Fiscal deficit, GDP, Inflation: Meaning of terms likely to be used by Nirmala Sitharaman in Budget 2023 speech

The union finance minister, Nirmala Sitharaman will announce the Union Budget 2023-24 on February 1 (Wednesday). This is going to be the last union budget before the next elections. Everyone is eagerly waiting for the budget. 

But prior to the Union Budget being presented, here are some terms that you should be familiar with. We have listed some terms that can be heard on the budget speech. Know the meaning of these words for a better understanding of the Union Budget 2023-24. 

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Fiscal Deficit

Fiscal deficit is an account of how the government's total expenditure is more than the revenue, excluding the borrowings. Economists often argue that fiscal deficit is not a bad indicator of the economy as the government uses the money to fund infrastructural development. Ideally, fiscal deficit should not cross 4 per cent of the Gross Domestic Product (GDP).

Annual Financial Statement

The annual financial statement is a statement of approximate receipts and expenditures from April 1 to March 31 in a financial year. The government is required to present the annual financial statement before the Parliament every year, as per Article 112 of the constitution. The annual financial statement is divided into three parts-- consolidated fund, contingency fund and the public account.

Gross Domestic Product (GDP)

Gross domestic product (GDP) is the measure of monetary earnings by a country through the production of goods and services in a financial year. 

Inflation

Inflation is the rise in the price of goods and services in the country resulting in a higher cost of living. The inflation is expressed in percentage terms. Expressed in percentage terms, inflation is the rise in the general price of goods and services in the country, which results in a higher cost of living. Inflation indicates a decrease in the purchasing power of the rupee as products and services become more expensive.

Fiscal Policy

The decisions that are taken by the government to adjust the expenditure level and revenue collection is called fiscal policy. Fiscal policy is an important instrument that helps to monitor and accomplish the country's economic goals. The fiscal policy highlights the adjustments in spending levels and tax rates. 

Current Account Deficit

The current account deficit indicates that the country is importing more goods and services in comparison to its export. CAD is a component of the country's balance of payments (BoP).

Divestment

Divestment is when the government sells a stake in its existing assets to raise revenue. In the past few years, the government has also taken this route to exit loss-making ventures and increase non-tax revenues.

Capital Revenue and Expenditure

When the government spends money to maintain or upgrade its assets, then that is called capital expenditure. These expenses are not recurring in nature and include long-term expenditures towards developmental and infrastructural projects. 

Direct Tax (Income Tax)

One of the most important components of the budget is direct taxes, which include income tax and corporate tax. These are levied on the income or wealth of companies and individuals. Income tax includes fringe benefits tax, securities transaction tax and the banking cash transaction tax.

Revenue Deficit

A revenue deficit is a situation of more revenue expenditure and fewer revenue receipts. This is one of the key indicators of the government's overspending from its regular income.