Analysis & Discussion of Union Interim Budget 2024 -25

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have some of managed to squeeze in in this classroom and to all of all of our friends who are in the other classroom watching One you are late and second don't be disappointed I'll be taking up your queries as well okay Cho this is the session on budget first you must know why are you here if you are here because you think that I will tell you about some scheme announced in the budget and therefore you will be able to remember that then you are in the wrong class this is not a class for getting to know about some schemes or some announcements or what was the allocation for certain sectors this is not the class for that in fact when you read budget when you study budget it should not be with the objective of or with ANP as many of you are my students you know I repeat this several times in the class there are one lak facts being generated every moment one you can't remember and second you don't have to remember all of them most of them are useless read something for the purpose of only reading it not remembering it so when you are reading budget when you're coming ac across budget try to visualize the concepts that you have learned in the class try to visualize those Concepts in action this should be your objective when you read budget I don't know where where your economics syllabus is at the moment but because this is a budget class I'll have to assume some things I mean these are the basic things that you should know if you don't yet know you are expected to know by yourself in some time fcal policy normally we conduct that chap we do that chapter at the end of the sessions but you have studied fiscal policy you know about government's taxes government's expenses government's borrowings deficits from where does government Finance its deficit you know these things budget presents you an opportunity to recap all those things in front of your eyes see those things happening in front of your eyes Revenue expenditure Capital expend Capital effective Revenue deficit it is your this budget is that document that helps you to understand things by looking at them in action it is not some document where you simply try to remember things eom surve monent affs standing you are reading pt35 or budget or economic survey or any of these facts documents thinking that you will be able to remember some fact and that fact will be asked in the exam and hence you'll be successful approach he read it with the objective of trying to learn the concepts bringing yourself in that situation that if questions are asked with respect to these topics you shall be able to answer them question in the exam will be arrange the following deficits in order of their magnitude fisc Revenue please make sure that your objective of coming to this class is settled you have this Clarity in your mind that you're not going to learn some fact rather you are going to become capable to be able to answer questions which may have some facts in them this must be the objective of attending these sessions s 45 48 minutes that would be far more productive as attending this class there are 5 minute summaries of budget everywhere on YouTube on on various websites you read that that would be a better use of time fact focus on different aspects of budgeting we are going to basically speaking we are going to recap the entire chapter of government budgeting with the example of the present budget so current budget this is what we are going to do in this chapter all right there will be some polity parts I'm not going to cover those parts some parts certainly I'll but not theti Parts appro okay let's quickly start now so we have budget I'm sure everybody knows article 112 it defines annual financial statement AFS what does article 112 read it reads that the president [Music] shall president causes to be laid down before both houses of Parliament with respect to each Financial year main part start estimates of expenses and receipts expenses must be such that number one they separate the expenses charged on Constitution and other expenses on the Consol fund of India CFI and other expenses Clause that expenses must be such that they are separated that they clearly show differences between expenses on revenue account and other account Revenue expenses and other expenses that means when you read this thing now you get to know K by when you look at annual financial statement there is going to be one estimates future respect pertain estimates of something you'll come across various numbers which are ultimately estimates budget estimates revised estimates advanc estimate num budget estimates when the government is presenting budget present budget 2024 1 5 2024 for which year for the year 2024 25 for the coming Financial year that means estimates for the year to come estimates of this particular year these are called as budget estimates mes there is an ongoing year FY 2324 is ongoing at this moment this year's budget would have been announced one year before last year announce with respect to last year now we have some Advanced idea as to how much money government would have collected or is probably going to collect so government will revise those estimates they become revised estimates so broadly speaking budget estimates revised estimates budget expect that we are going to let's say collect 10 lakh CR rupes of taxes 10 months have passed and we have yet collected let's say 6 lakh CR rupees of taxes that means in the remaining two months we expect that we are probably going to be at 8 lakh crores hence what we are going to do is we're going to revise our estimate presented during last year budget that becomes Revis estimate that is one set of numbers that you see budget estimates Revis estimates set of numbers M then next Clause expenses must be such that they are separated on Revenue account and capital account on other account that means when you look at all the estimates of expenses and receipts you are going to see that there are something called as Revenue receipts Revenue expenses and capital receipts Capital expenses then naturally the question should be that what is revenue what is capital government natural entity artificial entity government is an artificial entity we create government for what do why do we create government so that government can provide certain Goods to us which we fail to provide to ourselves and therefore we create somebody with adequate Authority that you have this Authority you exercise Authority and perform this responsibility for us so we create government for this very purpose government by the virtue of being government in its status as being the government from where and how much money does the government collect and from and where and how much money does the government spend that is basically your revenue account Revenue expenses and revenue receipts government collects taxes because we have authorized the government to collect taxes from us money that government collects as its status its Authority as Government taxes you pay fees to the government some fines to the government all these are Revenue receipts of the government right receipt Sim as Government expenses Revenue expenses so we have Revenue receipts Revenue expenses versus capital capital receipts Capital expenses anything that has an effect on assets and liabilities of the government we call them as capital expens is capital seats repeatedly this question has been asked in prelims and surprisingly was asked last to last year in Mains as well that differentiate between revenue account and capital account on the budget uh in the budget of the government but in prelims this is a very common question which of the following is a revenue expense which of the following is a tax non- tax revenue of the government which of the following is a which of the following is a non debt creating Capital expense of the government non debt reducing Capital expense of the government Capital Revenue classification so you must know these things Capital Revenue rightfully colle meaning in its status as a government upsc you'll pay some fees to the government fees that the government collects fines that nobody else can collect a fine only an authorized entity can collect FES government collects money Revenue receed in its right as a govern government as its right as a government in its Authority as a government that is revenue receipt tax receipts non- tax receipts government spends money because it is responsible to spend some money it spends money on payment of salary to its staff pensions to its staff defense expenses interest payments all these are examples of government's Revenue expenses similarly Capital expenses Capital seats asset liability any expenditure which results in increase in government's assets or a reduction in government's liability asset liability something from which you expect to generate an income in future versus liability something government spends money on something which sorry government spends money which is of the nature that it is creating some asset assets for the government government expenditure what kind of expenditure which is creating some assets for the government capital expenditure or government spends money which results in reduction of liabilities of the government asset creating or liability reducing that becomes capital expenditure opposite Capital receip receive government gets money government of India disinvest from some company disinvestment to government will receive money or not it receives money but that