BUDGET UNVEILED

(Only For Learners)


An attempt to elucidate the budget related processes and terminologies.

Finance Minister - Pranab Mukherjee
Date - February 26, 2010


What does the Union Budget contain?

The Union Budget is our country's annual financial statement of receipts and expenditures for the coming financial year -- similar to an individual's personal cash flow statement but prepared on an annual basis.
It contains the expected revenues (to be received) and expected expenditures (to be met) in the coming FY by the Government of India. It is supposed to be an indicator of the economic growth and the financial well being of our country.


When is the Union Budget presented?

The presentation of the Union Budget is usually done on the last working day of February. This year, however, it will be presented on February 26 as the last working day falls on a Sunday. The current budget being presented is for the coming financial year: FY 2010-11.


Who prepares Government's annual budget?

There's a separate division in the Ministry of Finance called as the 'Budget Division' to look after the preparation of the Budget.




BUDGET PROCESS



Here are the various stages through which the Union Budget goes through before it is passed in the lower house of Parliament (Lok Sabha) after which the President of India signs it and it becomes an Act:

• Every year, the 'Budget Division' under the Ministry of Finance is responsible for the preparation of the budget. All government ministries & departments send in their funds' proposals and requirements

• Based on the inputs, a Draft Budget is prepared

• The draft budget is then approved by the Finance Minister in consultation with the Prime Minister

• A final budget is then presented in the Parliament

• A discussion on the budget is held in the Parliament (regarding each ministry's grant proposals) and Finance Minister responds to questions. Revision of tax (direct & indirect) proposals are also discussed & voted upon here

• Once the grants are approved, 2 bills are introduced in the Lok Sabha : Appropriation Bill (final approval of funds to be given to each ministry) and Finance Bill (tax proposals).

Union Budget is then approve




Budget terms you should know


1. Budget estimate

The Budget estimate is an assessment of the Government's revenues and expenses for the coming FY. The government makes an assessment of the expenditure to be incurred and revenue (or income) to be received.


2. Central plan/Annual plan

The government's Five-Year plans are split into Central Plans or Annual Plans and necessary funds are allocated every year through the Union Budget to achieve the laid-out goals (social & welfare commitments).


3. Consolidated Fund of India

This is the government's savings account. All money received by government (in any form) is placed here. All expenses are met from this account. Withdrawal is subject to Parliament's authorisation.


4. Public account

It is an account where money received through transactions not relating to consolidated fund is kept.


5. Contingency Fund of India

As the name suggests, money from this account is only for contingencies (such as floods, drought, other national calamities, disasters etc). Withdrawal is subject to Parliament's authorization.


6. Revenue account

This is the income & expenditure statement of the government containing details of revenue spent in comparison with revenue received.

Revenue receipts: The government earns revenue in the form of taxes (direct and indirect taxes), duties (excise, custom), interest, and other fees collected.

Revenue expenditure: Any expenditure (other than for creation of capital asset) for the normal operation of the government is called revenue expenditure. Example, interest payments on government borrowing programme, salaries to government staff, subsidies etc.

The above expenditure must be financed from revenue receipts, ie revenue that the government earns.


7. Capital account

Alike Revenue Account, Capital Account is the statement containing details of capital expenditure incurred vis-a-vis capital receipts.

Capital receipts: They refer to the money that the government make via loans -- given to RBI, market advances, to foreign governments and other international organisations. Also, disinvestment proceeds fall into this category.

Capital expenditure: Refers to the money used up on creating capital assets (railways, express highways, airways, canals and dams, purchase of land, machinery and equipment), loans to state governments & government subsidiaries, and other investments made/incurred by the government.


8. Non-Plan expenditure

This consists of government's fixed expenditure like expenditure on defense, interest payments, subsidies and grants to states. This can be both revenue & capital in nature.


9. Plan expenditure

This consists of expenditure incurred on five-year plans and social and welfare commitments of the government (example, expenditure incurred on National Rural Employment Guarantee Scheme). Funds are allocated for this periodically.


10. Fiscal deficit

When the revenue receipts of the government falls short of its total expenditure, a fiscal deficit is created. In such a case, the Government resorts to borrowing to make good this shortfall.


11. Finance Bill

This consists of the proposed amendments to taxes (example, change in income tax slabs etc) and their impact on the Government's revenue resources.


12. Direct and indirect taxes

Direct Taxes: Taxes cut directly from salary, business income or income from other sources are called direct taxes.

Indirect Taxes: Taxes added (indirectly) to the price of goods and services are called indirect taxes. Example: sales tax, excise duty and service tax.


13. Subsidies

Monetary concession given to producers or consumers of specific goods in order to control prices and manage resources for better utilisation.



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From – Investmentyogi.com

How a Bullet changed our History......

Hey people ever noticed that it was one bullet which started the World War 1 (assassination of Archduke Franz Ferdinand of Austria by Gavrilo Princip, a Serb) and after 31 Years it was one bullet again which brought an end to the goriest war ever, the World War 2 (Adolf Hitler committed suicide by shooting himself on his right temple, in his bunker along with Eva Braun).......

