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Types of Budget/Budgeting Terms/Deficits


Types of Budgeting Budgeting Terms Deficits

Types of Budget

Budget
• Budget is an Annual Financial Statement of yearly estimated receipts and expenditures of the government in respect of every financial year.
• Budgeting is the process of estimating the availability of resources and then allocating them to various activities according to a pre-determined priority.
• Budgets act as instruments of control and act as a benchmark to evaluate the progress of various departments.
TYPES OF BUDGETING
Performance Budgeting
• A performance budget reflects the goal/objectives of the organization and spells out its performance targets.
• These targets are sought to be achieved through a strategy. Unit costs are associated with the strategy and allocations are accordingly made for achievement of the objectives.
• A Performance Budget gives an indication of how the funds spent are expected to give outputs and ultimately the outcomes.
• However, performance budgeting has a limitation – it is not easy to arrive at standard unit costs especially in social programmes, which require a multi-pronged approach.
Zero-based Budgeting
• The basic purpose of ZBB is phasing out of programmes/activities, which do not have relevance anymore. ZBB is done to overhaul the functioning of the government departments and PSUs so that productivity can be increased and wastage can be minimized. Scarce government resources can be deployed efficiently. Therefore, Zero Based Budgeting is followed for rationalization of expenditure.
• The concept of zero-based budgeting was introduced in the 1970s. As the name suggests, in the process every budgeting cycle starts from scratch.
• Unlike the earlier systems, where only incremental changes were made in the allocation, under zero-based budgeting every activity is evaluated each time a budget is made and only if it is established that the activity is necessary, funds are allocated to it.
• Under the ZBB, a close and critical examination is made of the existing government programmes, projects and other activities to ensure that funds are made available to high priority items by eliminating outdated programmes and reducing funds to the low priority items.
• Governmental programmes and projects are appraised every year as if they are new and funding for the existing items is not continued merely because a part of the project cost has already been incurred.
Programme Budgeting
• Programme budgeting aimed at a system in which expenditure would be planned and controlled by the objective. The basic building block of the system was classification of expenditure into programmes, which meant objective-oriented classification so that programmes with common objectives are considered together.
Programme and Performance Budgeting System (PPBS)
• PPBS went much beyond the core elements of programme budgeting and was much more than the budgeting system. It aimed at an integrated expenditure management system, in which systematic policy and expenditure planning would be developed and closely integrated with the budget. Thus, it was too ambitious in scope.
• Neither was adequate preparation time given nor was a stage-by-stage approach adopted. Therefore, this attempt to introduce PPBS in the federal government in USA did not succeed, although the concept of performance budgeting and programme budgeting endured.
• Many governments today use the “programme budgeting” label for their performance budgeting system. As pointed out by Marc Robertson, the contemporary influence of the basic programme budgeting idea is much wider than the continuing use of the label. It is defined in terms of its core elements as mentioned above. Programme budgeting is an element of many contemporary budgeting systems which aim at linking funding and results.
Outcome Budget
• The Outcome Budget is a progress card on what various ministries and departments have done with the outlay announced in the annual budget.
• It is a performance measurement tool that helps in better service delivery; decision-making; evaluating programme performance and results; communicating programme goals; and improving programme effectiveness.
• The Outcome Budget is likely to comprise scheme- or project-wise outlays for all central ministries, departments and organizations during 2005-06 listed against corresponding outcomes (measurable physical targets) to be achieved during the year.
• It measures the development outcomes of all government programmes. The Outcome Budget, however, will not necessarily include information of targets already achieved.
• This method of monitoring flow of funds, implementation of schemes and the actual results of the usage of the money is followed by many countries.
Gender Budgeting
• The 2005-06 Budget introduced a statement highlighting the gender sensitivities of the budgetary allocations.
• Gender budgeting is an exercise to translate the stated gender commitments of the government into budgetary commitments, involving special initiatives for empowering women and examination of the utilization of resources allocated for women and the impact of public expenditure and policies of the government on women.
BALANCED AND UNBLANCED BUDGETS
A. Balanced Budgeting
1. A Balanced Budget is that budget in which Government receipts are equal to Government expenditure.
Merits of the Balanced Budget
1. The Government does not indulge in wasteful expenditure.
2. Interference in economic functioning of the system is totally avoided by the government generally.
3. Financial stability is ensured with balanced budget.
4. However, balanced budget is not an achievement of the government when economy is in a state of depression for at that time, government is expected to increase its expenditure with a view to increasing aggregate demand.
Demerits of a Balanced Budget
1. Balanced budget does not offer any solution to the problem of unemployment during depression.
2. Balanced budget is not helpful to the growth and development programmes of the less developed countries.
B. Unbalanced Budgeting
1. An unbalanced budget is that budget in which receipts and expenditure of the government are not equal.
2. In this, two cases concerning surplus Budget and Deficit Budget arise.
3. In Surplus Budget, Government receipts are greater than Government expenditures. While in the case of Deficit Budget, Government expenditures are greater than Government receipts.
Merits of a Deficit Budget
(i) It helps in addressing the problem of unemployment during depressions.
(ii) It is conducive for growth and development in less developed countries
(iii) It works towards social welfare of the people.
Demerits of Deficit Budget
(i) It shows wasteful expenditure by the government.
(ii) It shows less revenue realization in comparison with the expenditure.
(iii) It increases debt burden of the government.

