General Awareness – How the Indian Budget is prepared every year?

India Incorporated

The Annual Union Budget Formulation

The budget process in India, like in most other countries, comprises four distinct phases:

i) Budget formulation- preparation of estimates of expenditure and receipts for the ensuing financial year;

ii) Budget enactment- approval of the proposed Budget by the Legislature through the enactment of Finance Bill and Appropriation Bill;

iii) Budget execution- enforcement of the provisions in the Finance Act and Appropriation Act by the government—collection of receipts and making disbursements for various services as approved by the Legislature;

iv) Legislative review of budget implementation- audits of government’s financial operations on behalf of the Legislature.

Process commences in August- September

By convention, the Union Budget for next financial year is presented in Lok Sabha by the finance minister on the last working day of February. However, the process of budget formulation starts in the last week of August or the first fortnight of September. To get the process started, the Budget Division in the Department of Economic Affairs under the Ministry of Finance issues the annual budget circular to all the Union government ministries/departments around August- September. The Circular contains detailed instructions for these ministries/ departments on the form and content of the statement of budget estimates to be prepared by them.

Three kinds of figures in a Budget

The ministries are required to provide three different kinds of figures relating to their expenditures and receipts during this process of budget preparation. These are:

1. budget estimates
2. revised estimates
3. actuals

Let’s understand this in the context of Union budget 2013-14, which was presented, as usual, on 28th of February 2013 by the Finance Minister, Shri P Chidambaram on the floor of LokSabha. However, the process of its formulation would have got started in August 2012 through issuance of budget circular of the Budget Division and this process would have continued till February 2013

The approval of Parliament is sought for the estimated receipts/expenditures for 2013-14, which would be called budget estimates. At the same time, the Union government, in its budget for 2013-14, would also present revised estimates for the ongoing financial year 2012-13. The government would not seek approval from Parliament of revised estimates of 2012-13; but, these revised estimates allow the government to reallocate its funds among various ministries based on the implementation of the budget for 2012-13 during the first six months of financial year 2012-13. Finally, ministries also report their actual receipts and expenditures for the previous financial year 2011-12. Hence, the Union budget for 2013-14 takes into account a total of 3 financial years 2013 -14, 2013 -12 & 2012 – 11 which consists of budget estimates for 2013-14, revised estimates for 2012-13, and actual expenditures and receipts of 2011-12.

Planning Commission comes in

The ministries would provide budget estimates for plan expenditure for budget estimates for the next financial year, only after they have discussed their respective plan schemes with the Central Planning Commission. The Planning Commission depends on the finance ministry to first arrive at the size of the gross budgetary support, which would be provided in the budget for the next annual plan of the Union government. In principle, the size of each annual plan should be derived from the approved size of the overall Five-Year Plan (12th Five-Year Plan, 2012-13 to 2016-17, in the present instance). However, in practice, the size of the gross budgetary support for an annual plan also depends on the expected availability of funds with the finance ministry for the next financial year.

Reducing deficit, a priority

In the past few years, the finance ministry has been vociferously arguing for reduction of fiscal deficit and revenue deficit of the Union government, citing the targets set by the Fiscal Responsibility and Budget Management Act and its rules. Hence, presently, the aspirations of the Planning Commission and Union government ministries with regard to spending face the legal hurdle of this Act, which has made it mandatory for the Union government to show the revenue deficit as nil (total revenue expenditure not exceeding total revenue receipts by even a single rupee) and the fiscal deficit as less than 3 per cent of GDP. This means new borrowing of the government in a financial year cannot exceed 3 per cent of the country’s GDP for that year.

Final stages of budget preparation

During the final stage of budget preparation, the revenue-earning ministries of the Union government provide the estimates for their revenue receipts in the current fiscal year (revised estimates) and next fiscal year (budget estimates) to the finance ministry. Subsequently, usually in the month of January, more attention is paid to finalization of the estimated receipts. With an idea about the total requirement of resources to meet expenditures in the next fiscal year, the finance ministry focuses on the revenue receipts for the next fiscal.

