ECON 101- Group Assignment
Government Budget
Submitted by –
Shray Bhalla
Jiya Mohan
Jerin Mathew
Tushar Mangla
Introduction:
A national budget is a plan made by government for the coming financial year that includes projected
tax collections (inheritance tax, payroll tax, corporation tax, customs duties) as well as intended
expenditures (health, schooling, military, roads, and government aid). The budget is presented to
parliament, where it must be approved by elected officials by a vote. The government uses this budget
to carry out economic policies and meet pre-determined targets. Once the budget is approved, the
government, departments, and other entities have control over how money is spent. The majority of
the government budget's revenue comes from taxes, customs fees, and other revenue sources.
The following are the several categories of government budgets:
1. Nationalized budget: a spending plan created for the entire country by the central government.
2. State budget: Individual states construct their own budgets under federal systems.
3. Plan budget: This is really a document that details the financial arrangements for the country's
major initiatives, programmes, and plans. It also shows the federal government's financial
assistance to the provinces and territories.
4. Performance budget: Central departments and departments in charge of development
initiatives generate quality budgets, which are then allocated to members of the parliament.
5. Supplementary budget: This budget estimates revenue and expenditure for the following fiscal
year.
Budgetary policy in India:
In the current era, each government's budgetary policy plays a significant part in the nation's economic
and social life. "Budgetary policy is a policy about the relationship between total government revenue
and total spending to fulfil the main objectives," by Committee on Economic Development (Mgkvp,
2021).
The budgetary policy must be utilized as a tool for sustainable development and to boost national
revenue, promise, and investment. Budgetary policy objectives of a developing country are:
1. To provide a maximum flow of people and recourses for economic growth, including a minimal
consumption demand.
2. Maintaining reasonable economic stability in the face of long-term inflationary pressures and
short-term global price fluctuations
3. Reducing when there are severe disparities in wealth, income, and consumption since these
three factors lead to a lack of productive capacity, inequity, and, ultimately, political stability.
In summary, fiscal policy can only be employed in conjunction with monetary and credit policies.
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Budgetary Procedure:
India:
The planning process begins in the 3rd quarter of the financial year. There are four stages to the
budget:
(1) Expenditure and revenue estimates.
(2) Preliminary estimate of the shortfall
(3) Deficit shrinking.
(4) Presentation and approval of the budget
In the 3rd quarter of the fiscal year, the budgeting process begins.
1.Estimates of expenditures and revenues:
The process starts with various ministries submitting preliminary estimates of planned and unplanned
spending. The Planning Committee works with the departments to talk about the budget. The Planning
Commission decides on new programmes that can be usually determined on a preliminary evaluation
of resources available presented by the Ministry Of finance and provides financing for continuing plan
programmes (Indian Infoline, 1970).
2. Preliminary estimate of the shortfall:
After the income and spending estimates have been made, they are matched. This is the initial
assessment of the estimated income gap needed to cover forecasted expenses. The government then
decides on the best level of borrowing to cover the deficit, in conjunction with the top economic
advisor. The amount for external borrowings is known since a large portion of the government's
foreign borrowing is made up of mutual aid, which is known at the time budget exercises are
conducted.
3. Deficit shrinking:
Any remaining gap is covered, if feasible, by changes in the tax rates, taking into account the financial
economic incentives the government wishes to enact to stimulate growth in specific sectors. If any
modifications to the initial plans are required, adjustments are made to the spending; in most cases,
the plan expenditure must be amended. Interest payments, subsidies, and administrative costs are
included in nonplan expenditures
4. Presentation and approval of the budget:
On February's last working day, the budget for the following fiscal year is normally completed. In
financial affairs, the Indian constitution has declared Parliament paramount.
Only with the permission of both houses of Parliament can it charge taxes or dispense funds. However,
the request for taxes or expenditure must be started by the Minister of Finance in the Council of
Ministers. The Finance Minister makes a financial statement to Parliament describing the central
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government's expected receipts and expenditures for the future fiscal year, as well as an assessment of
the current year
Canada:
The "Expenditure Management System" is the primary basis for the Canadian budget process (EMS). It
sets the budgeting and resource allocation framework, stresses the critical roles of various institutions
and organizations on the legislative and executive sides, as well as political involvement, establishes
the process timetable, and establishes the procedure reporting and accountability requirements. The
major stages of the cycle are listed below.