Budget


Union Budget 2017-18 Important Terms in Budget

Budget

State of the National Economy
Budget for 2017-18 was presented amidst huge expectations from the government. Most challenging and important among all is ‘good governance’. Good Governance includes the burning issues like inflation and price rise, corruption in day to day transactions and crony capitalism.
Government’s policies aim to bring a Transformative Shift in the way our country is governed. In the last two and half years, India has moved
• from a discretionary administration to a policy and system based administration;
• from favoritism to transparency and objectivity in decision making;
• from blanket and loose entitlements to targeted delivery; and
• from informal economy to formal economy.
Overall, Inflation, which was in double digits, has been controlled, sluggish growth has been replaced by high growth and a massive war against black money has been launched.
Government undertook many more measures to ensure that the fruits of growth reach the farmers, the workers, the poor, the scheduled castes and scheduled tribes, women and other vulnerable sections of the society. Its focus was on energizing our youth to reap the benefits of growth and employment.
State of the Global Economy
The world economy is facing considerable uncertainty, in the aftermath of major economic and political developments during the last one year. Nevertheless, there are positive signs too as the International Monetary Fund (IMF) estimates that:
• World GDP will grow by 3.1% in 2016 and 3.4% in 2017.
• The advanced economies are expected to increase their growth from 1.6% to 1.9% and the emerging economies from 4.1% to 4.5%.
• Macro-economic policy is expected to be more expansionary in certain large economies.
• Growth in a number of emerging economies is expected to recover in 2017, after relatively poor performance in 2016.
Challenges for the Emerging Economies 
There are three major challenges for emerging economies in the present world:
• First, the current monetary policy stance of the US Federal Reserve, to increase the policy rates more than once in 2017, may lead to lower capital inflows and higher outflows from the emerging economies.
• Second, the uncertainty around commodity prices, especially that of crude oil, has implications for the fiscal situation of emerging economies. It is however expected that increase, if any, in oil prices would get tempered by quick response from producers of shale gas and oil. This would have a sobering impact on prices of crude and petroleum.
• Third, in several parts of the world, there are signs of increasing retreat from globalization of goods, services and people, as pressures for protectionism are building up. These developments have the potential to affect exports from a number of emerging markets, including India.
India as a Bright Spot
Amidst all these developments, India stands out as a bright spot in the world economic landscape.
• India’s macro-economic stability continues to be the foundation of economic success.
• CPI inflation declined from 6% in July 2016 to 3.4% in December, 2016 and is expected to remain within RBI’s mandated range of 2% to 6%.
• Favorable price developments reflect prudent macro-economic management, resulting in higher agricultural production, especially in pulses.
• India’s Current Account Deficit declined from about 1% of GDP last year to 0.3% of GDP in the first half of 2016-17.
• Foreign Direct Investment (FDI) increased from 1,07,000 crores in the first half of last year to ‘1,45,000 crores in the first half of 2016-17.
• This marks an increase by 36%, despite 5% reduction in global FDI inflows.
• Foreign exchange reserves have reached 361 billion US Dollars as on 20th January, 2017, which represents a comfortable cover for about 12 months of imports.
• The Government has also continued on the steady path of fiscal consolidation, without compromising on the public investment requirements of the economy.
• Externally, the economy successfully weathered a number of shocks, the redemption of FCNR deposits, volatility from the US elections and the Fed rate hike.
India as Fastest Growing Economy
According to IMF forecast, India is expected to be one of the fastest growing major economies in 2017.A number of global reports and assessments, over the last two years, have shown that India has considerably improved its policies, practices and economic profile. These are reflected in:
• Doing Business Report of the World Bank;
• World Investment Report 2016 of UNCTAD;
• Global Competitiveness Report of 2015-16; and
• 2016-17 of the World Economic Forum and several other Reports.
India has become the sixth largest manufacturing country in the world, up from ninth previously and Indian economy seen as an engine of global growth.
Economic Reforms in the last One Year 
In the last one year, our country has witnessed historic and impactful economic reforms and policy making. In fact, India was one of the very few economies undertaking transformational reforms.
There were two tectonic policy initiatives, namely,
1. Constitution Amendment Bill for GST- The Passage of the Bill and the progress for its implementation
2. Demonetization of high denomination bank notes.
NOTE: Demonetization and GST are built on the third transformational achievement of Government, namely, the JAM vision (Jan Dhan Aadhar Mobile), and will have an epoch making impact on our economy and the lives of our people.
Other Reforms in the last One Year
The last one year was a witness to other major reforms, namely,
• Enactment of the Insolvency and Bankruptcy Code;
• Amendment to the RBI Act for inflation targeting;
• Enactment of the Aadhar bill for disbursement of financial subsidies and benefits;
• Significant reforms in FDI policy; and
• The job creating package for textile sector and several other measures.
Approach of the Budget
While preparing this Budget, approach has been to spend more in rural areas, infrastructure and poverty alleviation and yet maintain the best standards of fiscal prudence (Fiscal Prudence means being conservative when estimating your revenues but accounting for the unforeseen when estimating your expenditure). The need to continue with economic reforms, promote higher investments and accelerate growth has also been kept in mind.
