Reading the Union Budget: ten terms that decide where the money goes

The Union Budget, presented by the Finance Minister every year — usually on 1 February — is the government’s plan for what it will earn and spend in the financial year that begins on 1 April. These are the terms you will hear most often.

Fiscal deficit

The gap between the government’s total spending and its total income excluding borrowings. It is roughly how much the government must borrow in the year, and is usually quoted as a percentage of GDP.

Revenue deficit

The shortfall when day-to-day (revenue) spending exceeds revenue income. It means borrowing to pay running costs, which economists treat as a warning sign.

Capital expenditure (capex)

Spending that creates assets — highways, railway lines, ports, hospitals. It tends to support growth for longer than routine spending.

Revenue expenditure

Spending that does not create assets: salaries, pensions, interest payments and subsidies.

Direct and indirect taxes

Direct taxes, such as income tax and corporation tax, are paid by the person or company that earns. Indirect taxes, such as GST and customs duty, are built into the price of goods and services.

Cess and surcharge

Extra levies on top of a tax, collected for specific purposes. Unlike most central taxes, they are not shared with the states.

Devolution

The share of central taxes passed on to state governments, based on the recommendations of the Finance Commission.

Disinvestment

Money raised by selling the government’s stake in public-sector companies.

Finance Bill

The bill that turns the Budget’s tax proposals into law. Changes to income-tax slabs, for example, take effect through it.

Appropriation Bill

The bill that gives the government legal authority to withdraw money from the Consolidated Fund of India for its spending.

For households, the most useful Budget document is usually the memorandum that explains the Finance Bill, because that is where every tax change is spelled out. Our Business section covers each year’s Budget in detail.