15 Terms to Understand Budget

15 Terms to Understand Budget

ICT Dialogue is a new initiative by ICT Academy through which we engage with people of expertise from various sectors and post the interview on our YouTube Channel. The first session was done by the Vice President of ICT Academy, Mr. Anbuthambi, in which Mr. V Pattabhi Ram, a renowned Chartered Accountant, explained fifteen terms that we must know to understand budgets by the Central Government:

1. Budget: A statement drawn up at the beginning of the year, which says where from money is going to come from and where to money is going to be spend.

Revenue Receipts and Expenditure: Tax collected by Government and Interest and Dividend Income received from Investments by Government are Revenue Receipts. Essentially, cost of running various departments and money given to State Government under any scheme are revenue expenditure.

3. Capital Receipts and Expenditure: Money borrowed by Government and repayments of loans given out by the Government to others are Capital Receipts. Expense towards creating or purchasing any asset is Capital Expenditure.

4. Revenue Deficits: Excess of total revenue expenditure over total revenue receipts is Revenue Deficit.

5.Revenue Vs Fiscal Deficits: When revenue receipts and capital receipts excluding borrowing, is not sufficient to meet revenue and capital expenditure of the government, Fiscal Deficit arises. When there is Fiscal Deficit, government borrows.

6.GDP: Wealth created/earned by a country during a year. Money people spent, investments made by business, government spending, and excess of export over import contribute to a country’s GDP.

7.Inflation: When, with a given amount of money, you can only purchase lesser than what you could purchase earlier, purchasing power of money is said to have fallen. This fall is called inflation.

8. FII and FDI: A foreign investor that who directly invests in India is FDI and a foreign investor who invests indirectly by purchasing shares of Indian Companies is a FII.

9.HDI: Human Development Index tracks the development of people in a country by factoring education, life expectancy and income of citizens. HDI of 1 is most favorable.

10. Exchange Rates: Value of currency is determined by market. When dollar goes up against India, rough reading is that US economy is doing better than India’s and hence the demand for dollar has increased.

11.Big Mac Index: An interesting idea developed by the Economist magazine which comes up with exchange rate of different currencies by comparing the price of the same McDonald burger at different countries.

12. Interest Rates: Interest Rate at which banks lend to customers depending on their risk profile.

13. Repo Rates: Interest Rate at which banks can borrow money from the Reserve Bank of India.

14. Sensex: A sample of 30 companies is taken, and their share prices are used to draw up an index. If Sensex ‘goes up’, it means the average share price of these 30 companies have gone up.

15. Direct Tax and Indirect Tax: When the person who is supposed to pay is the person who actually pays, it is Direct Tax. Eg. Income Tax. When a person collects tax from the sufferer of tax and remits it to the Government, it is Indirect Tax. Eg. GST.

About the Author

Pattabhi Ram CA is an author, public speaker, and teacher. The author could be reached at