Budget for 2017-18 – Annual Financial Statement
Budget for 2017-18 contains three major reforms.
• First, the presentation of the Budget has been advanced to 1st February to enable the Parliament to avoid a Vote on Account and pass a single Appropriation Bill for 2017-18, before the close of the current financial year. This would enable the Ministries and Departments to operationalize all schemes and projects, including the new schemes, right from the commencement of the next financial year. They would be able to fully utilize the available working season before the onset of the monsoon.
• Second, the merger of the Railways Budget with the General Budget is a historic step. Government has discontinued the colonial practice prevalent since 1924. This decision brings the Railways to the centre stage of Government’s fiscal policy and would facilitate multi modal transport planning between railways, highways and inland waterways. The functional autonomy of Railways will, however, continue.
 Third, government has done away with the plan and non-plan classification of expenditure. This will give a holistic view of allocations for sectors and ministries. This would facilitate optimal allocation of resources.
Road Map and Priorities – TEC INDIA
Continuing with the task of fulfilling the people’s expectations, Govt. agenda for the next year is “Transform, Energize and Clean India”, that is, TEC India. This agenda of TEC India seeks to
• Transform the quality of governance and quality of life of people;
• Energize various sections of society, especially the youth and the vulnerable, and enable them to unleash their true potential; and
 Clean the country from the evils of corruption, black money and non-transparent political funding.
To foster this broad agenda Budget has been proposed under ten distinct themes, i.e.
1. Farmers: for whom government has committed to double the income in 5 years;
2. Rural Population: providing employment and basic infrastructure;
3. Youth: energizing them through education, skills and jobs;
4. Poor and the Underprivileged: strengthening the systems of social security, health care and affordable housing;
5. Infrastructure: for efficiency, productivity and quality of life;
6. Financial Sector: growth and stability through stronger institutions;
7. Digital Economy: for speed, accountability and transparency;
8. Public Service: effective governance and efficient service delivery through people’s participation;
9. Prudent Fiscal Management: to ensure optimal deployment of resources and preserve fiscal stability; and
10. Tax Administration: honoring the honest.
Farmers & Agriculture Budget Announcements
Agricultural Credit & Funds
• Target for agricultural credit in 2017-18 has been fixed at a record level of 10 lakh crores
• Farmers will also benefit from 60 days’ interest waiver announced on 31 Dec 2016
• To ensure flow of credit to small farmers, Government to support NABARD for computerization and integration of all 63,000 functional Primary Agriculture Credit Societies with the Core Banking System of District Central Cooperative Banks. This will be done in 3 years at an estimated cost of Rs. 1,900 crores
• Dairy Processing and Infrastructure Development Fund to be set up in NABARD with a corpus of Rs. 2000 crores and will be increased to Rs. 8000 crores over 3 years
Agricultural Insurance
• Coverage under Fasal Bima Yojana scheme will be increased from 30% of cropped area in 2016-17 to 40% in 2017-18 and 50% in 2018-19 for which a budget provision of Rs. 9000 crore has been made
Agricultural Extension Service
• New mini labs in Krishi Vigyan Kendras (KVKs) and ensure 100% coverage of all 648 KVKs in the country for soil sample testing
• As announced by the Honorable Prime Minister, the Long Term Irrigation Fund already set up in NABARD to be augmented by 100% to take the total corpus of this Fund to Rs. 40,000 crores.
• Dedicated Micro Irrigation Fund in NABARD to achieve ‘per drop more crop’ with an initial corpus of 5,000 crores
Agricultural Market
• Coverage of National Agricultural Market (e-NAM) to be expanded from 250 markets to 585 APMCs. Assistance up to 75 Lakhs will be provided to every e-NAM
• A model law on contract farming to be prepared and circulated among the States for adoption
• Total allocation for Rural, Agriculture and Allied sectors is 187223 crores
Rural Population Budget Announcements
Poverty, employment & skill training
• Over 3 lakh crores spent in rural areas every year, for rural poor from. Central Budget, State Budgets, Bank linkage for self-help groups, etc.
• Aim to bring one crore households out of poverty and to make 50,000 Gram Panchayats poverty free by 2019, the 150th birth anniversary of Gandhiji.
• Against target of 5 lakh farm ponds under MGNREGA, 10 lakh farm ponds would be completed by March 2017. During 2017-18, another 5 lakh farm ponds will be taken up.
• Women participation in MGNREGA has increased to 55% from less than 48%.
• MGNREGA allocation to be the highest ever at Rs. 48,000 crores in 2017-18.
• For imparting new skills to people in rural areas, mason training will be provided to 5 lakh persons by 2022.
• Allocation for Prime Minister’s Employment Generation Program and Credit Support Schemes has been increased three fold.
Infrastructure
• Pace of construction of PMGSY roads accelerated to 133 km roads per day in 2016-17, against an average of 73 km during 2011-2014
• Government has taken up the task of connecting habitations with more than 100 persons in left wing extremism affected Blocks under PMGSY. All such habitations are expected to be covered by 2019 and the allocation for PMGSY, including the State’s Share is Rs. 27,000 crores in 2017-18
Housing & Electrification
• Allocation for Pradhan Mantri Awaas Yojana – Gramin increased from 15,000 crores in BE 2016-17 to Rs. 23,000 crores in 2017-18 with a target to complete 1 crore houses by 2019 for the houseless and those living in kutcha houses.
• Well on our way to achieving 100% village electrification by 1st May 2018.
Sanitation & Drinking Water
• Sanitation coverage in rural India has gone up from 42% in Oct 2014 to about 60%. Open Defecation free villages are now being given priority for piped water supply.