result that is because of fall in its assets its assets reduceed it it receives money government borrows money government is borrowing money it liability is increasing or decreasing increasing obviously government receives money but this money is received on account of incurring of liability by the government so liability increasing receipt that becomes the capital receipt so any receipt of the government which is on account of either increase in liabilities or a fall in assets becomes your Capital the government the budget which is the annual financial statement is basically all this record of all this estimate of how much money does the government expect to collect and spend on these various purposes Revenue purposes and capital purposes expect colle spend that becomes our basically that is what is part of our annual financial statement what we are going to do now we are going to look at the budget we'll see number one what are the major sources of receipts of the government Maj budget specifically what are the major sources of receipt for the government taxes non- taxes capital and then we look at what are major expenses of the government for what purpose is government spending money sches example announce there is not much announcement in the budget but more of a continuation of the old scheme but yes we look at the examples and try to see that what are all these expenses of the government what are all these receipts of the government sir please explain receipt receipt sir government receipt government has received some money that is called as received you pay taxes to the government government receives money government borrows money from the market government again receives money receive there are different kinds of receipts of the government sources say arrange is arranging money from various sources it is borrowing some money it is selling some PSU and from that it collect some money some PSU earn some profit and because government is owner therefore government earns some money in form of dividends government collects taxes you pay your fees you you are going to pay some fees when you fill your upsc form government collect some money from that all these are receipts of the government one important thing this was a interim budget difference interim budget or normal budget May or more importantly vote on account what is a vote on account what is an interim budget does anybody know the difference specifically otherwise I'll explain you know what is an interim budget versus what is a vote on account anyone who knows the specific answer sh the remaining period uh that is called as otan account which is been voted in Parliament does vter account have a constitutional basis yes yes sir huh yes sir yes interim budget does it have a constitutional basis no this question has been in PRS I think it was 2013 or 14 but vote on account versus interim budget interim budget full-fledged budget interim budget vote on account full-fledged this government is presenting the entire document all all policies its new steps that is going to take for the year to come it may announce some changes in taxes it may continue the same taxes it may announce some new scheme some new areas of focus anything it may announce those things budget becomes a document where government makes huge announcements with respect to where it is going to spend money or collect money from that is a full-fledged budget versus an interim budget now there is no such formal term called as interim budget it is more of a practice in the election year because the government should not government should not present a budget which pertains to the entire year it should not announce some new schemes or some changes in tax laabs the government still because it has to present a budget the government still presents a budget that is called as an interim budget as far as it is concerned an interim budget may continue for the en because does the Constitution require anything with respect to policy announcements contion simply requires article one2 requires that the government simply present a statement of expenses and receipts which are divided on a revenue account and capital account and as long as the government does that it prevents it presents the annual financial statement there is nothing that is unconstitu that is happening but because of convention government should not be presenting a full-fledged budget in an election year hence government normally refrains from making any big bang announcements in an interim budget so an interim budget is different from a full-fledged budget only in the the extent extent as in not the extent for 2 months or 4 months difference because in an interim budget government generally refrains from such announcements that is what an interim budget is versus vote on account now vote on account is constition in on account article 116 what does article 116 read it says that pending the authorization of the required bills by Parliament government presents that appropriation Bill finance bill all these different bills po aspect please read it yourself government presents authorization by the parliament for appropriation government says we have to appropriate meaning withdraw some money from CFI and therefore you the parliament please authorize us to withdraw that money Parliament will authorize the government only after proper discussion on on all those Provisions but maybe the discussion does not take place in time maybe the voting does not happen in in time therefore pending all that voting government immediately would want Parliament to authorize some expenses meaning for a part of financial year government will seek a vote on account in financial year Financial year versus part of financial year government seeks a vote on account that simply allow us to withdraw money for some time period so a vote on account particularly pertains to a part of fi versus is a interim budget it generally is expected to put into part of FY but it can be for the entire year differ vote on account versus interim budget and a full-fledged budget vote on account is a constitutional term as in one article 116 this question has been asked in the exam that is in prelims I'm sure now you understand you'll be able to mark the correct answer now a vot on account is only and only seeking authorization from the parliament to spend money versus AFS annual Financial it is a estimate of expenses and receipts versus V on account it is a authorization sought from the parliament to spend some money difference government presents to the Parliament that we expect that we are going to collect these much taxes this will be a tax La for future this is the scheme on which we going to spend money it presents all its proposals its estimates for the coming year that is a budget or an interim budget if the extent is less versus whate on account government asks the Parliament that in next two months 3 months four months we may have to spend this much money so before you people vote on anything discuss anything at least because we have to withdraw money to spend therefore please give us authorization to spend this money that is what vote on account is vot on account pertains only to expenses for a part of finan Financial year versus interim budget pertains to both expense side and receipt side tax side expenditure side and that may well continue for the entire year as well to main difference okay a obviously the numbers not important more important is this table as in all the components of budget annual annual financial statement estimate of expenses and receipts where expenses are required to be separated on revenue account and other account the practice that has developed is one other means Capital therefore we separate expenses on revenue account and capital account and second it is not just receipts it is not just expenses but also receipts also that are separate on Capital account and revenue account so when you look at the budget you'll come across numbers like this Revenue receipts of the government revenue receipts of the government you have got tax revenue non- tax revenue Capital receipts recovery of loan other receipts borrowing and other liabilities specifically budget document discuss what is that that the reason why you are here so now application how did we how did I explain that what are capital receipts what goes into Capital account anything that affects assets and liabilities all right Capital receipts what goes into Capital receipts and or or or any money received by the government receipt any money received by the government which is on account of an increase in government's liabilities government borrows money it receives money or on account of reduction of government's asset receipts government of India lends money to government of up government of India is spending money or receiving money spending money what kind of expenditure is this asset creating or liability reducing asset creating why because government of India lends money to loan to loan capital expenditure asset create up government repays that money to central government what is happening to value of Center's assets last year and this year up government repays some part of that loan Modi G lend 100 CR Rupees to Yogi G Yogi G has returned back principal amount return back 20 CR rupees this year central government receives money or not receipt what kind of receipt would this be Capital receipt or Revenue receip value of central government's asset was 100 CR rupees earlier because it has lent 100 rupes now because up government has repaid 20cr that means what has