[Budget] Interim Budget 2014: Plan vs Non-Plan Expenditure, Subsidies, Disinvestment, Deficits, PDMA Public Debt Management Agency

shortfall in capital reciepts

[Budget] Interim Budget 2014: Plan vs Non-Plan Expenditure, Subsidies, Disinvestment, Deficits, PDMA Public Debt Management Agency

  1. Prologue
  2. Budget: Capital part: incoming (receipts)
    1. [Table] Capital receipt
    2. #EPICFAIL in disinvestment
    3. Capital Expenditure
  3. Plan vs Non Plan
    1. Plan vs Nonplan budget: Incoming (Receipt) part
    2. Plan vs Nonplan budget: Outgoing (Expenditure) part
    3. [Table] Plan vs Non plan Expenditure in Interim Budget
    4. [Table] Total Expenditure
    5. [Table] Sub plans: Women, Children, SC/ST
    6. [Table] Subsidies in Interim Budget 2014
  4. Deficits
    1. #1: Revenue Deficit and Effective Revenue Deficit
    2. #2: Budgetary deficit
    3. #3: Capital Deficit Surplus
    4. Fiscal Deficit
      1. Fiscal deficit targets and achievement
      2. How did Chindu reduce fiscal deficit?
      3. #1: increase incoming money
      4. #2: Decrease outgoing money
      5. Why did Chindu reduce fiscal deficit?
        1. Main reason= to prevent Rating downgrade.
        2. Consequences if India’s rating fell to junk status:
        3. Secondary reasons= to save the economy
    5. Primary deficit
    6. [Table] Deficits Absolute figures
    7. [Table] Deficits as % of GDP

Budget: Capital part: incoming (receipts)

Two sub-types:
Debt Non-debt
because government has to repay this money (with interest) because government doesn’t need to repay
Money borrowed internally (via RBI, market stabilization scheme MSS, treasury bills, Government Securities G-Sec etc.) loan (principal) recovered (e..g Mohan loaned Rs.1 lakh to modi @36%. After 1 year Modi repays 1,36,000=> 1 lakh (capital incoming) + 36000 interest (non-tax Revenue incoming)
Money borrowed externally (from IMF, World Bank, ADB, Foreign nations etc.) proceeds from disinvestment e.g. Mohan sells his shares of LIC/ONGC to private investors and earns ca$h.
Money given by juntaa in small savings, State provident fund (Because government needs to repay it at later stage)

[Table] Capital receipt

Capital receipt BE 2013 RE 2013 BE 2014
Non-Debt 66468 36643 67452
Debt 542499 509539 528631
Total Capital receipt 608967 546182 596083
  1. Majority of the capital receipt comes from Debt.
  2. Within debt: internal >> external.

#EPICFAIL in disinvestment

shortfall in capital reciepts

In above table, observe the BE2013 vs RE2013 non-debt. (66k vs 36k)

Why didn’t Chindu earn as much capital money as he had expected? Because…

disinvestment target (= non-debt Capital receipt) crore rupees
BE2013 (Chindu originally hoped to earn this much) 40k
RE2013 (he actually earned this much) 16k
BE2014 (still Chindu is optimistic next year!) 36k

So why didn’t disinvestment fetch truckload of cash?

Chindu wanted to disinvest But #EPICFAIL because (Data of Dec 2013)
10% from Indian Oil Corporation (IOC) Moily (Petroleum minister) opposed. and while the file was pending, IOC’s share prices went down.
all the shares of Hindustan Zinc and Balco Mining ministry created obstacle about pricing mechanism. Now the matter has been postponed till after election.
Coal India trade unions opposed
Bharat Heavy Electricals Ltd (BHEL) & National Hydroelectric Power Corporation (NHPC) Praful Patel (Ministry Heavy industries) opposed saying “shares of power companies are down at the moment. So even if we sell, it don’t fetch good prices. Better just wait and watch for the sharemarket to go up.”
Neyveli Lignite Corporation (NLC), State Trading Corporation (STC), MMTC, and ITDC. Lukewarm response from investors. Barely got ~1300 crores.

Important: Disinvestment matter falls under Department of Disinvestment under Finance minister.

Capital Expenditure

Capital receipt (incoming) Capital Expenditure (outgoing)
Debt

  • internal
  • external

Non Debt

  • disinvestment
  • loan (principal) recovered from State/UT/PSU/Foreign nations

self-explanatory-

  1. money spent on capital assets / goods (buildings, machines etc.)- including Defense assets.
  2. loan (principal) given to State/UT/PSU/Foreign nations

Within capital Expenditure, majority goes to Five year plans >> Defense >> loans (PSU, State, UT)

Plan vs Non Plan

Until now, we learned the annual financial statement looks like this

Revenue Part Capital Part
Receipts (incoming) Expenditure (outgoing) Receipts (incoming) Expenditure (outgoing)

But in the late 80s, Government comes up with a new method to classify Expenditure (outgoing money) => plan vs non-plan Expenditure. This new format of annual financial statement, looks like this

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