• As part of a sub mission of the National Rural Drinking Water Programme (NRDWP), it is proposed to provide safe drinking water to over 28,000 Arsenic and fluoride affected habitations in the next four years.
Panchayati Raj Institutions
• A programme of “human resource reforms for results” will be launched during 2017-18 for human resources development in Panchayati Raj Institutions
Rural Life
• Total allocation for Rural, Agriculture and Allied sectors is 187223 crores
Youth Budget Announcements
Education
• To introduce a system of measuring annual learning outcomes in schools.
• Innovation Fund for Secondary Education proposed to encourage local innovation for ensuring universal access, gender parity and quality improvement to be introduced in 3479 educationally backward districts.
• Good quality higher education institutions to have greater administrative and academic autonomy
• SWAYAM platform, leveraging IT, to be launched with at least 350 online courses. This would enable students to virtually attend courses taught by the best faculty.
• National Testing Agency to be set-up as an autonomous and self-sustained premier testing organization to conduct all entrance examinations for higher education institutions.
Employment and Skill Development
• Pradhan Mantri Kaushal Kendras to be extended to more than 600 districts across the country. 100 India International Skills Centres will be established across the country.
• Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) to be launched at a cost of Rs. 4000 crores. SANKALP will provide market relevant training to 3.5 crore youth.
• Next phase of Skill Strengthening for Industrial Value Enhancement (STRIVE) will also be launched in 2017-18 at a cost of Rs. 2,200 crores.
• A scheme for creating employment in the leather and footwear industries along the lines in Textiles Sector to be launched.
• Incredible India 2.0 Campaign will be launched across the world to promote tourism and employment.
Poor and the Underprivileged Budget Announcements
Women and Child Development
 Mahila Shakti Kendra will be set up with an allocation of 500 crores in 14 lakh ICDS Anganwadi Centres.This will provide one stop convergent support services for empowering rural women with opportunities for skill development, employment, digital literacy, health and nutrition.
• Under Maternity Benefit Scheme 6,000 each will be transferred directly to the bank accounts of pregnant women who undergo institutional delivery and vaccinate their children.
Healthcare for all
• Government has prepared an action plan to eliminate Kala-Azar and Filariasis by 2017, Leprosy by 2018, Measles by 2020 and Tuberculosis by 2025 is also targeted.
• Action plan has been prepared to reduce IMR from 39 in 2014 to 28 by 2019 and MMR from 167 in 2011-13 to 100 by 2018-2020.
• To create additional 5,000 Post Graduate seats per annum to ensure adequate availability of specialist doctors to strengthen Secondary and Tertiary levels of health care.
• Two new All India Institutes of Medical Sciences to be set up in Jharkhand and Gujarat.
Labour Reforms
• To foster a conducive labour environment, legislative reforms will be undertaken to simplify, rationalize and amalgamate the existing labour laws into 4 Codes on (i) wages (ii) industrial relations; (iii) social security and welfare; and (iv) safety and working conditions.
• Propose to amend the Drugs and Cosmetics Rules to ensure availability of drugs at reasonable prices and promote use of generic medicines.
SCs and STs
• The allocation for Scheduled Castes has been increased by 35% compared to BE 2016-17.
• The allocation for Scheduled Tribes has been increased to 31,920 crores and for Minority Affairs to 4,195 crores.
Senior Citizens
• For senior citizens, Aadhar based Smart Cards containing their health details will be introduced.
Housing for all
• Affordable housing to be given infrastructure status National Housing Bank will refinance individual housing loans of about 20,000 crore in 2017-18.
Real Estate Sector and Promoting Affordable Housing Budget Announcements
Promoting Affordable Housing And Real Estate Sector
• Between 8th November and 30th December 2016, deposits between 2 lakh Rupees and 80 lakh Rupees were made in about 1.09 crore accounts with an average deposit size of Rs. 5.03 lakh. Deposits of more than 80 lakh were made in 1.48 lakh accounts with average deposit size of 3.31 crores.
• Under the scheme for profit-linked income tax deduction for promotion of affordable housing, carpet area instead of built up area of 30 and 60 Sq.mtr. will be counted.
• The 30 Sq.mtr. limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country including in the peripheral areas of metros, limit of 60 Sq.mtr. will apply
• For builders for whom constructed buildings are stock-in-trade, tax on notional rental income will only apply after one year of the end of the year in which completion certificate is received
• Reduction in the holding period for computing long term capital gains from transfer of immovable property from 3 years to 2 years. Also, the base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property
• For Joint Development Agreement signed for development of property, the liability to pay capital gain tax will arise in the year the project is completed
• Exemption from capital gain tax for persons holding land on 2.6.2014, the date on which the State of Andhra Pradesh was reorganized, and whose land is being pooled for creation of capital city of Andhra Pradesh under the Government scheme.
Infrastructure Budget Announcements
Transport Sector
• For transportation sector as a whole, including rail, roads, shipping, provision of 2, 41,387 crores has been made in 2017-18.
Railways
• For 2017-18, the total capital and development expenditure of Railways has been pegged at 1, 31,000 crores. This includes Rs. 55,000 crores provided by the Government
• For passenger safety, a Rashtriya Rail Sanraksha Kosh will be created with a corpus of Rs. 1 lakh crores over a period of 5 years
• Unmanned level crossings on Broad Gauge lines will be eliminated by 2020
• In the next 3 years, the throughput is proposed to be enhanced by 10%.
• This will be done through modernization and upgradation of identified corridors.
• Railway lines of 3,500 kms will be commissioned in 2017-18. During 2017-18, at least 25 stations are expected to be awarded for station redevelopment.