CFA Level 1 - Debrief

When I say I have been plain "lucky", I mean it.......I had many people around me, who have already cleared all the three levels of the exam, to take counseling from.......But not all who decide to take the exam have someone, who is been there, to guide them and help them from going astray......

Since knowledge is best used when shared.......I want to share here the debrief of the entire studying process, from skipping lunches to sleepless december nights, everything required to take you there.....

a) First things First - Have a plethora of studying material around you. From schweser notes to CFA Institute curriculum books. Get hold of random videos, ppts etc if you can (they are generally not helpful but keep giving you scholarly feeling).

b) Make a study schedule - Plan, segregate, divide, ponder. Planning is of utmost importance. Some concepts require a longer spree and some are just passe'. I have seen and have rather been a victim of non-adherence at times, and it may drag you back so badly that recovery will seem inconceivable. I kept procrastinating Alternative Investments and suffered in the final exam ( I have 50% - 70% band in this section ).

In my opinion, start with an easy topic like Quant. and jump onto a longer (when I say longer it means absolute Brute force) section like FSA (Book 3).

My week wise distribution (also in the order I did them) (when I say Book 3 etc., I mean books of Schweser) -

1) Quant. - 2 Weeks
2) FSA (Book 3) - 1 Month (at least)
3) Corporate Finance - 1 Week
4) Economics - 3 Weeks
5) Fixed Income (Bonds and all) - 3 Weeks
6) Equity Investments (Last Part of Book 4) - 1 Week (Easiest of all, bonus round)
7) Portfolio Management (Middle Part of Book 4) - 1 Week (Maximum)
8) Derivatives (Book 5, All the Options, Swaps etc.) - 2 weeks (has some complex theories, need to redo them time & again)
9) Ethics - 2 Weeks (I did only Schweser, but this is STRICTLY not suggested, CFAI Book is a must)
10) Alternative Investments - 1 week

(The above schedule is both squeezable as well as expandable, depending upon the time you can devote. Though I consider mysely as a Quick Learner, yet I spent 1-2 hours in the initial months and 3-4 hours in the later months everyday studying).

People say that it's enough to study from Schweser, but truly speaking I had to read the whole bunch of CFA Institute books to get clarity. Considering the bulkiness of the CFAI books, it may seem that reading CFAI Books may take long, but there are many things which just require a vision are not important (you'll yourself realise it while you'll study from CFAI books).

Do not leave a single word (rest aside any topic) from the Schweser books. These books are divine and should be consummated. Do every test at the end of the chapters. They are easy and will motivate you (getting 70-80% accuracy in these tests will certainly take you there).


c) Taste the Tests - I tried finishing the curriculum by 1st November, but as it turned out, the entire Ethics and Alternative Investment thing was still pending till 10th November. Eventually I finished both of the topics simultaneously in 2 weeks.

I gave a super-quick revision to the topics in the last week of November and that certainly is a scary experience when you go through each topic and half of the things appear to you as if being read for the first time.

Finally started the last week before the exam and I took an off from the office. No mock exam, no full length exam, no Sample Test till now. No nothing that could judge the preparation level.

Gave a Sample test on Monday and failed by 1 mark ( I assume so as my friend who had a mark more than me passed). 5 days to exam. Spent 20-22 hours per day in last 4 days. Not feeling confident at all. Wish could postpone the exam. Thus came the Saturday, flown to the test center location.Had print-outs of the Mock exams and their solutions, so kept studying the questions rather than solving them. Stayed at friend's company's guest house. I thought that I'll push off to sleep around 11 but "just one last topic" revision syndrome didn't let me sleep till 3 in the morning. Got up at 6 and rushed to the test center. Reached the center at 8 AM. Not at all feeling drowsy. First exam finished. Simpler than I expected it to be. Conducted at the HIGHEST possible level of professionalism. wowwwww..... had a quick meal, off to second exam. It was a bit tougher than the first exam but was still doable.

Out I came. It's been less than 15 hours of sleep in the entire week. Yet not at all exhausted. The next few days are gonna be fun.

Almost 45 days hence, Outcome - "Pass".
Ecstacy and Jubiliance.


d) In a Nutshell -

- It's tough to study if you're working.

- Once the time will pass, You may have to look out for small-small patches of time to cover the things up. Like skipping lunches, not cashing upon a lucrative dinner offer, missing a relative's retirement party, missing the most exciting cricket match India has ever played etc.

- Do make a circle or a group with whom you can discuss your doubts with and can keep a track of your progress vis-a-vis other group members.

- Things will not be so clear in the first reading, second reading will reveal many new secrets, third reading will take you there. So don't worry if after first reading you end up feeling if it's Chinese written over there.

- Lastly, have faith in your abilities.
There are many who have done it earlier as well so its not something absolutely divine.

I wish you all the best and expect the same from you guys as even my story is unfinished yet......