Introduction

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Difference between Capital Budget and Revenue Budget

Components of Revenue Budget

1. Revenue Receipts
   • Tax Revenue: Direct taxes (Income tax, Corporation tax) and Indirect taxes (GST, Customs, Excise).
   • Non-Tax Revenue: Interest receipts, dividends & profits from PSUs, fees, fines, and other charges.
2. Revenue Expenditure
   • Interest payments on government borrowings.
   • Subsidies: Food subsidy, fertilizer subsidy, fuel subsidy.
   • Defence revenue expenditure (salaries, maintenance).
   • Grants to states/UTs.
   • Salaries, pensions, and administrative expenses.

Components of Capital Budget

1. Capital Receipts
   • Borrowings: Market loans, external borrowings, treasury bills.
   • Recovery of loans: Loans repaid to the government by states, PSUs, or others.
   • Disinvestment proceeds from sale of government shares in PSUs.
2. Capital Expenditure
   • Creation of assets: Infrastructure projects like highways, railways, irrigation, schools, hospitals.
   • Loans given by government to states, PSUs, or other parties.
   • Defence capital outlay (purchase of aircraft, ships, tanks).
   • Investments in equity of PSUs.

Conclusion

Introduction

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Challenges in Public Expenditure Management

1. Growing Revenue–Expenditure Mismatch
   • Subsidy burden on food, fertilizer, and fuel has expanded, while tax revenues often lag behind due to tax concessions and compliance gaps.
   • Persistent fiscal deficit limits space for productive expenditure.
2. Subsidies vs. Capital Formation
   • A large share of expenditure is on revenue items (salaries, pensions, interest, subsidies).
   • This crowds out capital expenditure, reducing investment in infrastructure and long-term growth.
3. Centre–State Fiscal Strains
   • Implementation of Finance Commission recommendations (post-2000s) increased devolution to states.
   • Centre struggles to balance fiscal consolidation with state demands for more funds.
4. Social Sector Commitments
   • Post-liberalization, expectations of welfare spending grew: MGNREGA, Food Security Act, Education and Health programmes.
   • Pressure to meet inclusive growth objectives increases expenditure commitments.
5. Globalization and External Vulnerability
   • External shocks (oil prices, global recessions, financial crises) directly affect expenditure on imports, subsidies, and stabilization packages.
6. Defence and Security Expenditure
   • Rising defence and internal security needs post-Kargil (1999) and terror threats compel higher allocations, limiting flexibility.
7. Fiscal Responsibility Constraints
   • The FRBM Act (2003) restricts deficit financing, yet government struggles to adhere due to populist pressures and welfare commitments.
8. Inefficiency and Leakages
   • Weak public delivery systems, corruption, and subsidy leakages dilute the impact of expenditure.
   • Technology-based reforms (like DBT, Aadhaar, PFMS) are recent corrective measures but challenges persist.

Way Forward

• Expenditure Prioritization: Focus on capital formation in infrastructure, health, and education.
• Subsidy Rationalization: Better targeting using DBT, Aadhaar, JAM trinity.
• Fiscal Discipline: Adherence to FRBM targets while allowing counter-cyclical flexibility.
• Outcome-Based Budgeting: Shift from input-based to results-oriented expenditure management.
• Public–Private Partnerships (PPP): Leverage private investment in infrastructure and services.
• Strengthening Institutions: Empower CAG, Finance Commission, and independent fiscal councils for better oversight.

Conclusion

Introduction

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Changes in Long-Term Capital Gains Tax (LTCG)

• A 10% tax was levied on long-term capital gains exceeding ₹1 lakh from the sale of listed equity shares, equity mutual funds, and business trust units.
• No indexation benefit was allowed, differentiating it from other asset classes like real estate or gold.
• To safeguard past investors, a grandfathering clause exempted gains accrued up to 31st January 2018.
• This ended the earlier exemption under Section 10(38) of the Income Tax Act, which had made long-term equity gains completely tax-free.

Changes in Dividend Distribution Tax (DDT)

• A 10% DDT was introduced on dividends distributed by equity-oriented mutual funds.
• Earlier, dividends from such schemes were exempt in the hands of investors, creating a tax arbitrage with growth schemes.
• The measure ensured parity with dividend taxation in companies and prevented misuse of dividend options in equity funds.

Implications

• Broadened the tax revenue base to aid fiscal consolidation.
• Reduced tax arbitrage between equity and other asset classes.
• May discourage some retail participation in equity markets but ensures long-term equity in taxation policy.

Conclusion

Introduction

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Requirements of Gender Budgeting

• Institutional Mechanism: Creation of gender budget cells in ministries/departments to assess the gender impact of policies.
• Adequate Allocations: Targeted funds for schemes addressing women’s health, education, skill development, and safety.
• Mainstreaming Gender Concerns: Integrating women’s needs across all sectors, not just welfare.
• Monitoring & Evaluation: Outcome-based tracking of fund utilization to assess impact on women’s empowerment.
• Capacity Building: Training officials to analyze budget proposals from a gender perspective.

Status in India

• Introduced in 2005–06 Union Budget, covering nine ministries, now expanded to 30+ ministries/departments.
• Gender Budget Statement is presented annually along with the Union Budget, divided into Part A (women-specific schemes, 100% allocation) and Part B (pro-women schemes, at least 30% allocation).
• Major schemes: Beti Bachao Beti Padhao, Swadhar Greh, Nirbhaya Fund, National Maternity Benefit Scheme, STEP, Stand-Up India.
• Challenges remain: low proportion of gender budget (~5% of total expenditure), weak monitoring, and underutilization of funds.

Conclusion