1.Creating a Budget: (June to September)
Around June, the Cabinet has a retreat to review major parts of the forthcoming budget, based on
conversations about the economy and political situation, briefs on public issues and concerns, and a
stock take of government objectives. The deliberations have resulted in a broad direction in the form
of a ministerial decree that lays out the strategy for central agency and department officials to follow
in their budget preparations.
2. Consultation on Budget: (September to December)
The Budget Consultation Papers, which address the economic and fiscal forecast as well as anticipated
fiscal and spending objectives, are prepared by the Department of Finance with the help of other
government agencies and ministries
3.Decision on the Budget: (January to March)
Cabinet considers the Budget plan, which includes fiscal goals, new expenditure projects, and cost-
cutting measures. Final decisions are made by the Prime Minister and the Minister of Finance. The
Department of Finance completes the Budget papers, while the Treasury Board Secretariat completes
the Main Estimates in conjunction with ministries and agencies, including Budget choices as much as
feasible.
4.Review and Approval of the Budget: (March to June)
The House of Commons commences its discussions once the Estimates are tabled (under House of
Commons norms, no later than March 1st). The Estimates are automatically forwarded to the House of
Commons Standing Committees
Indian budget:
The Republic of India's annual budget is called “Yearly Financial Statement” under Article 112 of the
Indian Constitution. The government presents it on February 1st for it to be implemented before the
start of the next fiscal year in April. The budget division of the finance ministry is the nodal entity in
charge of budget preparation.
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Budget Highlights: -
1. Expenditure: In 2021-22, the government had to spend Rs 34,83,236 crore. According to the
most recent projections, the government has invested Rs 34,50,305 crore during 2020-21, up
13% from the budget forecast.
2. Receipts: In 2021-22, revenue (excluding loans) was forecasted to gather roughly Rs 19,76,424
crore, up 23% from revised predictions for 2020-21. Revenue predictions for 2020-21 have been
lowered by 29% compared to budget estimates. Given COVID-19's influence, GDP growth
projections for 2019-20, which imply a 6% yearly increase, are noteworthy.
3. Growth: In 2021-22, nominal GDP was predicted to rise at a rate of 14.4%. that is real growth
Plus inflation.
4. Deficits: The revenue gap was estimated to be 5.1 percent of GDP in 2021-22, down from 7.5
percent in 2020-21, according to the updated forecast. (3.3%) in the 2019-20 fiscal year. The
budget deficit is estimated to be 6.8% of GDP in 2021-22, down from 9.5 percent in 2020-21,
according to the revised forecast. (In 2019-20, it will be 4.6 percent). By 2025-26, the
administration hopes to ease the financial burden to 4.5 % of Gross domestic product.
5. Ministry Allocations: The Jal Shakti Ministry has the largest yearly increase (64%) among the top
13 ministries with the highest appropriations for 2019-20, second next is the Consumer Affairs,
Food and Public Distribution Ministry (48%) and the Ministry of Communications (31%).
Canadian budget
The Government of Canada prepares a federal budget each year to determine the planned government
spending and revenues and to forecast next year's economic situation. It is often released in February
or March, just before the start of the fiscal year. Budgets are also submitted by all Canadian provinces.
State budgets are usually set after the federal budget, as state finances depend on the federal budget.
The Minister of Finance presents the budget to the House of Commons. The budget process is complex
and begins with federal employees. The Finance Commission Secretariat receives "main estimates"
from many of the government's departments (e.g., health services, transportation, international
affairs, Department of Defence, industry, CRA, etc.). These documents list the expected spending for
each sector and correlate these proposed costs to programs, goals, and current government priorities.
The Finance Committee Secretariat combines these budget projections to develop the first proposed
budget. The budget is then adjusted by the Cabinet and the Prime Minister's Office according to
various economic, social and political considerations. Budget 2021 puts people first, creates jobs,
expands the middle class, guides companies on the path of long-term development, and makes
Canada's future healthier, fairer and more environmentally friendly a historic investment that promises
more prosperity.
The 2021 budget includes an investment of US $ 101.4 billion over three years as part of the
Government of Canada's economic strategy to create quality jobs and ensure a resilient and
comprehensive recovery (Maytree, 2022).