At this stage of budget preparation, the finance minister examines the budget proposals prepared by the ministry and makes changes in them, if required. The finance minister consults the Prime Minister, and also briefs the Union Cabinet, about the budget at this stage. If there is any conflict between any ministry and the finance ministry with regard to the budget, the matter is supposed to be resolved by the Cabinet.

Consultations with various stakeholders crucial

In the run-up to Union Budget each year, the Finance Minister holds pre-budget consultations with relevant stakeholders. The FM also holds consultations with Finance Ministers of States/Union Territories as well as Trade and Industry representatives. This has great significance for the process of budget formulation as it helps the FM take decisions on suitable fiscal policy changes to be announced during the budget. For this year’s budget, representatives from the agriculture sector, various trade unions, economists, banking and financial institutions and also social sector groups participated in these consultations in January 2013.

Among others, a delegation of People’s Budget Initiative also met Finance Ministry officials and shared the People’s Charter of Demands in the month of January 2013. But this year too, like in previous years, the process started late. Desired changes in expenditure programmes and policies can be influenced only if the consultations are begun earlier, preferably in October.

Consolidation of budget data

As the last steps, the budget division in the finance ministry consolidates all figures to be presented in the budget and prepares the final budget documents. The National Informatics Centre (NIC) helps the budget division in the process of consolidation of the budget data, which has been fully computerised. At the end of this process, the finance minister takes the permission of the President of India for presenting the Union budget to Parliament.

It would be useful to point out that while the second and the third stage in the budget cycle of our country are reasonably transparent, the first stage of actual budget preparation cannot be said to be open. The process is rather carried out behind closed doors.

Courtesy: Yojana March 2013

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Fall in Indian Rupees – Explanation

Fall in Indian Rupee against Dollar

Economics has a term “depreciation” – which can be defined as: When value of a currency decreases with respect of major currency benchmarks i.e. dollar, due to operating market forces and not because of government regulations and interference, the phenomenon is known as depreciation.

Past 6 or 7 months has witnessed a strong fall in currencies against Dollar in the Asian Region. The Top 5 currency traders and economists of India had predicted a 10% depreciation of Rupee against Dollar which would close to the figure of 60 by December 2013. It’s just June and the Rupee stands at 59.2725 against dollar already.

The world market is going through a phase of slump – many American and European countries were going through an economic & financial crisis. But they are in the phase of recovery. Let us try to understand the reasons of the phenomenon:

1.  Asian currencies are depreciating led by Yen – the government has flooded market with cheap currency to revive Japan’s economy. This has triggered a depreciating current tsunami in the Asian countries.
2. High Inflation makes the Indian products uncompetitive in the Export market, when there are cheaper goods available from China.
3. The Current Account Deficit – excess of import over export is 6.7% of GDP.
4. Import of Gold as hedge. Sharp fall of Gold prices in March, April & May. Imports soared by 138 %. Imports of Gold were $7.5 Billion in April accounting for 18% of total imports. This furthered the CAD imbalance.
5. Poor capital inflow into the economy despite of FM’s last minute revision of Foreign Investment ceiling in government bonds from $ 5 billion to $ 25 billion, cut in withholding tax from 20% to 5%.
6. The demand supply gap has led to money devaluation. Importers have to arrange for more dollars to buy goods and exporters do not want to bring back rupee in the expectation of more fall in its value.
7. Slow growth – the year 2011-12 had a growth of just 6.5% compared to about 9% of previous financial years.
8. High inflation – demand was created by Government subsidies on fuel and welfare projects. The Supply side failed to meet this. Wholesale Price Index shows improvement but consumer prices still continues at double digits.
9. Negative Rate of return – its lower than the inflation figures.

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General Awareness – Major energy consumers of the world

Qualities that a Public Administrator / IAS should have.

