NATIONAL INCOME :- 

National Income is equivalent to National product is equivalent to National dividend is equivalent to National expenditure.
/NI = NP = NO = NE
National Incomes is the annual income of the nation. It is the monitory expression of our physical achievement in a given year. More overall goods + services produced in a given year in a given country expressed in terms of money is also called as National Income.
National Income may be explained in simple terms

Methods in the estimation of National Income:-

There are three methods.
Product method
Income method
Expenditure method.

Product method(National Income):-

Accordingly, National income may be estimated by calculating the total product in terms of price. Whatever the commodities and services we produced may be calculated in terms of money. There is a “base year” for calculation of National Income (2004-2005). Base year quantity and prices are expressed 90, Po respectively, the current product is expressed as in order to minimize price fluctuation in the economy we have to use base year price.
Q1 x P0 it is considered as Rationalistic estimation of National Income without inflationary pressure.

Income method(National Income):-

It is the most popular method India’s majority of income is calculating under this method. We have to take into consideration the income of all taxpayers as well as income of all non-tax page In the economics, there are four factors.
Factor Factor pavements
Land Rent
Labour wages
Capital interest
Organisation profit
National income = R+W+I+P+M+I (mixed income)

Here one individual earned income from different occupations.

Expenditure method(National Income):-

It is a modern method rarely used. It is famous in developed countries. India uses this method very rare occasions. According N.I. = Total expenditure + total savings. Here we have to see total expenditure as well as total expenditure of consumers, private Institutions and government Institution.

Note:-
India using all three methods for calculating National Income.
India national income estimated by dadabhai nauroil.
National income estimations historical background:-
For the first time in India, Dadabhai Nawraoi estimated India N.I. as rupees 340 crores. He estimated India’s population is 17 crores. For 1867-68 per capita income was 20 Rs.

 

 

India

United A.P.

Separate A.P.

Telangana

N.I.

CSO

DES

DES

DES

P.C.I.

1951

(N Delhi)

1971

(Hyd)

2014

2014

1. In India G.D.P. (Gross Domestic Product) or National Income per capita income may be estimated by central strategically organization (C.S.O.) established in New Delhi (1951)
2. C.S.O. works under the “Ministry of Statics” and program implementation.
3. State income technically called Gross state domestic product (G.S.D.P.)
4. Similarly, there is another technical word for assessment of district income-Gross district Domestic product (G.D.D.P.).
5. In unite A.P. previously G.S.D.P., as well as G.D.D.P., was estimated by the Directorate of Economics and statics (D.E.S.) established in Hyd (1971).
6. The same agency established for separate A.P. and Telangana established in 2014.
7. Centre for economic and (C.E.S.S.) social studies a premier research institution calculated poverty and Human development report independently U.A.P.
8. Now C.E.S.S. is preparing Human development for Telangana and A.P.

Concepts of National Income:-

1. Gross/Domestic product (G.S.P.) :-
1. It is considered a micro-level concept. Here the geographical area is always associated with G.D.P.
2. G.D.P. means all goods and services produced with a given geographical area including an exclusive economic zone (350 miles). In a given years measure in terms of money. The net value is called G.D.P.
3. Here we have to see the value of total goods, the value of total services difference b/w exports and. Imports (x-H) and goods and services are generated by foreign companies but under G.N.P. excluded income generated by foreign nationals in India.

Gross national product (G.N.P.):-

1. It is a macro-level concept.
G.N.P. = G.D.P.+ NFIA (Net Factor Income from Abroad)
2. It is the difference between receives- payments.
3. G.N.P. is disassociated with the Geographical area where goods and services produced are immaterial but those goods and services. Produced by Indians and Foreigners.
4. Even though N.R.I.S. work in outside India. Indian company working outside India whatever the income they generated would automatically become part and partial of India’s Income.

