When the Finance Minister reads out the Budget, you will come across various economic terms. Here's a simplified dictionary on some common terminologies that will help you to understand the budget easily.
BUDGET
The Finance Minister proposes the total revenue that the government would generate in the year through taxes and income through profits from government undertakings and, more importantly, where all this would be spent. Eg, for defence, education, developmental activities, etc.
BUDGET OUTLAY
This is the amount of total expenditure the government would make for different purposes in the year.
GDP
Gross Domestic Product is the total worth of output (production) from all sectors - including agriculture, manufacturing and even services - being made in the country over a year. A GDP growth rate suggests in percentage terms the difference in the increase, or decrease, in production of goods and services compared to previous year.
PER CAPITA INCOME
This is the total amount of GDP divided by the number population. It suggests how much an Indian earns on an average.
INFLATION
An important term. It's the aggregate of increase in prices of commodities in the country. There is an index and a wholesale price index (WPI) consisting a number of commodities ranging from fuel to foodgrains. Change in the prices of these commodities is reflected in the WPI, reflecting whether the inflation is increasing or decreasing.
FDI
Foreign Direct Investment is the investment made by a foreign organisation or a foreign government in India through a joint venture with a company or by setting up its own manufacturing or service houses, or by acquiring a portion of equity shares in an Indian company.
SLR
Statutory Liquidity Ratio is the percentage of the public's deposits collected by banks which they have to keep with the Reserve Bank of India (RBI). The banks cannot use this portion of deposits for giving loans or making investments. The banks can pay their SLR dues by buying government securities.
CRR
Cash Reserve Ratio is another proportion of the public's deposits that the banks have to keep with RBI, but in the form of cash. It means that the banks cannot use all the deposits they get from the public. Increase in CRR or SLR may increase the interest rates for loans as the banks are left with a smaller investible money.
CAPITAL MARKET
The stock markets include the BSE, NSE and other regional stock markets. The Initial Public Offers (IPOs) for equity shares are basically a part of these capital markets.
MONEY MARKET
This is the market for government securities including treasury bills, government bonds, commercial papers, etc in which mainly the banks and financial institutions trade in.
REVENUE DEFICIT
It is the gap between the total income of government and its expenditure on government employees and various government departments for their functioning.
FISCAL DEFICIT
This is the revenue deficit of the government along with the government's borrowings, which is its liability.
SURCHARGE
This is a tax on tax! That is, if you are paying 10 per cent of tax and 2 per cent is the surcharge; you have to pay 2 per cent additional tax on the amount of 10 per cent tax you pay, or 10.20 per cent.
CESS
Ii is similar to surcharge but the revenue generated by the government through cess is spent on a specific purpose, eg, education cess.
SOPS
Sops are incentives in terms of reduction in taxes or giving special privilege to any sector.
SUBSIDY
It's the amount of expenditure the government bears for activities like generating employment, providing education, alleviating poverty or for agricultural development.
AID
This is a loan government offers at very low or zero rate of interest or on very easy terms for development activities for specific purposes or for industries.