• 500 stations will be made differently abled friendly by providing lifts and escalators.
• It is proposed to feed about 7,000 stations with solar power in the medium term.
• SMS based Clean My Coach Service has been started ‘Coach Mitra’, a single window interface, to register all coach related complaints and requirements to be launched
• By 2019, all coaches of Indian Railways will be fitted with bio toilets.
• Tariffs of Railways would be fixed, taking into consideration costs, quality of service and competition from other forms of transport
Metro Rail Policy
• A new Metro Rail Policy will be announced with focus on innovative models of implementation and financing, as well as standardization and indigenization of hardware and software.
• A new Metro Rail Act will be enacted by rationalizing the existing laws.
• This will facilitate greater private participation and investment in construction and operation.
Road
• In the road sector, Budget allocation for highways increased from ‘ 57,976 crores in BE 2016-17 to Rs. 64,900 crores in 2017-18
• 2,000 kms of coastal connectivity roads have been identified for construction and development
• Total length of roads, including those under PMGSY, built from 2014-15 till the current year is about 1,40,000 kms which is significantly higher than previous three years
Airports
• Select airports in Tier 2 cities will be taken up for operation and maintenance in the PPP model
Broadband Highways
• By the end of 2017-18, high speed broadband connectivity on optical fiber will be available in more than 1,50,000 gram Panchayats, under BharatNet. A DigiGaon initiative will be launched to provide tele-medicine, education and skills through digital technology
Oil Reserves
• Proposed to set up strategic crude oil reserves at 2 more locations, namely, Chandikhole in Odisha and Bikaner in Rajasthan. This will take our strategic reserve capacity to 15.33 MMT
Solar Park
• Second phase of Solar Park development to be taken up for additional 20,000 MW capacities.
Electronics Manufacturing
• For creating an eco-system to make India a global hub for electronics manufacturing a provision of Rs. 745 crores in 2017-18 in incentive schemes like M-SIPS and EDF.
• A new and restructured Central scheme with a focus on export infrastructure, namely, Trade Infrastructure for Export Scheme (TIES) will be launched in 2017-18.
Financial Sector Budget Announcements
Foreign Investments
 Foreign Investment Promotion Board to be abolished in 2017-18 and further liberalization of FDI policy is under consideration
Derivative Market
• An expert committee will be constituted to study and promote creation of an operational and legal framework to integrate spot market and derivatives market in the agricultural sector, for commodities trading. e- NAM to be an integral part of the framework.
• Bill relating to curtail the menace of illicit deposit schemes will be introduced. A bill relating to resolution of financial firms will be introduced in the current Budget Session of Parliament. This will contribute to stability and resilience of our financial system
Financial Institutions
• A mechanism to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts will be introduced as an amendment to the Arbitration and Conciliation Act 1996.
• A Computer Emergency Response Team for our Financial Sector (CERT-Fin) will be established
• Government will put in place a revised mechanism and procedure to ensure time bound listing of identified CPSEs on stock exchanges. The shares of Railway PSEs like IRCTC, IRFC and IRCON will be listed in stock exchanges.
• Propose to create an integrated public sector ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies
• A new ETF with diversified CPSE stocks and other Government holdings will be launched in 2017-18
• In line with the ‘Indradhanush’ roadmap, 10,000 crores for recapitalization of Banks provided in 2017-18
• Lending target under Pradhan Mantri Mudra Yojana to be set at 2.44 lakh crores. Priority will be given to Dalits, Tribals, Backward Classes and Women.
Digital Economy Budget Announcements
Digital Economy
• 125 lakh people have adopted the BHIM app so far. The Government will launch two new schemes to promote the usage of BHIM; these are, Referral Bonus Scheme for individuals and a Cash back Scheme for merchant.
 Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly.
• A Mission will be set up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards.
• A proposal to mandate all Government receipts through digital means, beyond a prescribed limit, is under consideration.
• Banks have targeted to introduce additional 10 lakh new POS terminals by March 2017. They will be encouraged to introduce 20 lakh Aadhar based POS by September 2017
• Proposed to create a Payments Regulatory Board in the Reserve Bank of India by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems.
Promoting Digital Transactions
• Under scheme of presumptive income for small and medium tax payers whose turnover is upto 2 crores, the present, 8% of their turnover which is counted as presumptive income is reduced to 6% in respect of turnover which is by non-cash means.
• No transaction above Rs. 3 lakh would be permitted in cash subject to certain exceptions.
• Miniaturized POS card reader for m-POS (other than mobile phones or tablet computers), micro ATM standards version 1.5.1, Finger Print Readers / Scanners and Iris Scanners and on their parts and components for manufacture of such devices to be exempt from BCD, Excise/CV duty and SAD.
Public Service Budget Announcements
• The Government e-market place which is now functional for procurement of goods and services.
• To utilize the Head Post Offices as front offices for rendering passport services.
• A Centralized Defence Travel System has been developed through which travel tickets can be booked online by our soldiers and officers.
• Web based interactive Pension Disbursement System for Defence Pensioners will be established.
• To rationalize the number of tribunals and merge tribunals wherever appropriate.
• Commemorate both Champaran and Khordha revolts appropriately.
Prudent Fiscal Management Budget Announcement
• Stepped up allocation for Capital expenditure by 25.4% over the previous Year