 

Consumer (c)

Private (I)

Govt. (G)

Product method

C

I

G

Income method

C

I

G

Expenditure method

C

I

G

G.D.P. = C+I+G+(X-M)
G.D.P. = C+I+G+(X-M)-IT+S
Market price. Market price under product method
G.D.P. = C+I+G+(X-M)
G.D.P. at Factor cost factor cost nothing but factor payment. It is calculated under the Income method.
G.D.P. = C+I+G+(X-M)-IT+S(subsections)
Net = Gross – Depletiation (D)
NDP = C+I+G+(X-M – D)
NDC = C+I+G+(X-M) – IT +S – D.
G.D.P.+N.F.I./A – G.N.P. = C+I+G+(X-M)+NFI/A
G.N.P. = C+I+G+(X-M)+NFI/A-IT
N.N.P. = C+I+G+(X-M)+NFI/A –D
N.N.P. = C+I+g+(X-M)+NFI/A-IT+D
∴ GNP – NFI/A = G.D.P.
C = Consumer Income
I = Private Income
G = Govt. Income
(X-M) = Export and Import Income
NFI/A = Net factor Income from Abroad
N.N.P. = Net National product
N.D.P. = Net domestic product
M.P. = Market price
S = Subsideices
IT = Indirect taxes.

Note:-
Which is called National Income “NNPFC”
1.P.C.I.= (N.I.)/(Population (P)) P=Mid year population
2.P.C.I.= 〖N.N.P.〗_FC/P
3.〖P.C.I.〗_(at const.year)= (NNP_FC at constant year price)/(population.)
4.〖Nominal P.C.I.(or)P.C.I.〗_(at current year)= (NNP_FC at constant year price)/(Mid year population.)

Prices in the estimation of N.I. or G.D.P.:-
There are two different prices
Base year price (or) constant year price (or) Red year price
Current year price (or) Nominal year price.
The base year is 2004-05 – qo, Po
The current year is 2013-14 – q1, q1
National income in India q1xP1 = 11,00,000
q1XPD=55,00,000
P.C.I. at base, year price is 39,904 Rs
P.C.I. at current year price is 73,013 Rs.
Note:-
World Human Development Report – 1990
National Human Development Report – 2001
State Human Development Report – 2008

The first time the “world Human development report” published in 1990. The latest is 2014 till so far 24.04.01 has been released.
United Nations Development Program (U.N.D.P.) published H.D.R. every year. It is an associated body under U.N.O.
For the first time in India in 1996 “Madhya Pradesh” govt. has independently established the “state Human Development Report.”
The national planning commission has established the “National Human Development Report” in 2001. However, for the first time center of Economic and social studies (C.E.S.S.) established U.A.P. state H.D.R.
Pakistan economist Muhammad UI HUK constructed the “Human Development Index” based upon H.D.I. N.D.R. will be publishing.
Paul treated has defined H.D.I. There are three parameters under H.D.I.
Life Expectancy Index (L.E.I.)
Knowledge Index (K.I.)
The mean year of schooling
Expected years of schooling.
A decent standard of living Index. (GNI per capita Income)
Latest Human Development Report was released in the month of June. Here U.N.D.P. has calculated a total of 187 countries. Accordingly, 1st country given to Norway, 136th country – India (H.D.I. value 0.586) 187th country-Nigei
According to 2011-12 “N.H.D.R.” first state in India is Kerala, last Chattisgarh. United A.P. – 9th, Telangana -13th state

Planning and Development
Planning in India
(National Income):-

For the first time in the world economic plans established in 1928. Russian plans called “Gas plans”.
“Gas” means a state-controlled Economy.
Joseph stain established socialist plans in that country.
The stain is considered as “Father of world planning”.
Russia is considered as “Mother of world planning” because the maiority of the countries adopted plans in Russia.
In India plans were established 1951 by the efforts of J.L. Nehru. He is considered as “Father of Indian planning”.
Every year Nov-14 is celebrated “National-cooperative day”.
In the world 85 years of planning completed, in India 60 years of planning completed. We completed “11” five-year plans and six annual year plans. (1966-69) is also called plan holiday for five-year plans. We are in the middle 12-five year plan.
Name of the plan-Growth Model and objectives:-

Plan

Tenure

Growth Model

Objectives Agriculture

I

 

II five year plan

 

III annual plan (plan holiday)

 

IV five year plan

 

V five year plan

Annual plan (or) Rolling plan

VI five year plan

 

VII Plan

 

Annual plan

 

VIII

 

IX Plan

 

X Plan

 