happened to value of central government's asset reduced to 80 rupes Lo loan value was 100 CR loan value has reduced to 80 CR because the borrower has repaid the principal amount that means I have received money 20 CR but my assets have reduced in value is it affecting my asset or not asset reducing I am receiving money or not receiving money central government is receiving money but on account of reduction of its asset it is capital receipt recovery of loan Capital receip central government recovers loans had lent out money and is recovering that money becomes a capital rece questions so they make one question necessarily on this part which of the following is capital SE Revenue receipt non so recovery of loan becomes what kind of receipt Capital receipt right other receipts this is basically disinvestment receipt government of India sells some ownership in OMC OMC is a central government company let's say it is right now owned 100% by central government central government sells 10% of ownership in OMC central government sells ownership meaning it will again receive money or not but money received on account of reduction of assets assets disinvestment receipt this is basically this other receipt borrowing and other liabilities government of India borrows money liability increases so liability increasing receipts are obviously Capital receipts right total expenditure of the government again Revenue expense Capital expense Revenue expense would be salary expense pension expense defense expense all these are example of Revenue expenses rental expense maintenance expense all those expens are Revenue expenses Capital expense expense expense government of India lends money Capital expense all these are example of capital expenses so you'll have total expenses revenue account expense expense interest payment interest payment will be one of one the biggest revenue expens of the government there will be some grants in aid for creation of capital of capital account grants in aid for creation of capital assets to the states does anybody know why is this n why this head given a special treatment here expend one is revenue account Revenue expenses of the government example salary pension all these things and within Revenue special treatment one we are saying revenue account out of of out of which one is interest payment why a special treatment to interest because interest is the largest component of government expenses that is by interest payment and out of Revenue one more thing here grants in aid for for creation of capital assets to States why a special treatment to this particular term huh H effective focused numbers table this is the these heads are more important things for examp right we'll talk about ER What er is in a moment but yes this thing grants in aid for creation of capital asset this is for ER effective Reven capital expenditure effective capital expenditure term government spends money capital expenditure which leads to creation of assets or reduction of liability capital expenditure and there is something called as effective capital expenditure now what is this new thing effective capital expenditure that they form 12 + 13 this plus this government spends money Capital account asset creating liability reducing add to that grants in a for States for creation of capital assets that becomes effective capital expenditure but for the time being try to understand what should be your approach towards reading these documents we'll discuss these deficits in a second let's first look at government's receipts numbers these are the numbers that we are going to be concerned about with respect to this particular project what are major receipts of the government now these are total receipts of the government are caret total re seat visualize rather than numbers look at the py chart and try to understand which is the biggest component of government's receipt Let It Be X orange pinkish pink Peach this I'm sure you can see this is the biggest component here right what is this component borrowings and the liabilities now you understand the nature of question that may be asked which of the following is the biggest source of receipt for the government borrowing will help you to write answer in Mains as well you have to assess government's finances the question is about discuss the sustainability of government of India's de whether the government of India's debt is sustainable or not meaning is it something that government can repay without reducing some major expenses sustainor how much is the what is your capability to borrow capability to borrow depends upon your capability to repay can you repay the debt that you're incurring or not and how will you assess that sustainability only when you know when you only when you understand that out of the total money that government has for spending the biggest money comes from borrowing that money not from some other source from taxes as in rightful receipts or borrowed receip interest interest is the biggest expenditure of government total interest expense interest expenses around 10 lakh CR rupes number just magnit total interest expenses around 10 lakh CR rupees out of of government of India's total expenses all expenses of around 47 lakh CR rupes to 47 interest exp debt sustainability evaluate arrange the following expenses in order of magnitude arrange the following sources in order of magnitude arrange the following taxes in order of magnitude you see the biggest sources Which tax corporation tax is the biggest source corporation tax GST income tax corporate tax excise duty which are the biggest amongst all I use the word GST I did not say cgst when I say GST GST is Central plus State GST this is Central component of GST sorry GST but yes this is Central component this is not total GST this is Central comp but yes because it is central government document it is GST don't there's nothing wrong GST which is cgst plus sgst that is the biggest component around 5050 GST and sgst CST when you look at total tax of the government corporation is biggest then cgst then income tax then excise Customs arrange the following taxes in order of I think common are the following taxes in order of their magnitude GST that means it is total GST cgst plus sgst specifically cgst that means it is only Central component so this is what you should be looking at in in this chart that one that our biggest source of money is borrowing the amount of borrowing that we do is more than amount of taxes that we collect as in amount of individually speaking any tax that we collect it collectively obviously amount of borrowing that we do is more than any other particular source of receipt for the government borrowing is the biggest source of receipt for the government and amongst its non-borrowing sources non debt receipts we have GST corporate tax then the half component cgst then income tax excise Customs ET these are sources of our receipts common question in exam regarding trends of receipt now these statements would be there as part of normally you will see these questions as part of two statements statement one which would normally be a fact and statement two which would be some conceptual statement India's tax to GDP ratio has been consistently Rising during last decade factual statement a country with low tax to GDP ratio is expected to have more inequality conceptual and some opinion based statement so you have then statement one and two is correct statement so second one is subjective in nature meaning you have to deduct derive that whether countries with low tax DP ratio will have more inequality or less inequality chances are low tax DP would mean that countries have more inequality chances are versus first statement becomes a factual statement so for that you'll have to look at these diagrams then these diagrams these Trends these are important Trends our tax GB ratio has not been consistently Rising it is almost the same in last 30 35 years it has been around total Center State ke total has been around 15 to 177% in last 35 years just say Center Key around 10 to 11% or state around 5 to 6% our tax to GDP ratio has not increased by us by any significant amount in last 10 years 10% 10 11.2 10.2 11.7 it has been within this range you can look at this graph it's not showing some consistent increase over a period it is usually Bel within a very tight range only clear here governments tax receipts Trend then they would ask that within government's tax receipts what is the share of our direct tax receipts and indirect tax receipts the statement would be indect tax fact generally it is seen that direct taxes are more as compared to indirect taxes then they will ask a question Trend that direct taxes as a proportion of total taxes have been consistently increasing direct taxes as a proportion of total taxes have been consistently increasing of your green bar and this yellow bar yellow bar is direct tax green bar is indirect tax have direct taxes as a proportion of total tax have they been consistently increasing yellow Bar Key width as a proportion of total bar consistently increase it's not been increasing consistently it is almost in the same around 5050 division around 55% aspas we have our direct taxes around 45% we have indirect taxes that has been the case sometimes it might be 5 53 4 48 47 sometimes from 55 they increase 58 and they reduce to 42 but yes broadly they have been in the similar range this range 45 to 55% 45% in direct taxes 55% direct taxes normally this has been the range now from this they will ask this question that consistently and then second