• Total resources being transferred to the States and the Union Territories with Legislatures is 4.11 lakh crores, against 3.60 lakh crores in BE 2016-17
• For the first time, a Consolidated Outcome Budget, covering all Ministries and Departments, is being laid along with the other Budget documents.
• FRBM Committee has recommended 3% fiscal deficit for the next three years, keeping in mind the sustainable debt target and need for public investment, fiscal deficit for 2017-18 is targeted at 3.2% of GDP and Government remains committed to achieve 3% in the following year.
• Net market borrowing of Government restricted to 3.48 lakh crores after buyback in 2017-18, much lower than 4.25 lakh crores of the previous year.
• Revenue Deficit of 2.3% in BE 2016-17 stands reduced to 2.1% in the Revised Estimates. The Revenue Deficit for next year is pegged at 1.9% , against 2% mandated by the FRBM Act.
Tax Proposals Budget Announcements
Personal Income-Tax
• Existing rate of taxation for individual assesses between income of 2.5 lakhs to 5 lakhs reduced to 5% from the present rate of 10%.
• Surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between 50 lakhs and 1 crore.
• Simple one-page form to be filed as Income Tax Return for the category of individuals having taxable income upto 5 lakhs other than business income.
• Appeal to all citizens of India to contribute to Nation Building by making a small payment of 5% tax if their income is falling in the lowest slab of 2.5 lakhs to 5 lakhs.
Goods and Services Tax
• The GST Council has finalized its recommendations on almost all the issues based on consensus on the basis of 9 meetings held.
• Preparation of IT system for GST is also on schedule.
• The extensive reach-out efforts to trade and industry for GST will start from 1st April, 2017 to make them aware of the new taxation system.
Measures for Stimulating Growth Budget Announcements
• Concessional withholding rate of 5% charged on interest earned by foreign entities in external commercial borrowings or in bonds and Government securities is extended to 30.6.2020. This benefit is also extended to Rupee Denominated (Masala) Bonds.
• For the purpose of carry forward of losses in respect of start-ups, the condition of continuous holding of 51% of voting rights has been relaxed subject to the condition that the holding of the original promoter/promoters continues. Also the profit (linked deduction) exemption available to the start-ups for 3 years out of 5 years is changed to 3 years out of 7 years.
• MAT credit is allowed to be carried forward up to a period of 15 years instead of 10 years at present.
• In order to make MSME companies more viable, income tax for companies with annual turnover upto Rs. 50 crore is reduced to 25.
• Allowable provision for Non-Performing Asset of Banks increased from 7.5% to 8.5%. Interest taxable on actual receipt instead of accrual basis in respect of NPA accounts of all non-scheduled cooperative banks also to be treated at par with scheduled banks.
• Basic customs duty on LNG reduced from 5% to 2.5%.
Transparency in Electoral Funding Budget Announcements
• Need to cleanse the system of political funding in India.
• Maximum amount of cash donation, a political party can receive, will be Rs. 2000/- from one person.
• Political parties will be entitled to receive donations by cheque or digital mode from their donors.
• Amendment to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that the Government of India would frame in this regard.
• The electoral bonds, which will be issued by notified banks, can be redeemed by recognized political parties within a prescribed time-limit.
• Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act.
• Existing exemption to the political parties from payment of income-tax would be available only subject to the fulfillment of these conditions.
Ease of Doing Business Budget Announcements
• Scope of domestic transfer pricing restricted to only if one of the entities involved in related party transaction enjoys specified profit-linked deduction
• Threshold limit for audit of business entities who opt for presumptive income scheme increased from Rs. 1 crore to Rs. 2 crores. Similarly, the threshold for maintenance of books for individuals and HUF (Hindu Undivided Family) increased from turnover of 10 lakhs to 25 Lakhs or income from 1.2 Lakhs to 2.5 Lakhs
• Foreign Portfolio Investor (FPI) Category I & II exempted from indirect transfer provision. Indirect transfer provision shall not apply in case of redemption of shares or interests outside India as a result of or arising out of redemption or sale of investment in India which is chargeable to tax in India
• Commission payable to individual insurance agents exempt from the requirement of TDS subject to their filing a self-declaration that their income is below taxable limit
• Under scheme for presumptive taxation for professionals with receipt upto 50 lakhs p.a. advance tax can be paid in one instalment instead of four
• Time period for revising a tax return is being reduced to 12 months from completion of financial year, at par with the time period for filing of return.
• Also the time for completion of scrutiny assessments is being compressed further from 21 months to 18 months for Assessment Year 2018-19 and further to 12 months for Assessment Year 2019-20 and thereafter.
RAPID Budget Announcements
• Maximize efforts for e-assessment in the coming year.
• Enforcing greater accountability of officers of Tax Department for specific act of commission and omission.
Budget 2017 proposals pivot around elimination of black money, promotion of a digital economy and easing norms for attracting foreign investment in India.
The spirit of the Budget proposals for 2017-18 are to ensure better consolidation and smooth implementation of government’s developmental and various social schemes though in some sense it may not be high-sounding. The Budget has provided much higher allocations for infrastructure, Pradhan Mantri Gram Sadak Yojana, rural housing, Digital India and host of other sectors as its focus has been to ensure timely implementation of all developmental programmes of the government. But a larger plan to create jobs on a sustainable basis and overcome the demand constraint is missing.