XI

 

XII

1951-56 (Apr 1- Mar 31)

 

1956-61

 

1966-69

 

1969-74

 

1974-79

 

1979-80

 

1980-85

 

1985-90

 

1990-92

 

1992-97

 

1997-2002

 

2002-2007

 

2007-2012

 

2012-2017

Given by R.F. Marrad and Domar

 

P.C. Mahaionebis and J.L. Nehru

Allen Manne and Ashok Ruda

Dr. Gadgit

 

P.N. Hastar and D.P. Dhar

Gunnar Myrdal

 

R.F. Harrad and Domar

 

Vakil brahmananda and Rajiv growth

M.M. Singh and P.V.N. Rao

 

Manmohan singh and P.V. Narsimha Rao

Madhu dandavath

 

National planning commission (N.P.C.)

N.P.C.

 

N.P.C.

Agriculture and Irrigation development

 

Rapid industrial development

Green Revolution

 

Growth with Justice and Stability

Remoual of poverty

Small scale industries.

 

Remoual of Un-em plolyment, energy resource development

Development of food work and productivity

Establishment of new/economic reforms and privatization of  economy

Human Resource development

Growth with social justice and Rural development.

Generation of employment opportunities.

 

Towards faster and more indusive growth

Towards faster and sustainable more inclusive growth.

Note – Self/Reliance first time used under IV – five.

• In 2014-15, MGNREGS got 33,000 crores (Budget plan)

Rapid Industrialization(National Income):-

For the first time, Russia adopted this method. It also introduces a capital intensive methods giving more importance to technology and money is considered as a capital intensive method. By using this two within a span of 20 years (1928-48) Russia achieved tremendous growth vote which is equivalent to 150 years growth rate of America.
In India Nehru introduce capital intensive method but it created large scale unemployment. Due to this morarji Desai government in 1978 introduced labor-intensive methods means using more no of labor in the process of production. The largest labor-intensive social welfare program in India is “Mahatma Gandhi National Rural Employment Guarantee Scheme”. It is meant for the generation of employment in manual works. Under the 2014-15 budget Rs. 33000 crores allocated.

Self Reliance(National Income):-

We need to improve more production and we have to suspend imports from other countries we need to export max. commodities from other countries. Growth with social justice we have to provide from weaker sections to minorities.
Human Resource Development:-
Here we need to improve human skills efficiency, Hardworking. In economics, human Resources called as Demographic dividend. Demos means population, graphy means study. A scientific study of population is the demography population is considered an asset.

Faster:-

In India initial 30 years of the economy (1950-80) avg annual growth rate registered to 3.4%. It is a very slow growth rate prof. Raj Krishna commented this growth as the Hindu Growth rate.

Inclusive growth:-
According to this whatever you neglected 64 years of the economy need to identify take immediate steps. Accordingly, we need to include poverty, unemployment, rural backwardness, farmer’s suicide and take appropriate methods immediately.

Sustainable:-

It has two components
1. Protection of Environment
2. Save the resources in the interest of the future.

National planning commission(National Income):-

It is established on March- 15 1950. Headquarter is New Delhi. That building is known as yojana Bhawan.
Structure:-
It has one ex-officio chairman, one Deputy chairman. 6 Cabinet minister, I secretary and some of the experts. Whoever becomes P.M. will act as Ex-officio chairman for N.P.C.
The first Ex-officio chairman is J.L. Nehru. The last chairman is Manmohan Singh. Because of N. Modi govt. abolished N.P.C. they are looking for alternative institutions.
The first Deputy chairman is Gurjali Lal Nanda. Last Dy. Chairman is Moket Singh Ahluwalia.

Function(National Income):-

N.P.C. is not a constitutional body it is established by parliament it will give advice to the government on socio-economic parameters. It tries to modernize India. It will make research on various policy matters. Periodically it will estimate the problem of poverty. It will prepare five-year plans and annual plans. Later same draft plan will be sent to the National Development council (1952 Aug-6).
N.P.C. will scrutinize draft plans and finalizes. Without the acceptency of N.D.C. no central plan will come into effect. Similarly, state plan will scrutinized by National planning commission without acceptance of N.P.C. no state plan will come into effect.