statement would be direct taxes are progressive in nature and indirect tax are regressive in [Music] nature true or false direct taxes are progressive in nature and indirect taxes are regressive in nature true or [Music] false Progressive [Music] huh Progressive taxes which is consistently increasing no h hello hello sir when income slab increases H yes when when income slab increases the tax increases then it is Progressive taxes basically the idea is the rich pay more proportion of their income as tax that is the idea Progressive regressive the rich pay less proportion of their income as tax Progressive and regressive indirect tax generally speaking Progressive consider because everybody pays same amount of indirect tax on a particular good rate of tax that means as a proportion of income Amani will paying much less rate of tax proportion of income therefore generally speaking we consider indirect taxes regressive taxes versus Progressive Direct Tax are generally Progressive in nature why because when incomes increase you pay more proportion of your income as tax one statement would be of this nature that our proportion of direct and indirect taxes direct taxes have been consistently increasing and statement to direct taxes are generally Progressive or regressive whatever it nature don't look at these numbers 4.9 6.7 look at these Trends and then try to assertain something that you can think about these as in what can you conclude from these Trends what can you look at this number and then what can you conclude this is what you should be looking at when you look at these numbers right total receipts of Center the total receipt this is not percentage term receipt this is total receipt of Center you have to be careful about please read the statement carefully that whether the question is asking total receipt your total receipt as a percentage of GDP carefully our tax revenue as a percentage of GDP has been around 15 to 17% tax tax Es as a proportion of GDP have not increased have not shown some increasing Trend but obviously total taxes that we collect inre GDP is increasing and we are collecting even though we are collecting same proportion of ta gdps taxes to amount of tax so read the question statement carefully right so total taxes that we collect obviously they have been in Trends in our receipts right this year we are expected to collect as every year we are expected to collect much more amount of taxes this is an aberation or not normally you see an increasing Trend but you see a decline here and then again an increasing Trend which is this year covid year the nature of question would be our total tax receipts has shown a consistent increase over every year since last 5 years has consistently seen an increase since last 5 years no in 2020 it declined right so this please keep a Keen Eye on the nature of question so when you look at these things when you're looking at these things think of it like this look at the trends here right this is about our non- debt receipts some facts that our finance minister said regarding taxes our direct taxes again our direct taxes even though as a proportion of GDP they are on the same side as in we were collecting around 5% of gdps taxes direct taxes we are still collecting around 5.5% Cash pass but the total number of tax taxpayers income taxpayers they have increased by around 2.3 times in last 78 years so this has increased direct tax collection has increased by this much improvement in ease of tax payment we have got certain steps that we took for example reduction of tax rates introduction of new forms form form 26 as use the use this form in his in Her speech form 26 as I earn income from Vision I the income that I earn tax is paid on that income tax is paid how much amount of tax has been paid all of that gets recorded and automatically populated in that particular form both form 26 as I also have my bank account in which I have deposits I earn interest on my deposit that is also my income tax when when my bank pays interest to me my income my bank also deducts a tax on that income that means that information also gets automatically known to the government under form 26 as as in I get to know it government gets to know it I also have investments in multiple shares and those shares pay dividend to me and when they pay dividend that is Again part of my income therefore again when I earn those dividends the company will deduct the tax and deposit the tax with the government any kind of tax that I have paid to the government or anybody else on my behalf has paid to the government s tax information form 26 as income tax returns anybody earns an income from any Source I earn income in form of salary in form of interest on my deposits in form of some shares that I purchase dividend on those incomes I sell some shares at a higher price I have some capital gains that is also my income I have some house I earn rent on that house that is also my income as an individual I will have multiple sources of income you you will have multiple sour of income in some cases you will yourself be paying taxes in other cases when somebody pays an income to you that person is responsible to deduct a tax and then pay the tax adjusted income to you is TDS tax deducted at source I get a salary of 1 lakh rupees from Vision let's say Vision I has to deduct a 10% tax on that so therefore I will get 90,000 rupees in my account and 10,000 rupees will be automatically deposited with the government as part of my taxes all that record is where it's in form 26 as what does that help in that helps in ease of assessment or not now the government knows now the individual knows how much income I have I earned and therefore how how much tax am I supposed to pay or the government how much tax we are supposed to collect from this person this is ease of earning ease of paying taxes so we have been doing these things new form has been introduced and because of that you can see number of tax payers has been increasing tax collection has been increasing and most importantly disputes between government and taxpayers have been falling tax isar which is with respect to some disputes that government had with taxpayers income on which I have to pay 10 lakh Rupees tax to the government but I declare to the government that my income is because let's say I claim some deduction some expenses I declare to the government that my income is not one rupees it is only 80 lakh rupees hence government thinks that I have to pay 10 lakh Rupees of tax versus I claim that I have to pay only 8 lakh rupees of tax so there is a dispute between me and government or not the tax department tax noce that we believe that you have to pay more tax versus you have paid less amount of tax tax dispute what will happen to these tax disputes they will Linger on for many years they will be on government books for many years application exchange you might let's say extracting some bribe from me or I might be willingly giving some bribe to you there will be litigation costs involved in this case so government said this year that we are going to forego many of such tax disputes tax disputes 196 1961 Income Tax Act it act 1961 and 1962 so up to 2010 disput said that okay as in not all but yes up to a certain amount and from 2010 to 2015 some more disputes have been simply said that we are not going to raise any tax demands with these people ease of payment of taxes right tax assessment ease this is an important step with respect to collection of taxes by the government and this is why we see that there has been Improvement in tax collection by the government you important step indirect tax taxes again one more important fact here regarding tax biy tax I'll come to your question just a second you second second tax it is an indicator minute minute Revenue upon GDP which Revenue upon tax I'll not give it to you 50% say not completely correct PJ sir it is an indicator which is used to find when the sir tax received that is received by the government divided by the total GDP of the no yes yes increase increase in taxes respect to GDP increase in taxes with respect to GDP tax growth upon GDP growth that is what tax buyan is your GDP is growing by some number economic activity economic activity Grows by some number probably in my view tax tax which in my view probably is the most difficult question asked in PR still dat as in there is no correct answer to that question even that anybody knows tax buy tax bancy tax bancy means what how buyant are your taxes meaning your econom is growing are your taxes growing at the same Pace or not economy is growing at the rate of 10% more economic activity economy Grows by 10% do you collect 10% more taxes as compared to last year or not extra 10% tax growth upon 10% economic growth if you collect 12% taxes given 10% economic growth that means your taxes are more buyant it is 1.2 12% upon 10% becomes 1.2 tax B 1.2 so would you desire desire would a country desire taxes be buyant more buyant or less buyant tax for example taxes depend upon degree of formalization of the economy or not economy formal in nature economy is more formal meaning more people are recognized as taxpayers hence chances are they will be paying those taxes economy is growing grow econom formal like if economy is growing and simultaneously economy is also formalizing then because economy becomes formal therefore chances are government taxes will now rise at a greater paase type formalization and tax B so formalization is an important factor determining government tax tax indirect taxes preg GST post GST now this