Personality traits required of a Public Servant / IAS

Current state of Economy in India: Faltering Economy

GDP Growth growth projectile

With growth faltering and investment lagging, the economy is skidding.
The provisional estimates of gross domestic product (GDP)
for 2012-13, together with those of the last quarter of the
same, released by the Central Statistics Offi ce on 31 May,
have not brought any surprises for the advance estimates,
released earlier in February, had hinted at what was to come.
GDP at 2004-05 prices has decelerated sharply from 9.5% in
2010-11 (second revised estimate (RE)) to 6.2% in 2011-12 (fi rst
RE), and from this to 5.0% in 2012-13, the fourth quarter fi gure
of which is 4.8%. Going by economic activity, the growth fi gures for agriculture, forestry and fi shing, taken together, chronologically, for the years just mentioned are 7.7%, 3.6% and 1.9%, for the manufacturing sector 11.4%, 2.7% and 1.0%, and for the services sector, relatively the least affected, 9.8%, 8.2% and 7.1%.
Looked at from the expenditure side, the growth of gross
fi xed capital formation (again, all fi gures at 2004-05 prices) has
plunged, from 15.0% in 2010-11 to 4.4% in 2011-12, and from this
to 1.7% in 2012-13, accompanied by a sharp rise in the trade
defi cit on goods and services, and a sharp fall in the growth of
private fi nal consumption expenditure in the last two years,
from 8.0% in 2011-12 to 4.0% in 2012-13.
What explains the sharp decline in growth?
Since 2003-04, the fate of the Indian economy has hinged
upon net capital infl ows and successive governments have done
all they could to please the fi nancial markets in order to
enhance such fl ows. By and large, in this phase, the growth
process has unfolded in the following manner. Net capital
infl ows have come in search of better yields, at times, far in
excess of the current account defi cit (CAD) on the balance of
payments (BOPs), taking the fi nancial and real estate markets
to a new high, in turn triggering the “wealth effect” and expanding liquidity. Concurrently, private investment led-growth
policies, including public-private partnerships (PPP) with viability gap funding involving huge capital subsidy, have unleashed “animal spirits” to boost private investment, which has
been liberally fi nanced by domestic and external commercial
borrowings. The wealth effect and easy access to consumer
credit have triggered self-indulgent, elite consumption, and all
of this has led to high growth.
Even now, despite a huge current account defi cit (relative to
GDP), unprecedented in its magnitude, net capital fl ows have
been suffi cient to fi nance it. Yet, why has growth faltered?
There are three reasons. One has to do with bank lending for
private investment in sectors such as telecom, power, roads,
ports and civil aviation, which went up quite sharply over
the last decade, but much of such assets of the banking
system are now distressed. In order to stave off outright default, these distressed assets of the banks have been “restructured”. The worst case is, of course, that of Kingfi sher Airlines.
With directions from North Block, a number of public sector
banks have been obliged to route good money after bad to
bail it out; they are now saddled with huge bad debts. More
generally, the banks have reached the limits to which they
can continue fi nancing such investments, while alternative
sources of fi nance, private equity and corporate bonds have
not fi lled the gap.
The other signifi cant component of banks’ assets in this
period from 2003-04 onwards has been personal loans for
buying houses, cars and consumer durables, and here too, the
quality of the banks’ portfolio is poor, due largely to the fact
that the jobs that the debtors hold are insecure. But as long as
this form of lending could be sustained, it did boost investment
in housing and real estate, steel and cement, and in the automobile and consumer durables industries. Now this form of
lending also seems to have been reaching its limits.
Besides, with a spate of allegations of corruption, for instance, in
relation to the 2G spectrum, coal blocks allocations, the PPP for
the Delhi airport, the DLF group’s real-estate activity on the
outskirts of New Delhi, etc, the government is perhaps fi nding it
increasingly diffi cult to provide more concessions to spur the
process of private investment-led growth.
What of course worries the mandarins in North Block the
most is the moment, if it comes to pass, when net capital fl ows
ebb and are no longer able to fi nance the CAD. With the North
American, western European and Japanese economies trapped
in stagnation, generating an excess of exports of goods and
services over the gush of liberalised imports, and this, suffi –
cient to pay for capital gains, dividend and interest payments
on foreign capital will be near impossible. As it is, infl ows of
foreign capital fi nance consumption more than they do investment, and if the external supply conditions of the country’s
petroleum, oil and lubricants deteriorate, the country will land EDITORIALS
8 june 15, 2013 vol xlviII no 24 EPW Economic & Political Weekly
itself in an external economic crisis of its own making. The
confi dent tone of the Union Finance Minister P Chidambaram
will then begin to sound hollow.
Be that as it may, has not growth already faltered and
infl ation still running high? Given the high CAD, the BOP too
appears severely stressed. Further, with gross fi xed capital
formation stagnant and no signs of investment picking up,
the economy sure seems in the doldrums. Earlier, the economy
was doing well but the people were not; now both are in
deep trouble.