Historial Background of plans:-

In 1928 first person who talks on the establishment of plans was subash Chandra bose. In 1934 Mokshagundam visveswaraya published one important book “planned economy for India” under this title he advised to British government for the speedy establishment of plans.
In 1938 under the leadership of J.L. Nehru planning committee established it was suspended due to out broke of the second world war during 1936 P.S. Loknath published principles of planning. During 1936 K.N. Sen published “Economic reconstruction of India” both advised establishment of plans. In 1944 A.D. Dhalal acted as a chairman for planning the advisory body. In the 1944 Bombay plan established at Mumbai.
8 crate industrialist assembled and made some resolution for the development of India. In 1944 “Sriman Narayan Agrawal established the “Gandhian plan” on Gandhian principles. He advised the government to prepare a plan on the Gandhian Economy model. In 1945 people’s plan was established by M.N. Roy. In 1946 under the leadership of Nehru Department of planning and development was established. It was recommended the establishment of N.P.C.
In 1950 Sarvodaya plan was established by Jai Prakash Narayan. It is also prepared Gandhian Ideology.

 

Objectives of planning:-

Economic Objectives

Social Objectives

1.    Improve Gross domestic product.

2.    Improve per capita income It may be arrived to National income, by population.

3.    Improve saving and investment. Investment is considered engine of growth on economics.

4.    Improve productivity.

5.    Minimize poverty and unemployment.

6.    Minimize inflation and prices.

1.    Minimize illiteracy and improve child sex ratio (0-6 years).

2.    Encourage women empowerment

 

3.    Improve Life expectancy.

 

4.    Minimize infant mortality rate (0-1 year) of children.

 

5.    Minimize over population.

 

6.    I.M.R. rate in girls is 44:100

 

7.    “Missing future mothers” word used by Amartsen.

 

8.    Minimize materal motor rate (M.M.R.)

 

Vision 2020:-

1. Vision 2020 established on Jan-23, 2003. It was designed by span Prasad Gupta popularised by A.P.T. Abdul Kakam implementing through N.P.C.
2. During 1995 for the first time Malaysia “Mahadie Mohamad” published “New deal program for Asia” were he advocated vision 2020.
3. The first state in the world introduced vision 2020, which was united A.P. in 1999.
4. The second state is Gugarat (2001).
Long term objectives of vision 2020.
1. Annual targeted G.D.P. growth rate (9%)
2. By 2020, 1.35 billion people will be provided a better standard of living.
3. Dependency ratio on agriculture reduced to 40%.
4. The urban population will be improved to 40%.

Investment:-

11th five-year plan: 35, 82, 767 crores (actual estimate)
36, 44, 718 crores (proposed estimate)
12th five year plan : 76, 49, 802 crores.
Note: – Most successful plan in India is “1st five-year plan”
G.D.P. Growth rate
10th – 8% 7.6 %
11th – 9% 8%
12th – 8.2% Awating
Off all plans highest G.D.P. growth rate is “8% (11th five year plan)”

Plan wise development in India:-

1. First five-year plan:-
1. First five-year plan (1951-56)
2. The growth model is R.F. Harrod and Domar. He is a U.S.A. economist.
3. Objectives are Agriculture, Irrigation development, Minimize the rate of inflation or prices, improve the G.D.P. growth rate.
4. G.D.P. growth rate 2012-13 is 4.5% and 2013-14 is 4.7.

Achievements:-

1. In 1951 land reforms are established. It is to the distribution of land to the poorest of poor.
2. In 1951 Jamadari system was abolished. It acted as a middle man between the government and farmers. They collected huge taxes from formers and paid less taxes to the government.
3. They have been greatly exploited farmers.
4. In 1952 for first time in India family planning operation established by prof. Irawati Karve. India was first country that established a family planning program. That’s why India is considered as “Mother of world family”.
5. In 1952 community development program established. It was the first to sel social welfare program in India. This is meant for Rural development.
6. In 1955, S.B.I was nationalized. It was the first commercial bank that was nationalized.
7. In 1955 Industrial Credit Investment Corporation of India was established. It gives loans to private industries.
8. First, the five-year plan is the only plan which succeeded control inflation here average annual inflation registered to 3.2%.

