The file highlights the importance of the macro-economics related to a country's budget. Lot of guidance has been taken from www.mrunal.org where the concepts have been very lucidly explained.

2. Budget Comprises of
• A. Annual Financial Statement (AFS)
• B. Demands for Grants (DG)
• C. Appropriation Bill As required by Constitution
• D. Finance Bill
• E. Memorandum Explaining the Provisions in the Finance Bill, 2013
• F. Macro-economic framework for the relevant financial year
• G. Fiscal Policy Strategy Statement for the financial year As required by
• H. Medium Term Fiscal Policy Statement FRBM
• I. Medium Term Expenditure Framework Statement
• J. Expenditure Budget Volume-1
• K. Expenditure Budget Volume-2
• L. Receipts Budget
• M. Budget at a glance
• N. Highlights of Budget
• O. Status of Implementation of Announcements made in Finance Minister’s Budget
Speech of the previous financial year.

3. OVERVIEW OF THE NATION
PER CAPITA INCOME CURRENT DEFICIT
2011-12 2012-13 RISE 2011-12 2012-13
Rs.68,747 Rs.61,564 11.7 4.2% 5%
GDP
2011-12 2012-13 2011-12 2012-13 2013-14
6.2 5.0 5.9 5.2 4.8
GDP (Next 510 years) FISCAL DEFICIT
NEXT 5 YEARS NEXT 10 YEARS
8.00(0.5) 8.00(-0.8)

4. Fiscal Deficit
• How does the government plan to meet the shortfall of Rs.5.14 Lakh crore?
• Borrowings
• Taxes
• Printing Notes

5. Printing Notes ?
• Suppose that there is only one commodity that everyone needs to buy in order to live a good life say
wheat.
• Total Money in the economy – Rs. 1 crore.
• Total Production - 10,000 quintals of wheat every year.
• Total Population - 25,000
• Since this Rs. 1 crore is spent to purchase ten thousand quintals of wheat, the cost of wheat is Rs. 1,000
per quintal.
• Now suppose to repay some of its debt, the Government decides to print some new currency notes worth
Rs. 10 lacs. So money in economy increases to Rs. 1.1 crores.
• Since the amount of wheat produced hasn't increased, each tonne of wheat now costs Rs. 1,100, a 10%
increase.
• So we have just seen that the effect of debt monetization is "inflation."
• Is Fiscal deficit always bad

8. Twin Deficit effect
• An economy is deemed to have a double
deficit if it has a current
account deficit and a fiscal deficit. In
effect, the economy is borrowing from
foreigners in exchange for foreign-made
goods. Traditional macroeconomics predicts
that persistent double deficits will lead to
currency devaluation/depreciationthat can be
severe and sudden.

9. Current A/c Deficit

10. Gold -Current Account Deficit (CAD)
• There are two main villains responsible for India’s current account deficit: 1) gold import 2)
crude oil import.
Why do people invest in gold?
• To invest in share market / mutual funds, you need PAN CARD + DEMAT Account.
• Inflation is high. So the profit (return) offered on savings, FD = not attractive.
• When you combine these factors: most people prefer to invest in gold / silver.
• Rising demand for gold is only a “symptom” of more fundamental problems
• Gold is a non-productive asset
How to stop gold rush?
• One solution = increase duty on gold import. But problem= people will start smuggling. Then
Government will not get any import duty at all.
Therefore, Economic survey suggests following things :-
• Government should curb the inflation.
• Second problem is lack of financial instruments available to the average citizen, especially in
the rural areas. (they don’t have PAN card, DEMAT account or knowledge ). Initiatives for
financial inclusion.
• Introduction of inflation indexed bonds.

13. What is FRBM ?
• Act Introduced in Lok Sabha in December 2000.
• Objectives include:
1. Long-term macroeconomic stability
2. Inter-generational equity in fiscal management.
• It aimed at:
1. Reducing revenue deficit
2. Reducing gross fiscal deficit
3. Reducing the Public debt
4. No Borrowing from the RBI

14. No Clear Road Map For GST
 Release of first tanche of Rs.9,000 crore as CST compensation for states
 Urged them to help the central roll out the Goods & Service Tax(GST).
 But expert do not see the new regime being rolled out any time soon.
 No clear road map on GST, compared to previous year’s budget which
talked about GST network establishments”.

15. On Infrastructure Front

16. PC PROMISES
MORE ……………….
 ON GROWTH – Time for prudence, restrain & patience.
 ON FISCAL DEFICIT NUMBERS – The numbers are absolutely
credible. Subsidies would reduce.
 ON GST & DTC – DTC bill by the end of the budget session. No
deadline for GST.
 ON SPECTRUM AUCTION - As far as Spectrum are concerned a
note of the fact that this year the Spectrum auction did not yield the
amount.
 ON DBT- The food subsidy & the fertiliser subsidy will be among the last
subsidies to be transferred.
 Vodafone – Matter may go for conciliation

17. FM Walks the Talk,Will RBI Follow?
STAGE SET FOT RATE CUTS
Lower Inflation Jan-12 7.23
WPI(%) Jan-13 6.62
Better government finance 2012-13(RE) 5.2
Fiscal deficit,as % of GDP 2013-14(BE) 4.8
No cut in repo rate
By RBI since October 2011.

18. WILL THIS BUDGET HELP CONGRESS
WIN THE NEXT
ELECTION ?
TO ASPIRING TO THE POOR OF
TO WOMEN TO Middle Class
YOUTH INDIA
2000 Tax Benefit / To introduce Direct
Nirbhaya Fund / Skill development
Benefits Transfer(DBT)
Women’s bank institutions Housing Loan. scheme

19. ExpERt’s REviEw
S.NO NAME DESIGNATION REVIEW
1. KV KAMATH Chairman,Infosys Chidambaram has clearly addressed
the needs of the whole
development process & that
includes sustainable growth.
2. SUNIL SINGHANIA Head,Equities, The STT has been slashed which is
Reliance Mutual Fund an incentive for the small investors.It
also opens a door for many other
reforms,like future interest rate cuts
etc.

20. REPORT CARD
S.NO PARTICULAR/SUBJECT REMARKS RATING (OUT OF 10)
1. DEFICIT Fiscal deficit under 8
control.But some
targets steep
2. GROWTH Boost to investment. 7
3. INFLATION Price rise a worry. 6
4. INVESTOR Markets jittery.But 6
worry on TRC
clarified.
5. POLITICS Big No to populism. 8
OVERALL RATING-7/10

21. Need to Focus on Inclusive
Growth Strategies
 By 2021,64% of population will be in working age(15-59 years).
 Demographic dividend - only if young are healthy, educated & skilled.
 Income inequality & social stresses grow.
 Economic Survey says-India faces five interlocking threats as follow
1. Climate change.
2. Food security.
3. Water security.
4. Energy security.
5. Managing urbanisation.

22. • FM throwing a stone at SUV…………..