Courtesy: EPW, Editorial, June 15th 2013, “The Faltering Economy”.

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Communication Improvement Tips for Job-seeking Freshers

Today, India is one of the fast growing economies. As a result of this job market is expanding. Unfortunately, not many engineering graduates are grabbing the job opportunities as their proficiency level in English is not up to the mark. Students of engineering shouldn’t be satisfied with just math, thermodynamics, alkali, chips and transistors. They must work on enhancing their English language skills, communication skills, and soft skills. The engineers to-be must focus on improving their command over grammar, comprehension, report writing, seminar presentation and interview techniques etc. Effective English communication skills are vital to engineering students to enhance their academic performance, employability and personal effectiveness.

Today’s job industry wants students who have good communication skills and a dynamic personality. Organizations look for people who can work in teams and who can get along with their colleagues comfortably. Employers are keen on recruiting only those students who possess a right mix of technical skills and soft skills. Hence, it is high time students realized that communication skills in English and soft skills play a pivotal role in their personal as well as professional lives.

Identify your problems:
Many students find it difficult to overcome their English language problems as they lack proper awareness and exposure. Some of their language and communication problems are stated below:

• Incorrect pronunciation
• Incorrect grammar
• Inability to use the right word in the right context
• Inability to adjust their pace, pitch and tone depending on different situations
• Inability to speak clearly and audibly
• Inability to comprehend quickly while reading
• Inability to write effective reports
• Inability to give seminar presentations impressively
• Inability to face interviews confidently

Use of Right Approach:
Learn some useful tips for all skills/sub skills: Get tips from experts and various books on improving the four language skills, viz., listening, speaking, reading and writing and the sub skills, viz., pronunciation, vocabulary grammar and spelling. And you must realize that you need to be equally good at all the skills and sub skills.

Grab opportunities for practicing all skills/sub skills:
You must take responsibility for your own learning. You must get opportunities to practice various skills in various situations. You must be very active and get involved in discussions and debates on various topics. It is also a good idea to recall and talk about the language learning techniques and strategies. Also, you must check which of them are effective and which of them are not so effective. You must use the ‘good’ strategies more often. You must try new styles of learning and apply what you learn in various situations.

Improve both oral and written communication:
You should improve your oral communication by grabbing opportunities to practise conversations, JAM sessions, speech-making, group discussions, debates, seminar presentations, telephoning, inter viewing and role-playing. Written communication can be improved by way of keeping diary entries, letter writing, ’emailing’, essay writing, summarizing, report writing, chatting on the net, ’emailing’ and ‘smsing’.