Note:-

Which committee has established in India to review ongoing social welfare schemes? [D]
A. Ranjaraian
B. Montek Singh Ahluwalia
C. Jai ram Romesh
D. Chaturvedi committee

 All given 144 programs, he recommended minimizing programs.

Second five-year plans:-

1. It is established in 1956-61
2. Objectives:-
a. Improve G.D.P. growth
b. Minimize income inequalities
c. Provide 11 million employment opportunities
d. Establishing industries very vapidly.
3. Progress:-
a. Under this plan govt. adopted big push theory originally it was advocated by Rossesta in Rodan.
b. Accordingly, large scale investments are needed to establish large scale production.
c. Russia developed by using large scale investments. Here economy may be pushed forward through big investments.

Trickledown theory:-

It established by J.L.Nehru in 1956. Accordingly to minimize age hold problems. Such as unemployment, Hereteracy, rural backwardness, we need to improve state income. This theory was failed because although the income of the govt has been improved govt. unable to distribute resources that why during 1978 Morarji Desai has
For the first time in India. First Industrial policy was established in 1948. Under this we adopted a mixed economy Here we can see the co-existence of the public as well as the private sector in the economy.
The father of the mixed economy system was J.M. Keynes. The father of capitalism was Adnan smith. The investment was given mc importance here the private sector will guide the economy.
The father of socialism is Karl Marx. Here the public sector is given more importance. In 1956 Industrial policy Resolution is considered as Magna Karta of Industries (or) economic constitution.
Under this I.P.R. three big Iron steel industries were established.
1. Rourkela Iron steel Industry (Technology given by Germany)
2. Bhilai Iron Steel Industry (Technology given by Russia)
3. Durgapur
In 1954 prof. Gorwala committee was established by R.B. or rural credit is classified into three categories.
1. Short term credit (15 – months)
2. Medium-term (15 months – 5 years)
4. Long term (5-20 years).
In 1956, P.C. Mhalanoubes committee established on Income inequalities

Note:-

1. In 2013 by R.B.I. Prakash Bakshi committee to study on “cooperative society”.

Third five-year plan (1961-66):-

1. Designed by Ashok Mehta

Objectives:-

1. Self Reliance
2. Minimize regional inequalities
3. Minimize population growth rate
4. Improve exports

Progress:-

1. In 1960-61, intensive agriculture district program was established (I.A.D.P.)
2. In 1964-65, an intensive agriculture area program (I.A.A.P.) established. Both the program was designed to boost up agriculture production.
3. Due to these Green Revolution made possible in India.
4. The word Green Revolution was coined by William F God.
5. Norman Boring is treated “Father of world Green Revolution”.
6. In India M.S. Swaminathan is considered “Father of Green Revolution”.
7. By the beginning of the third five years. Plan our planners though that “takes off stage”. The word coined by Rostow.
8. Registering maturity in the economy is called the “take-off stage”.
9. In 1963, Agriculture Refinance Development Corporation (ARDC) established it is renamed as “NABARD” in 1982. (National Bank for Agriculture Rural development). It was recommended by the Shiva Raman committee. It is considered as Apex bank in refinance.
During third five year plan Bokaro Iron steel industry was established.
10. Is established Rural development fund in 1995. (RTD R.I.D.F.)
11. In 1954 Unit thrust of India was established. It is renamed as Axis Bank.
12. In 1964 Industrial development bank of India (IDBI) which is largest development bank to provide maximum credit to industries.
13. It become scheduled commercial bank in 2008. So it is last scheduled commercial bank.
14. To provide modern seeds in 1965 “High yielding varieties” of program was established”.

Failure of a third five-year plan:-

1. A third five-year plan was considered the most unsuccessful plan because of the following reasons.
1. 1962 war with china was broke out
2. 1965 war with Pakistan. Due to these two wars plan base priority shifted from development to defense.
3. Development of unfavorable monsoon.
4. Decline in Agriculture production. Due to this India imported wheat from “public law of 480”. When food grains production was declined huge demand for food grain production emerged and finally High-level inflation registered (14%). The Recommendation of Ashok Mahta committee annual plans was established because India was not in a position to start the fourth five-year plan. In 1966-69 “annual plan period” remember as “plan holiday (plan holiday for a five-year plan)” . Three annual plan all economic parameters improved. Then India established the 4th five-year plan (1969-74).