question has been asked in Mains not in PRS tax BC of state government preg GST post GST up government has some tax revenue pre GST government is collecting some taxes in 2014 it was collecting 100 rupees of tax in 15 it collects 105 rupees of tax in 16 it collects 112 rupees of taxes so there is some growth in taxes versus up government Up's GDP would also be growing at some Pace Indian economy is growing at 10% let's say up slow growth State up is growing at 8% so GDP growth of up and tax growth of up government What proportion at what sorry what is the relationship between tax growth of up governments ta growth in tax of up government to that of Up's GDP tax tax B preg GST tax bcy of state revenue was 72 77 meaning State's GDP was growing but their revenues were not growing at the pace taxes were non buyant not buyant GDP grew by faster Pace but State government's tax revenues did not grow post GST we have got greater bcy a bcy 1.22 meaning taxes are growing at a faster Pace as compared to growth of States states economy more B is desirable or not that means States now have relatively speaking more money with them as compared to what they would have had had we not switched over to GST question question in paper two and paper three paper three paper two regarding discussion of GST as a more efficient way of tax collection basically was with respect to fiscal federalism two versus paper three which is I think 2021 or 2020 paper 3 with respect to analysis of GST as a more efficient way of tax collection so post GST our tax bany especially for States has increased and we can see it is 1.22 that means GST has resulted in had GST not been there so more buy collection of indirect taxes also post GST right so this is with respect to taxes m expenditure we look at some major areas of focus announcements and then finally we'll look at debt sustainability right we look at government's debt and deficit Bel sir can you please explain how as you have said how Dept to high depb to GDP ratio will increase inequality because it's very confusing since all the major economies like Japan and us have such high ratio andity what is the level of inequality in US it can't be calculated but this is this is more intuitive in nature his question is he wants an explanation on how does debt to GDP ratio relate to inequality in a country without numbers we'll try to think of it intuitively only numbers a country having high debt to GDP ratio versus country having low debt to GDP ratio tax tax to GDP ratio when the tax to GDP ratio is low that means chances are only few people are paying taxes that means most of the economy is not even eligible to pay taxes or is evading paying taxes how many people in the country pay taxes country around 7 CR individuals pay taxes which is in fact 2.3 times increase over 20156 IND tax if you earn 10 lakh Rupees of income in India today which is around 55,000 R per month to random top 1% 2% 5 10 15 take a guess sir uh to become in top 10% you have to earn 25,000 per year data around 55,000 mon huh. 1% you in. 1% feel good chances are all of you are from the same families from the families who ear more than chances are chances are all of you are in the top. 1% bracket do you think you are in top. 1% no you don't think you're in top 1% this is what inequality is a country with low tax to GDP ratio would mean that chances are there are very less individuals who pay taxes and therefore one entire burden of taxes is upon them only and second what it means is most population is ineligible to pay taxes that means most population does not even earn to that threshold where you are required to pay some taxes threshold already hence in a country with low tax DDP ratio chances are inequality would be high there in fact observation when we look at countries with lesser inequality as compared to others we see normally tax Japan Germany Sweden Denmark countries where if you remove the extremes meaning the richest people most people are in that middle bracket and most of them are paying taxes as a result of which the government's tax collections are normally on the higher side so tax R ratio is higher therefore chances are inequality would be low okay expenses again observe the pie chart and see which is the major expense of the government are State's share of taxes this is also chart but numbers 20 20 you're not able to State share of taxes discuss State share of taxes how does central government spend how does a central government spend the total money that it receives central government receive income tax corporate tax GST cgst part it receives debt receive reips it has disinvestment receipts how does government spend one this is how the government spends it money second within this what does Finance commission do Finance Commission divides what huh net proceed of taxes Finance commission divides net proceeds of taxes between Center and states and then amongst States horizontal vertical Devolution right net proceed of taxes so central government number one taxes collect Central GST income tax excise custom government tax tax Center collects tax es of let's say 100 rupees out of that 100 10 Rupees are spent in collection of taxes tax collect basically income tax department G department so 90 Rupees is what is the net proceeds of taxes out of that 90 it that sorry that 90 will be divided between Center and state by Finance commission first Finance commission 42% States or 50% so 9 say around 40 Rupees is States and 50 rupees is Center to State share of taxes this is not available with the center to spend Center collects this money but part of this money goes to States on which Center has no control over this is finance commission Grant Finance commission transfer this is State share of tax and duties when we talk about toal this is where money is going this is State share of tax remaining part is what is available with the center to actually spend Center is going to spend the remaining money it it doesn't have this money it collects this money but this money goes to the states as part of Finance commission recommendation so this is not available with the center remaining money this you Peach this is what is available to the center to spend so within this which is the biggest component of Center expenses interest payment all the remaining expense when we look at remaining expense of the center this is how we look at Cent expense as in apart from Finance commission division broadly divided into two categories centers expenses and centers transfers central government pass 110 rupes central government collected 110 rupees as taxes out of which 10 Rupees were spent for collection of taxes remaining is 100 out of which 40 rupees have gone to States for as part of Finance commission remaining with Center is 60 rupes 60 ta then Center has around 50 rupees of borrowing borrowing Total Money available with C 60 + 50 110 rupees then central government has some disinvestment receipts of let's say 10 rupes more that means 110 plus 10 rup plus there are some fines fees dividends interest receipts Etc which are let's say total to 20 rupees Total Money available with the center 140 rupees 60 rupees of taxes with Center 50 rupees of borrowing by Center 10 Rupees of disinvestment by Center and 20 rupees of other Revenue receipt of the center so 50 plus 60 plus 50 110+ 10 20 plus 20 40 central government toal central government collect plus 40 it collected total 180 now it has 140 with it to spend where does it where does that 140 come from it comes from taxes it comes from borrowings it comes from disinvestments it comes from interest receipts it comes from some other sources fin fees Etc so central government has 140 Rupees to spend how is it spending that 140 rupees broad divide one centers expenditure and second Cent transfers central government Central government's own expenses Cent expenses and centers transfer meaning what it is going to give to the states centent expenses three parts here first is establishment expense establishment expense central government central government has offices around the country across the world home Ministry expenses finance ministry expenses agriculture Min these are all centers establishment expenses centers establishment expens these are Center's establishment expenses then Center has still lot of money left with it then comes in central sector schemes Central sector schemes central government makes schemes on Union list or on con concurrent list these schemes both both both these schemes are owned by a center implemented by Center financed by Center Center will obviously take help of states to implement it will take help of states to implement those schemes but entire scheme is central government scheme complete modalities laid down by the center implemented by the center but obviously taking help of state government to implement these are Central sector schemes then Center still has remaining money it obviously has to pay interest other expenses to C expenses interest expense establishment expense and Central sector scheme expense these are Central expense centers expenses one Center transfers money in form of centrally sponsored schemes centrally sponsored CSS state government proposes central government agrees to finance that that scheme partly but on the basis of conditions laid by the center Center will say conditions sche so central government lays on conditions of that scheme sponsoring that scheme States agree to those conditions and hence Center sponsors those schemes partly so central government sponsors those schemes centrally sponsored scheme CSS