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The main actions are:
• The budget will provide a total of over $ 30 billion in new investments over the next five years,
with an additional $ 8.3 billion continuing. The creation of a national early intervention and
childcare system will make it easier for all families to find quality and flexible childcare at an
affordable price.
• Extend the unemployment allowance period from 15 weeks to 26 weeks.
• Strengthen old-age safety to provide better financial safety for older people over the age of 75.
• Support small and medium sized enterprises through a variety of innovative programs,
including:
• A new program called Canada Digital Adoption helps more than 160,000 companies at the cost
of new technology. With the support of 28,000 young Canadians trained to work with them, it
will provide them with the information they need to get the most out of modern technology.
• Allows Canadian small and medium sized enterprises to fully offset up to $ 1.5 million in capital
investment in a variety of assets, including digital technology and intellectual property. Over
the next five years, an additional $ 2.2 billion will be invested in the growth of Canadian
entrepreneurs.
• US $ 1 billion to help restore and promote festivals and cultural events that bring employment
and economic growth to many cities and regions in Canada.
• Invest $ 300 million to strengthen programs that help women, black Canadians, and other
minority communities start and maintain their businesses, such as the Black Entrepreneurship
Program and the Women Entrepreneurship Strategy.
• Adopting a $ 15 federal minimum wage.
• Increasing the value of the Canada Workers' Benefit will benefit an additional 1 million
Canadians and help approximately 100,000 individuals escape poverty. This will result in an
increase of $8.9 billion in support for low-wage employees in Canada over the next six years.
• Investing $ 2.5 billion and reallocate $ 1.3 billion of current resources to help create, restore,
and maintain 35,000 affordable homes for risky Canadians.
• It proposes an investment of US $ 4.1 billion to improve access to higher education and provide
direct support to students in need.
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• Toward a green restoration to achieve the goal of Canada protecting 25% of land and rivers by
2025, reducing emissions by 36% by 2005, and converging to net-zero emissions by 2050, $ 17.6
billion investment.
Changes in government spending due to Ukraine-Russia conflict:
India:
India is concerned about the impact of the Ukrainian-Russian conflict, particularly on its exports. On
the bigger issues of the current situation in Ukraine, India's position in the United Nations Security
Council, and so on. The Center has ensured that citizens will not be harmed by global gasoline supply
shortages caused by the Ukraine-Russia dispute.
The budget assumed an average crude prices of $75 to $80 for every chamber, but prices briefly soared
to nearly $140, their maximum level in over ten years. Expansion would be lowered by 90 basis points
if oil costs aggregated $100 for every chamber in the financial year finishing March 2023, collapsing
below 8% from a revised estimate of 8% to 8.5 percent (Reuters, 2022).
The rise in oil prices is likely to put pressure on the government to slash taxes and lower consumer
burdens. As a result, sales would suffer, leaving less room for capital spending to stimulate growth.
Every rupee reduction in fuel levies, on the other hand, diminishes government income by 130 billion
rupees per year. Researchers predict that India might end up losing up to 900 billion rupees through its
attempt to reduce pump costs (Reuters, 2022).
On the good side, the government may be able to make a profit by selling a portion of its humongous
grain inventories as global wheat prices rise, perhaps boosting Indian wheat exports.
This could help reduce costs associated with its massive annual grain imports at prices above world
levels in order to boost agricultural incomes.
In the short term, the ongoing conflict between Russia and Ukraine may have an impact on high-
frequency indicators such as financial markets, exchange rates, and crude prices. However, it was
pointed out that the current situation will not have a long-term influence on the Indian economy. In
addition, due to insurance risk, Indian Oil Corp (IOC) announced that it will no longer accept free on-
board cargoes of Russian crude and Kazakh CPC Blend cargoes (Business Today, 2022).
Crude oil prices climbed beyond $100 per barrel amid all of this, mirroring concerns about global
supply disruptions. India, which imports 80% of its crude oil from foreign countries, could be one of the
hardest hit countries.
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Trade:
India is on a trade deficit with Russia and Oil is a key component of our Russian imports. According to
the data, Russia has accounted for 2.8% of our total imports in FY22. However, total commerce is not
significant as Russia accounts for only 1.3 percent of worldwide trade and is our 25th largest trading
partner. The impact on trade would be limited, and the economy would be impacted by rising
commodity prices, which would impact our inflation and Current Account Deficit. Increases in oil prices
of $10/pb are projected to raise inflation by 25 basis points and widen the CAD as a percentage of GDP
by 35 basis points.