Contract farming


Contract farming

Contract farming is agricultural production carried out according to an agreement between farmers and a buyer, which places conditions on the production and marketing of the commodity.
Contract farming (CF) is defined as forward agreements specifying the obligations of farmers and buyers as partners in business. Legally, farming contracts entail the sellers’ (farmers’) obligation to supply the volumes and qualities as specified, and the buyers’ (processors’/ traders’) obligation to off-take the goods and realize payments as agreed.
Furthermore, the buyers normally provide embedded services such as: upfront delivery of inputs (e.g. seeds, fertilizers, plant protection products); pre-financing of input delivery on credit (explicit rates not always charged; see insert); and other non-financial services (e.g. extension, training, transport and logistics).
Types of contract farming
Several types of contracts are distinguished according to the sharing of risks and specification of contract terms. From the management view point, two types of contracts are determined.
 Market specification contract where contract is a pre-harvest arrangement that binds the firm and grower to a particular set of conditions governing the sale of the crop. These conditions often specify price, quality and timing of delivery of the produce.
 Resource providing contract where the contract oblige the contracting firms to supply production inputs, extension or credit in exchange for a marketing arrangement.
• Management and income guaranteeing contract where contract includes the production and marketing stipulations of the former two types. In addition, market and price risks were transferred from farmers to firm and the farmer is assured of a certain level of revenue. But the contracting firms take a substantial part of the managerial responsibility of the farmer.
Advantages
• Easy access to inputs by farmers and assured access to commodities by contract companies.
• Guaranteed market for farmers. This gives farmers the comfort level to be able to focus on what they are good at (farming).
• Farmer access to cutting-edge production knowledge from contract companies. In order to get good quality commodities, contract companies provide the best varieties or breeds and advisory services from production all the way to marketing.
• Enormous opportunities for farmers to transfer good agricultural practices to other commodities outside contract arrangements. Contract farming inculcates a certain level of attention to detail.
• Rural employment creation through supporting the industrialisation of growth points.
• Farmers’ price risk is often reduced as many contracts specify prices in advance
• Contract farming can open up new markets which would otherwise be unavailable to small farmers
Disadvantages
• While contract farming tends to guarantee a market, contractors keep prices very low in order to maximise profit.
• Contract companies have the final say on quality and can reject ‘sub-standard’ commodities which they can allocate a lower grade. Farmers will just accept because there is nothing to compare with.
• Contract arrangements reinforce a dependency syndrome. It is not easy for farmers to get out contract arrangements.
• Most contract arrangements promote monoculture.