Finance commission recommend division of net proceeds of taxes between Center and state finance commission 275 272 283 280 280 division CET proceed of taxes apart from that also must have Finance commission is going to recommend other money that has to be given to States as well for example Finance commission will say utarak is facing lot of disasters please give some disaster specific Grant to the state discretionary grants it will say that Assam doesn't have enough money to meet even its Revenue expenses it has lot of expenditure requirement but because there is not there is not enough ability of the state to collect taxes that means even though we divide some taxes we even though we when you devolve some tax to the state the state will still have a huge shortfall of its Revenue hence you give some additional Grant to the state so Finance commission addition so Finance commission will give some other grants also Finance commission grants these are not net proceeds of taxes divided between Center and state these are apart from that Finance commission gives a recommendation to the president central government will in most cases not reject those recommendations tax part transfer so Finance commission grants to States central government then spends money gives that to State and there are some other grants loans or transfers other huh n Kumar special status political issue what benefit did a state get when it when when it became uh when it got special category status [Music] huh centrally sponsored Central sponsor scheme some sponsoring of State scheme by Center Center says okay this is a scheme Sera Aban in this you have to serve midday meal to students and this is a centrally sponsored scheme so what we are going to do is this scheme requires expenditure of 100 rupees I will give you 60 you spend 40 and hence the scheme will be sponsored 40 by state and hence the scheme is going to be sponsored the state then goes to Center and asks I don't even have 40 to finance my component then Center says okay I'm going to I'm going to give you either I'm going to either give you a loan for your 40 rupees or simply a grant for your 40 rupees difference loan or Grant loan loan has to be returned back Grant doesn't have to be returned back special category States used to get their part of CSS in form of Grant versus non-sp special category States used to get their part if a state needed they would then have got their part of sponsorship their part of contribution in form of a loan difference special category or non special category so this is what this other L loans transfers mostly are yes there can be disaster specific grants there can be some pchat grants all these are there but yes other grants mostly the were these were grants where Center is financing the state component of CSS right last part before I take up your questions capital expenditure asset creating liability reducing now what do we have here effective Capital expend now Revenue expense Capital expense Center is spending money for mg Central sector Cally sponsored CS or css huh centrally sponsored scheme mg is a centrally sponsored scheme CSS have two components core of core schemes and core schemes mgga is a core of core scheme centrally sponsored scheme mjga so mgga centrally sponsored scheme what is the objective 100 days of unskilled manual work you objective objective of mgga objective is to create durable Assets in rural areas objective objective of is to create durable Assets in rural areas by providing means means and object by providing 100 days of unskilled manual work to anybody who is willing to do that work fi I think so objective is to build durable Assets in rural areas by providing 100 days of unskilled manual work to those who are willing to do that work so let's say A pchat B has to be created on that punchayet b the total expenditure incurred is let's say 100 CR rupees and how will that be incurred that will be incurred in two parts one purchasing cement steel bricks etc for that b buying land for that b and by providing wages to workers who are going to build that b so 100 crores is total expenditure there and out of the 100 CR some money will be spent on broadly speaking material and broadly on men mgga has this defined ratio spend the money that is which is being spent for giving out wages salary purely a revenue expense but the money which is being spent on building of on purchasing material that money even though categorized as even though categorized as a revenue expense is of the nature of a capital expense I'll repeat even though categorized as a revenue expense is of the nature of a capital expense Indian government gives a grant to Afghanistan government Indian government spends money grant afan government million what kind of expenditure is this Revenue expense Capital expense gr revenue revenue expense we gave this grant for the purpose of building a football stadium Afghanistan government Indian government gives a grant we give a grant it is a revenue expense for us Afghanistan government receives the money it is a revenue receipt for them why because it is not on account of reduction of assets or increas in liability receive the receipt is also a revenue receipt but how will this money be spent it will be spent for creation of some asset infrastructure that means expenditure will be of the nature of capital expenditure so Indian government when it is compiling its accounts Indian government categorizes that expenditure as a revenue expense expense versus Afghanistan government it will categorize that expenditure as a capital expense so look at it from India's perspective even though the money that we gave was on revenue account it is ultimately being used on Capital account Indian government gives money to up government any any kind of money that Indian government gives to up government which is not a loan that gets categorized as a revenue expense of Indian government Central scheme Central sector scheme centrally sponsor any kind of money that IND Indian government gives to up government that is categorized as a revenue expense of Indian government but some part of that expense is of the nature of it is going to be spent for creation of capital asset to Indian government accounts compile it categorizes that expenditure as a revenue expenditure versus its ultimate use is of the nature of a capital expenditure identify these expenses which are even though classified as Revenue but their nature is capital expense expense identify and that becomes your effective capital expenditure that is Grants to States for creation of capital assets it is a grant to State because it is a grant hence it is a revenue expenditure of the center but the Grant's purpose is that it is for creation of capital assets hence ultimately it is being used as a capital expenditure even though classified as Revenue expense since it's use is ultimately Capital expense add and then arrive at effective capital expenditure capital expenditure and grants in aid for creation of capital assets this becomes our effective capital expenditure so you classify government expenses like this expense classify you look at centers expense centers transfers out of which some transfers would be such which are given to States for creation of capital assets you add that to capital expenditure and then you have effective capital expenditure of the government effective Capital expend grants to States for creation of capital assets even though classified as a revenue expense since it is ultimately being spent on Capital purposes hence we treat it with some special treatment sir what's the Coit free loan what is the collateral F collateral M uh I mean they don't need to deposit anything anything security security security collateral free loan means the other party the borrower is not giving any kind of security that becom a Coller free loan Indian government lends Bank lends to anybody Indian government without taking any Security in return I'm talking I'm talking about in sense of last year government has cental government given some loans to the states collateral free loans yes Calment including states without any collateral return so is it the special treatment is it special treatment special treatment in if you want to classify as total collateral free loans given by Center special treatment a special treatment collateral free loans it is simply a term which is specifying that how much amount of money center has given with without taking any Security in return from anybody else sir what if the Indian government gives credit to Central Asian countries as it is given so will it be counted in revenue or uh Capital it gives credit okay loan uh kind of loan 100 million Credit in which they can do anything there is a third category right uh you can give you can grant them you can give them credit credit or loan same what you are trying to say is something called loc yes sir yes line of credit yes sir yes sir sorry line of credit is also credit okay line of credit is simply a loan that is given like a window India opens a $100 million loc for Bangladesh meaning Indian government has said that we are giving you a permanent loan of $100 million as in when you need it you can simply take it line of credit so we have opened the loc for you up to $100 million meaning you can come at any time borrow this much amount of money from us permanently is debt Indian government has opened that $100 million Lo for Bangladesh doesn't mean that Indian government has lend to Bangladesh Bangladesh government will come and borrow from Indian government let's say