Banking:
So far, the banking industry has remained unaffected by the Russia-Ukraine conflict.
Aside from a strong banking environment, the SBI report revealed adequate liquidity of Rs7 lakh crore
and a suitable cash balance of Rs2.8 lakh crore. This should provide ample protection for the financial
industry as it navigates the crisis.
Corporate:
SBI economists demonstrated that Indian corporations have taken numerous methods to capitalize on
the pandemic's potential to become relevant and keep their balance sheets in good shape. Through
public equity markets, corporations have raised an all-time high of Rs1.89 lakh crore.
Improvements in credit ratios were also seen across industries. In the first nine months of FY22, new
investment announcements increased from roughly Rs10 lakh crore in the previous two years to
Rs12.78 lakh crore. According to the research, it can expect a 50% increase in FY22 over the previous
year.
GDP:
With trade, banking, and business sector restrictions, the SBI analysis predicts that the Russia-Ukraine
crisis will have a negative impact on the Indian economy.
Canada:
A day after Russia's invasion of Ukraine, Canada issued the first wave of economic penalties against it.
All financial transactions with the separate states of Luhansk and Donetsk have been prohibited by
Canada. It will also be prohibited from purchasing Russian state debt.
Members of the Russian parliament who voted in favor of recognizing Donetsk and Luhansk as
independent will face sanctions. It will impose further restrictions on two Russian state-owned
institutions and prohibit any financial transactions with them.
Canada has supplied an extra $100 million in public welfare to support knowledgeable associates in
meeting the most pressing philanthropic necessities in Ukraine and adjoining nations. These funds will
be used to provide emergency health care, preservation, assistance to relocated individuals, and life-
saving necessities such as accommodation, water, sanitary conditions, and meals. Canada will keep
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going to collaborate with associates, such as the UN and numerous non-entities, to recognise what else
it can do to help war-affected populations (Global Affairs Canada, 2022)
Since the commencement of 2022, Canada has increased its philanthropic aid to Ukraine by $25
million. This contains roughly to $10 million in matching funds for the Canadian Red Cross' Ukraine
Philanthropic Emergencies Agency and millions of dollars for skilled philanthropic collaborators in
Ukraine who really can adjust quickly to changing circumstances. Ukraine has received approximately
to $620 million through international loans from Canada to help its economy. Canada has provided
approximately $50 million in numerous forms of aid since 2014. This includes humanitarian assistance,
development assistance, and peace and stability assistance.
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References (APA 7 Style):
Reuters. (2022, March 8). India govt reworking Budget plans due to Ukraine crisis: Report. Mint.
https://www.livemint.com/economy/indian-govt-reworking-budget-plans-due-to-ukraine-crisis-report-
11646734639757.html
In-text: (Reuters, 2022)
P. (2022, February 28). Ukraine crisis: Worried about impact on India's exports, says FM Sitharaman.
Business Today. https://www.businesstoday.in/latest/economy/story/ukraine-crisis-worried-about-
impact-on-indias-exports-says-fm-sitharaman-324276-2022-02-28
In-text: (Business Today, 2022)
Global Affairs Canada. (2022, March 1). Canada announces $100 million humanitarian assistance to
Ukraine. Canada.Ca. https://www.canada.ca/en/global-affairs/news/2022/03/canada-announces-100-
million-humanitarian-assistance-to-ukraine.html
In-text: (Global Affairs Canada, 2022)
Budgetary Policy in India. (2021). Mgkvp. Retrieved March 20, 2022, from
https://www.mgkvp.ac.in/Uploads/Lectures/28/1692.pdf
In-text: (Mgkvp, 2021)
Understanding the budget process. (1970, January 1). Indian Infoline News Service. Retrieved March
20, 2022, from https://www.indiainfoline.com/article/news-sector-others/understanding-the-budget-
process-113111404476_1.html
In-text: (Indian Infoline, 1970)
An overview of the Canadian budget process. (n.d.). Maytree. Retrieved March 20, 2022, from
https://maytree.com/wp-content/uploads/Rdg1-Canadian_Budget_Process_EN.pdf
In-text: (Maytree, 2022)
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