Concept of Terminal Market


Concept of Terminal Market

Terminal Market is a central site, often in a metropolitan area serves as an assembly and trading place for commodities. Terminal markets for agricultural commodities are usually at or near major transportation hubs. The term is also used for markets in other commodities such as metals and bullion. The Terminal Markets (TM) have been conceptualized and introduced as a new item under the National Horticulture mission (NHM), which will be implemented in a Public Private Partnership (PPP) mode.
The main objectives of setting up Terminal Markets Complex (TMC) are:
• To link the farmers to the markets by shortening the supply chain of perishables and enhance their efficiency and thus increase farmers income.
• Provide professionally managed competitive alternative marketing structures that provide multiple choices to farmers for sale of their agricultural produce.
• To drive reforms in the agricultural marketing sector resulting in accelerated development of marketing and post harvest infrastructure including cool chain infrastructure in the country through private sector investment.
• To bring transparency in the market transactions and price fixation for agricultural produce and through provision of backward linkages to enable the farmers to realise higher price and thus higher income to the farmers.
The State Government approves the number and indicative location of the TMCs based on the demand, economic viability, commercial considerations.
Who all are eligible?
TM project would be built, owned and operated by the selected Private Enterprise (PE) through Competitive Bidding process. PE includes individuals, Group of Farmers/Growers/Consumers, Partnership/ Proprietary firms, Companies, Boards, Corporations, Co-operatives, Producer Organisations and Self Help Groups. The PE could also be a consortium of entrepreneurs from, inter-alia, agri-business, cold chain, logistics, warehousing, agri-infrastructure and related background. PE will be selected through competitive bidding process. The PE has full freedom to fix the service charges based on commercial and viability considerations. The service levels as prescribed in the OMDA agreement will have to be met by the PE.
The stakeholders involved are the Private Enterprise, State Government / State Horticulture Mission (SHM) and National Horticulture Mission (NHM). The State Government can participate in the equity of the project either in the form of direct investment or by offering the assets in the form of existing market / area (land) etc. However, the combined total equity of the State Government and NHM cannot exceed 49% of the project equity.
Tradable commodity
The commodities to be marketed by the TMC will include all perishables, interalia, fruits, vegetables, flowers, aromatics, herbs, meat, poultry etc. Nonperishables can also be handled in the TMC. However, the proportion of Non- Perishables shall not exceed 15% of the total through put of the market. Similarly, the proportion of non horticultural products within the perishable commodities shall not exceed 15% of the total through put of the market.
Monitoring mechanism of it
The State Horticulture Mission will monitor the successful implementation of the Terminal Market Projects through the Nodal Officer. The Nodal Officer will take the help of PMA of each terminal market for this purpose. The State Horticulture Mission will submit monthly reports on the progress of implementation of TMs to the Mission Director, National Horticulture Mission.
Role of state government
The State Government would play a pro-active role and designate, an officer of the rank of Secretary to the Government as Nodal Officer to function under an SLEC of the SHM for the purpose of terminal market complexes. The responsibility of the Committee would include.
• Approval of the number and location of the terminal market complexes;
• Approval of the bidding process and implementation modalities of the project;
• Technical Financial appraisal of the detailed business plan of the complex;
• Regulatory Clearances, issue of licenses and granting of permission for facilitating establishment and operation of market complexes and the collection centres;
• Identification of land and when necessary provision of Government land for TM and CC.
• Convergence with other development programmes for infrastructure support to TM/CC such as road connectivity, power and water supply;
• May participate in the equity of the project either through direct funding, land/ infrastructure support and/ or transfer of existing market assets.
• Selection of the Private Enterprise through an open, transparent competitive bidding process, and entering into Operation, Management, Development Agreement with the successful PE.
• Ensure the involvement of Panchayati Raj Institutions in establishing backward linkages to the Collection Centres.
• Encourage the involvement of agri-clinics and agri-business centres under each collection centre that can play an important role in establishing the backward linkages and organizing the farmers.
• The Project will be awarded to the bidder with the request for least equity participation.
• Make recommendations to Central Government for the release of equity and for its disinvestment.
• Set up institutional mechanism for resolution of disputes, if any, arising out of the implementation of the terminal market complex.
The State Government would play a pro-active role and designate an officer at the level of Secretary to the State Government as Nodal Officer who will be the single contact point for the PE and other coordination work. The State Level Executive Committee of the State Horticulture Mission will coordinate all aspects relating to the TMC project. The Nodal Officer will also be nominated as a member of the SLEC for this purpose.

Food Park Scheme


Food Park Scheme

The Mega Food ParksScheme aims to provide a mechanism to bring together farmers, processors and retailers and link agriculture production to the market so as to ensure maximization of value addition, minimization of wastages and improving farmers’ income.
Salient Features of the Scheme
The Scheme aims to facilitate the establishment of a strong food processing industry backed by an efficient supply chain, which would include collection centers, primary processing centers and cold chain infrastructure. The food processing units, under the Scheme, would be located at a Central Processing Centre (CPC) with need based common infrastructure required for processing, packaging, environmental protection systems, quality control labs, trade facilitation centers, etc.
It includes creation of infrastructure for primary processing and storage near the farm in the form of Primary Processing Centres (PPCs) and Collection Centres (CCs) and common facilities and enabling infrastructure like roads, electricity, water, ETP facilities etc. at Central Processing Centre (CPC). These PPCs and CCs act as aggregation and storage points to feed raw material to the food processing units located in the CPC.
The spirit of the guidelines of the Mega Food Parks Scheme is to facilitate setting up of only food processing industries. Accordingly, only food processing industries that make food products fit for human/animal consumption may be permitted to be set up in the Mega Food Parks. Packaging facilities of food products as ancillary to the food processing industries may also be allotted land in the Mega Food Parks.

Functioning of Mega Food Parks is closely monitored by the Ministry through a well-established mechanism as per the scheme guidelines. This includes detailed scrutiny of the periodical progress reports of the project by the Programme Management Agency (PMA) and the Ministry, verification of the bills by the Project Management Consultant (PMC) before release of the funds from the bank account maintained for the purpose, site visits of the projects by the PMA and Ministry officers, periodic review meetings of the progress of the projects at the level of the senior officers and Minister in the Ministry etc. Ministry monitors each project very closely and regularly.

Praveen

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