it borrows $5 million because five is less than 100 million that means Bangladesh can borrow even more than that it will come and borrow 25 million more 30 million more 40 million more 100 it can simply borrow that money I've opened from you you can borrow beyond that also Bangladesh government says we want to borrow more than that so Indian government will say but because you have exhausted your loc limit therefore now you can borrow on some high rate of interest from us that is what L because it is ultimately lending hence it obviously capital expenditure Bel hello sir basically I want to know about the difference between the effective Revenue deficit and effective capital expenditure in the first one we are taking the difference or in the second one we are taking the sum basically effective okay in effective Revenue deficit are effective Revenue deficit deficit versus effective capital expenditure yes can have similar components but these are two different concepts what is a deficit deficit deficit deficiency of something something is in excess versus what you have is less effective Capital expend your Capital your capital expenditure total Capital EXP expenses are something government spends money for building assets reducing liabilities Capital expenses it spends money on Revenue purposes giving loans to States grants to States but some of those grants or loans were given for creation of capital assets categorize as Revenue expenses not loans sorry grants categorize as Revenue expenses but the purpose for Capital expense hence espcially there is a effective Capital expend effective exp effective fine sir uh what if the central government give loans to the state governments on 0% so are they uh Revenue expenditure or capital expenditure take a guess Revenue take the correct guess by definition principal amount money has been given and that money has to be returned even though at a zero rate of interest but money has to be returned right so it is a capital expense of the government thank you sir Center give the loan to the state huh so give the loan to the state for example up and up spend this amount in the maintenance cost in dep like in the maintenance of a school building yes yes yes so this expenditure goes where yeah expenditure central government lends to State up government and up government spends that money for maintenance of schools central government central government has lent money I've lent money that means it's a loan it's my capital EXP expenditure up government is free to use that money in whatever way it can provided Center did not put a condition it is spending that money for maintenance that means for them it is a capital receipt and a revenue expense M Revenue expense for receip composition of total expenses is here visualize and see the yellow bar and the gray bar Central sector schemes and establishment expense of the center which is the biggest component of total government of central government this is apart from interest interest this expenditure this is other grants loan Finance commission Grant CSS Central sector expenditure Central sector scheme a other Central sector is interest sorry other Central sector interest and establishment expense sorry I'll repeat Central SE other SE Central sector expenditure this is the interest part I'll repeat say this gray bar is other Central sector expenditure which is mostly interest expenditure this yellow bar is Central sector scheme this is where I want to want you to focus Central sector schemes scer expenses has been rising or not as in consistent ring but yes it has been rising 2021 22 23 it same budget as in 2023 24 budget estimate Revenue Revis estimate or this is be of 2425 Central sector schemes central government Central sector schemes Central sector schemes expenses on Central sector schemes have been on the generally speaking Rising trend centrally sponsored schemes versus Central sector schemes till the time we had Planning Commission Planning Commission used to formulate CS as well as CSS more importantly Planning Commission used to lay down conditions for states to spend money on these CSS Planning Commission would tell the states condition is only then we are going to sponsor this sponsor the scheme for you post Planning Commission post 12th 5year plan when Niti AOG was established 12 establish when was established a committee was formed of Chief ministers that Chief ministers committee decided that what will be the new scheme new what will be sorry what will be the new scope of centrally sponsored schemes CSS scope so we had till that point around 120 CSS now we have around 30 CSS centrally sponsored schemes centrally sponsored schemes total allocation that has reduced why has centrally sponsored scheme allocation reduced and correspondingly Central sector scheme allocation has increased CSS allocation CSS centrally sponsored scheme allocation CSS allocation has reduced Central sector scheme allocation has increased why take a guess Central sector C sponsored clear Central sector schemes centr sponsored C stes Finance the total outlay the total outgo on centrally sponsored schemes has been reducing the total outgo on Central sector schemes has been increasing why p b yes so because uh there is a lot of duplication of schemes be it in center and state so subsuming some centrally sponsored schemes into Central sector schemes good good one reason good or what else fori one one time Center is located to implement the scheme and second time to revise modified there is not located the fund improperly n no or what else huh States not abiding the conditions no state state one last yes yes yes with the cap sir due to GST States Los lost their taxation Powers so re GST expend the total amount of money so no the total money is being spent for Central sector vers assertion reason statement statement one is correct two is correct and two the correct reason for fun the total money being spent for Central sector schemes has reduced because simply Finance commission increased the Untied grants to States Finance commission was giving 32% to States earlier now how much does it give to States 42% Finance commission States states right that is right ofate that comes without any condition Centra simply says States will get this money sorry Finance commission says States will get this money therefore they simply get that money versus the centrally sponsored schemes that was a tied Grant Planning Commission used to lay down conditions for those schemes serve shaan you please procure from only this this vendor you please serve only this meal at this time to the students only then you will be sponsor given sponsorship for that scheme post Finance commission recommendations 15 16th FC post 15th and 16th FC what has happened is State's share in total taxes has increased as a result the total untied Devolution to States meaning unconditional money given to States has increased because that money has increased naturally Cally sponsored scheme say so centrally sponsored the tide Grant so CSS allocation has come down versus CS allocation has gone up center now focuses more on its own schemes SCH CSS CSS are continuing versus Central sector scheme Center keeps on making some new schemes some some of the other scheme and hence it allocates money to schemes because untied allocation to States has increased hence the tied allocation in form of CSS has decreased Trend interest expense obviously the biggest component But Central sector scheme see that this is also a very big component it used to be a small part but now it is a very big part of total expenses right Central sector schemes this is with respect to specific announcements in the budget four key areas they have said poor women Youth and Farmers F manner of let's say Focus inclusive development geographically inclusive geographically inclusive and socially inclusive and he say that these are the area that we have to focus about some aspects for poverty multi-dimensional poverty when was last how do we measure poverty what is our official survey of measuring poverty National consumption expend NC or NES National household expenditure B consumption expenditure that is our official survey of measuring poverty when was last NCS conducted 20112 NCS and government is saying we have uplifted 25 CR people out of poverty multidimensional multi-dimensional poverty is a in fact stricter criteria as compared to consumption expenditure based pover tul poverty normally official poverty here MP poverty is a stricter criteria we have been able to uplift 25 CR people out of multi-dimensional poverty in around last 9 to 10 years how do we assess multi-dimensional poverty three heads Heads health education standard of living the international MBI has 10 indicators Niti AOG MPI has two additional indicators so our MPI poverty line is obviously stricter as compared to consumption expenditure poty line and if we see that we have been able to uplift 25 CR people that's a tremendous achievement what data is required which survey is there to assess multi-dimensional poverty nfhs National Family Health survey when was last nfhs conducted 2019 and remaining part in 21 cond 20155 so5 to 15 and then 15 to 2019 and 21 now these latest number 25 number this has come from Rapid surveys so nfhs is a comprehensive survey that nfhs has been carried out till 2021 but at the same time we also carry out some rapid surveys global global there are some dimensions on there are some indicators on M poty how many women have how many households do not have water at a 30 30 minutes of walking distance how