Fourth Five-year plan (1969-74):-

Growth model by D.R. Gadgit
Objectives:-
1. Growth with social justice.
2. Growth with stability.
3. Achieving self-reliance.
4. Minimize regional inequalities.

Progress:-

1. In 1969 by the recommendation of the Hazari committee 14 banks were nationalized.
2. For the first time, 1949 R.B.I. was nationalized under R.B.I. act 1949.
3. In 1955 S.B.I. was nationalized.
4. In 1980 six banks were nationalized. Now we are in the region  privatization of the banking sector recommended by Narasimhan committee in 1992.
5. Due to an increase in food grains production in India. ‘P.L-480’was suspended.
6. In 1969 under the Nareeman committee lead bank scheme was established. Accordingly, each scheduled commercial bank has lead one backward region are they have to adopt some of the districts to minimize regional inequalities.
7. In 1969, N.R. T.P. Act was established.
8. In 1970 M.R.T.P. implemented. (mono police Restrictive Trade practices). Mono poly means one single sellar will control the entire market sometimes they may exploit the interest of the consumers. Due to this, some restrictions were made on big industrialist or big companies.
9. F.E.R.A. (Foreign exchange Regulation Act)
10. In 2000 F.E.M.A. (Foreign exchange Management Act)
11. In India, there are three components in foreign exchange reserves. These are always kept with R.B.I.
a. Us dollars (through exporting commodities)
b. Gold reserves (by purchasing)
c. Special Drawing Rights. It is specially created money by the International Monetary fund.
However severe foreign exchange crisis has emergy in 1990-91 our foreign exchange reserves decline to very low I billion dollars. Due to the development of this crisis, India has adopted the privatization of the economy through 199 Industrial policy resolution. These efforts broadly called New economic reforms or macro-level economic reforms. During post-economic reforms by April 2014 Indies, foreign exchange reserves improved to 304.4 us billion dollars. By these India reached to 7th position. China is the top in terms of adding huge Gold reserves as well as foreign exchange reserves. India stood 9th position in terms of “God reserves”.

Fifth five-year plan (1974-79):-

1. Removal of poverty to minimize population growth
2. Minimize inflation rate
3. Boost up export
Progress:-
1. In 1974 minimum needs program was established.
a. Food
b. Shetter
2. In 1974, a command area development program established to improve Irrigation facilities.
3. In 1997 “National watershed management scheme” was established. In 2014 July, it is renamed as “Neeranchal”.
4. In 1975, “22 points program” was established on June – 1.
5. It has 20 important objectives these were meant for the comprehensive development of rural villages. In the implementation of 20 PP. United A.P. stood first in three successive financial years (2010-11, 2011-12, 2012-13).
6. On Oct-2nd 1975 by the recommendation of Narasimham committee regional rural banks established for the development of rural areas and farmers-previously they were 86 R.R.B.S presently they are been minimized to 63.
7. In 1975-77 during emergency period compulsory family planning operations have been implemented.
8. During 1976 “National population policy was established” under this. Marriage age will be hiked 14 to 18, 18 to 21.
9. Latest “National population policy” established on May-11 2000. At the same day, 8.45 AM by the birth of the Aastra India population reached to 100 crores. Under these India, the population may be stabilized by 2045. India’s population. Crores china’s population in 2050.
10. In 1975 “Integrated child development scheme” was established. It is to improve the nutritious level in children in rural villages. It is implementing in the name of the Anganwadi system. India’s having world largest I.C.D.S.
Budget = Revenue + Revenue
Debicit budget = Expenditure > Revenue
Surplus budget = Revenue > Expenditure
Balanced budget = Revenue = Expenditure
India always in debicit budget all developing countries shall with

with a debicit budget. Because we shall not save resources without spending.
Since developing countries are having major problems we need to spend more money even by getting borrowings.
1. In the revenue portion, tax revenue is more than non-tax revenue (25%).
2. In G.D.P. percentage of tax Revenue.
3. In a given tax, Direct (>50%) taxes are generating more income than Indirect taxes. But 1950-51 to 2007-08 indirect taxes are generating more income than direct taxes.
4. In 2013-14 direct taxes are 55.5% and indirect taxes are 44.5%.
5. Within direct taxes, corporation taxes provide more income.
6. In nontax revenue, total borrowing is 24%.

