org/wiki/NBFC_%26_MFI_in_India

India's Socio-Economic Classification​

https://trak.in/tags/business/2011/05/30/new-sec-socio-economic-classification

Budget​

INDIAN BUDGET EXPLAINED IN 10 MINUTES | Budget 2023 explained | Abhi and Niyu

Yield Curve Control (YCC)​

Yield curve control is a monetary policy tool used by central banks to manage interest rates across different maturities of government bonds. It involves targeting specific yields or interest rates on government bonds with different maturities, typically aiming to keep long-term interest rates at a desired level.

Yield Curve Control (YCC): Definition, Purpose, and Examples

External commercial borrowing (ECB)​

External commercial borrowing (ECBs) are loans in India made by non-resident lenders in foreign currency to Indian borrowers. They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs (public sector undertakings). ECBs include commercial bank loans, buyers' credit, suppliers' credit, securitised instruments such as floating rate notes and fixed rate bonds etc., credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc. ECBs cannot be used for investment in stock market or speculation in real estate. The DEA (Department of Economic Affairs), Ministry of Finance, Government of India along with Reserve Bank of India, monitors and regulates ECB guidelines and policies.

External commercial borrowing - Wikipedia