Tips for improving English language proficiency:

• Learn words in context
• Listen to / watch as many English programmes (on Radio or T.V) as possible and try to repeat the dialogues of the characters by imitating them.
• Do not hesitate to speak to your friends or classmates in English.
• Listen to music in English and repeat lyrics later even though you do not understand what is being said.
• Play as many grammar games / language games as possible.
• Use CDs with listening activities and practise listening exercises using headphones.
• Try to speak on telephone enquiring about a product / service.
• Maintain vocabulary notes. New vocabulary can be learnt from newspapers, books, dictionaries, thesaurus etc. Try to learn at least twenty words each day.
• Use all the new words you have learnt in real life situations.
• Use newspapers for improving English

Tips for Seminar Presentations:

1. Be clear about your topic
2. Make you presentation very purposive
3. Organize the content logically
4. Be clear about time and length of your presentation.
5. Be clear about how you want to make your presentation.
6. Rehearse thoroughly
7. Maintain eye contact with your audience
8. Sound confident, energetic and enthusiastic
9. Answer questions from your audience patiently, frankly and politely.

Tips for report writing: Be clear with the following to write effective reports.

• Format
• Report checklist
• Report sections
• Table of contents
• Referencing
• Style sheets

Tips for Interviews:

1. Be ready with your updated résumé, originals and their photocopies.
2. Do your research. Know as much as you can about the company/organization.
3. Dress appropriately. Do not wear anything too flashy. .
4. Reach the venue at least 15 to 20 minutes ahead of your scheduled interview time.
5. Do not be in a hurry while answering.
6. Do not speak too loudly or too softly.
7. Make sure your answers are clear, concise and are up to the point.
8. Thank the interviewers before leaving the interview hall. 

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INDUSTRIAL POLICIES AND PROGRAMMES IN INDIA (ias help

Update your knowledge bank on “Industrial Policies & Programmes in India”. (For IAS GS) Read More………

8 Kashmiris make it to IAS this year

Talented, hardworking Kashmiris make it to IAS 2013. Read More……

Kashmir News Service

Srinagar: Eight Kashmiris have made it to the prestigious Indian Administrative Service (IAS) exam held by Union Public service Commission for 2013.

Syed Sehrish Asgar has made it to the prestigious exam with 23rd rank, whileas Showkat Parray from Vizir Barmulla has made it with 41st rank. Other candidates from valley who qualified the exam include Khurshid Ali Qadri with 95th rank, Naveed Tramboo with 386th rank, Abid Sadiq 501st rank, Amanullah Tak 571st rank and Dr Ruveda Salam Bajjad with 820th rank.

While talking to KNS, Khurshid Ali dedicated his success to the hard work he had put in for this examination. Taking a tough combination of Botany and Geography for the mains examination Khurshid made it to IAS without coaching.

A lecturer of Botany in the School Education Department Khurshid had done his masters in Botany from Jamia Hamdard University Delhi and cleared the Junior Research Fellow (JRF)…

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UPSC Prelims – Few Tricks

Union Public Service Commission

In the final hours of preparation you can follow few tricks:

1. Make a daily routine of practicing previous years question papers – (atleast 4 hours daily).
2. Brush up your notes or seek help from friends who have notes. Nowadays many websites also offer ample notes like study materials.
3. Spend atleast 2 to 3 hours going through newspapers & magazines (previous 1 year Current Affairs book will be very useful at this point of time).
4. Last but not the least – Solve mock papers or model tests. Two tests per day.

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Can The Agriculture System Of The Developed West Feed the World?

Some advice to Indian Agriculturists from their Western Counterparts

Quick Take - As It Happens

Western farmers get more subsidy than the GDP of 125 countries in the world.

ooking at butter mountains, lakes of wine and milk, in Europe and US after the starvation and famine in Africa, it can be easy to jump to wrong conclusions.

Just 60 years ago, Europe was dependent on food imports – and was on limited rations.

Today the story is different.

The price of a ton of skimmed-milk powder, which in the summer of 2007 was above €3,000, had fallen roughly in half. In Germany it is currently around €1,400.

Farmers had been hit by a slump in demand for commodities caused by the global financial slowdown, and by the strength of the euro.

“We export a lot to Russia in terms of butter, cheese to the United States and milk powder to Africa and Asia, and all these are hit by the…

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