2014-15 budget Expenditure (100)%
Revenue 100%

1. Borrowing – 24% 1. Interest payment – 20%
2. Corporation – 21% 2. Subsidices – 12%
3. Income tax – 13%
4. Central exercise – 10%
 India’s borrowings place in world is 10th

                                    Budget Classification

 

                Revenue                                           Expenditure

 

Revenue                   Capital                    Revenue                    Capital

Raceds                      receds                   expenditure           expenditure

with a debicit budget. Because we shall not save resources without spending.
Since developing countries are having major problems we need to spend more money even by getting borrowings.
1. In the revenue portion, tax revenue is more than non-tax revenue (25%).
2. In G.D.P. percentage of tax Revenue.
3. In a given tax, Direct (>50%) taxes are generating more income than Indirect taxes. But 1950-51 to 2007-08 indirect taxes are generating more income than direct taxes.
4. In 2013-14 direct taxes are 55.5% and indirect taxes are 44.5%.
5. Within direct taxes, corporation taxes provide more income.
6. In nontax revenue, total borrowing is 24%.

2014-15 budget Expenditure (100)%
Revenue 100%

1. Borrowing – 24% 1. Interest payment – 20%
2. Corporation – 21% 2. Subsidices – 12%
3. Income tax – 13%
4. Central exercise – 10%
 India’s borrowings place in world is 10th

Budget Classification

Revenue Expenditure

Revenue Capital Revenue Capital
Raceds receds expenditure expenditure

Revenue account = Revenue Receds + Revenue expenditure
Capital account = capital receds + capital expenditure
Total Revenue = Revenue receds + capital receds
Total expenditure = Revenue expenditure +capital expenditure
Revenue defecit = Revenue expenditure>Revenue Receds

 In overall revenue, revenue recedes are than capital recedes
 In overall expenditure, revenue expenditure is more, within revenue expenditure interest payments are more.

Fiscal deficit (F.D.):-

1. The concept was initially given by J.M. Keynes (1936). It was introduced in India (1996-97) budget.
2. On the recommendation of S. Chakrawathi F.D. = Total expenditure > Total revenue
Total expenditure = Revenue expenditure + capital expenditure
Total revenue = Revenue recedes + capital recedes.
3. F.D. explains the overall borrowing requirements of the govt. in a given budget year.
4. For example, according to the 2014-15 budget F.D. is estimated to 4.1%.
5. By 2016-17 F.D. may be curtailed (reduced) to 3%.
6. To minimize F.D. F.R.B.M.A. act, 2003 established
7. In order to minimize F.D. government may be down Fiscal policy.
8. The ultimate objective of Fiscal policy is to bring social justice.
9. The following are the instruments under the Fiscal deficit.
a. Borrowing the money from R.B.I.
b. It leads to technically Deficit finance.
c. Lay down new taxes, taxes may be hiked, the imposition of tax on tax (C.E.S.S.)
d. Dis investment means selling government non-performing assets.
e. Borrowings are Internal and External Borrowings. Using post office savings, L.I.C., G.I.C., Employees provident-fund External borrowings are I.M.F., world bank, Asian development bank, Japanese reconstruction bank.
f. Internal, External Borrowing ratio (100%)
Internal – 95.5%
External – 4.5%
 From 2014 April, total borrowings in India are 55 lakh crores.
10. Revenue deficit is a part and partial of Fiscal deficit.
11. The study of govt. Revenue and expenditure sometimes called “public Finance”.
12. In the 2014-15 budget, Income tax slabs
Income tax slab
(60 years) (80 years)

Annual Income Slab Income Slab

1. Upto 2.5 lakh No tax 1. Upto 5 lakh No tax
2. Upto 2.5 to 5 lakh 10% 2. 5 to l0 lakh 20%
3. 5 lakh to 10 lakh 20% 3. Above 10 lakh 30%

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