Indian Economy: The Fiscal Side
BUDGET: Every budget has two aspects: Incoming Money (Revenue) and Outgoing Money (Expenditure)
Incoming Money is of two types:- Tax and Non-Tax
Outgoing Money is of two types:- Plan and Non-plan Expenditure
(This term is now obsolete with the dismantling of Planning Commission)
Non Tax Revenue includes Fees collected, Fines and penalties, money from PSUs, gifts, grants (foreign aid from Japan etc.)
Expenditure’s planned side includes Central Govt. plans such as MNREGA, JNNURM, INDRA Awas Yojna.
Non –plan expenditure is that which was unrelated to FYP, it included
- Salaries of judges,
- Defense Expenditure
- Bills of govt. offices and Executive heads
India’s Budget is generally a Deficit budget, which means Expenditure is more than the revenue.
Taxes:- There are two types of Taxes in broad terms
- Direct 2. Indirect
- Direct Tax are progressive- each person pays according to his economic capacity, hence there are equitable and help in re-distribution of income in society. Ex. Income tax, corporate tax, wealth tax (now abolished), DTC (Direct Tax Code) seeks to consolidate all these into one.
- Indirect Tax are regressive. Rich and poor pay the same irrespective of their economic capacity. Ex. VAT, Customs Duty, Sales Tax, Excise Duty, Service Tax.
Goods and service tax (GST) seeks to combine them into one.