many households are using some primitive fuel meaning solid fuel how many households do not have a Modern Sanitation facility how many children are not able to attend school for 55% of Time how many households have people below 18 years of age who has died in Last 5 Years these are which as these are some of the indicators on multi-dimensional poverty so you need to know performance of households each of households on these indicators where do you get that information from NFS but yes NFS we have some rapid surveys for that there are state level rapid surveys from which we continuously keep on assessing and it is from those rapid surveys applying data applying these standards on those rapid survey data we find that we have been able to uplift around 25 CR people from multi-dimensional poverty from 2005 to 15 we were able to uplift around 27 CR people from multidimensional poverty from 15 to around 22 we have been we have been able to uplift around 25 CR people more from M poverty per year to per year we were de our MPI was declining by around 9% which was already extremely high exceptionally high and it has further increased to around 11% every year to% reducing poverty by around 9% every year between 2005 and 15 further increasing the pace to around 11% between 2015 and 22 so our poverty reduction Pace has also increased right some of the schemes SCH credit assistance to Street vendors comes under Ministry of Housing and Urban Affairs PM J PVG private oh sorry particularly vulnerable tribal groups there are nine Ministries involved there exam PM jman is under which Ministry there is no one particular Ministry which is implementing p and genman there are nine Ministries which are part of this this comprehensively addresses pvgs addresses skill development addresses skill development availability of water Sanitation Mal nourishment this PM jman scheme is a comprehensive scheme comprising of both Central sector Andor plus there are multiple Ministries involved here and we have got vishwakarma recent important so important or not but they are in their in the budget now you see them hence you remember them Artisans and crafts right okay with respect to women again they ask questions Trend based questions on this for example labor force participation rate of women so lfpr has increased to around 37% so that is an important achievement lfp lfpr of women is low yes lfpr women has been consistently Rising yes or no huh this year it has increased but at the same time lfpr has generally shown a declining trend lfpr of women but was actually on the falling side so again Trends matter here yes around 37% lfpr of women which is again good as compared to ourselves in past still very low number one and number two it has not consistently increased it has decreased actually and then it has started to show an increment only in very recent years lfpr of women reasons for low lfpr or a falling lfpr of women one reason or huh low lfpr women huh security at workplace okay huh unequal wages po marage early early marriages early marriage patriarch H yes yes it can ultimately boil on to patriarchal aspect but yes before that so disgu unemployment second second so first of all there can be multiple factors social factors we all know patriarchy and all economic factors also that there's a growing in formal uh informal sectors so that there ultimately it is not incentive to women to go and other other factors are there's a uh there's a uh there is a trend of rising income of men so people think that why to go a job when you your husband is paying or when your husband is giving you earning enough for the house don't think of it as like the husband is giving it to you and there can it be also reason sir yes certainly yes fine or what else migration yes disguised unemployment huh disguised unemployment okay what else more H the positive reason positive last so they are mostly involved in care economy so so that's why they are working but they but their work is not calculated in the economy work is not work is not captured is not part of Labor Force everybody will be obviously 100% right but has two major reasons please listen please understand when I say two major reasons what I mean to say is that there are reasons that are there in the background all the time as in patriarchy it's not as that it's new so reason it's new or it is let's say unique to our country when we talk about reasons for low lfp women in the country or more important declining lfpr then we have to look at not these generic reasons which one have been there are there and chances are will be there we would not like them to be there but certainly they are there that's a fact and second they are there not just in our country but across the world so what is something specific to us care economy is not specific to us it's there everywhere in the world or discrimination based on wages is not specific to us High wages for men low wages for women for for same work that is not just in India it's everywhere specifically speaking now positive aspect one we have been seeing that incomes are rising since household incomes are rising and therefore need for more number of people to work is less and in that more number of people the one who obviously doesn't get to have a choice becomes the woman so that becomes the patriarchal aspect but the specific reason is incomes of the country are rising second another posi negative aspect as in discriminatory aspect and second is a greater enrollment in higher education earlier women used to study one less and second only up to a limited class sixth class eighth class now there is a greater time that you spend in studying including for graduation as such P more number of women used to enter labor force now there is a delay of some time as a result of that again lfpr has fallen because of less number of women sorry more number of women enrolling for higher education now sixth class let's say every wrong answer but for just for understanding Every Woman used to become eligible for Workforce that means 100 women population and out of 100 say 70 were becoming eligible were showing their interest to work because they have passed class 6th now on 70 now many of them are studying for a longer duration as a result of which now the number of women entering labor force every year have declined drastically so that becomes a positive reason Trend because of more enrollment in higher education as in Beyond class six this trend starts from around late 80s or '90s and now what we see especially in last few years and going to see more incoming years of extra years scho now they are graduating and now they are coming into labor force because now they are coming to labor force hence chances are now we are going to see an increase in lfpr women again so it fell temporarily because of Greater enrollment greater time that is spent in education institutions now because now we are going to see an increase in lfpr because those women are now entering Workforce so hence we see that it is increasing now okay plus also more enrollment in stem courses as nla G said that we have probably the highest enrollment in stem courses anywhere in the world around 43% was the number that I think she said so we have highest enrollment stem courses of women as in total stem courses around 43% women so again matter of of Pride for us pmas most houses are in women name or joint names LP scheme self-help groups via self-help groups you have been able to make make women earn around one lakh rupes or more income per year so that become right target is extension of aayushman Batu angan workers Asha workers and others what is the eligibility criteria for aan [Music] bat and the one of the question was who who among the following is eligible to work under mgga those who are BPL those who are in rural areas anybody can work in engineer provided you are willing to work for unskill do unskilled manual work anybody you are living here you want to go and do unskilled manual work you can go and enroll yourself in demand yes beneficiary p how do we assess beneficiaries now anybody knows yes yes yes yes what did you say secc social economic cast census secc is now the eligibility criteria for any enrollment any scheme enrollment you have sec social economic cast census in which you assess deprivation of in in which you assess deprivation of entities on certain criteria we have 10 criterias there and based on your deprivation you are made eligible for a respective scheme just example PM so in SEC there's a criteria house who is living in K or semaka house that means those who are identified as living in those houses become the beneficiaries of pavasa so all the schemes now even aishman B all these schemes have these eligibility criteria so now angan workers Asha workers have begun have also been made eligible for benefits in theat scheme for youth there are some schemes for Skilling one important scheme is there is a technology R&D fund that the government has set up which provides long-term interest free or very lowc cost loans for research and development so that is one important thing it was mostly which is ongoing schemes new one is just this technology development Rd fund to provide long-term loans interest free or lowc cost loans to entrepreneurs yeah purposes basically beneficiary Farmers you've got various schemes here PM kissane PM direct benefit we have got FAL Bea yoga what is there in F Bea yoga crop insurance a f a farmer says that I have a crop whose potential value is 5 lakh rupees therefore I want to insure my crop for 5 lakh rupees up to 5 lakh rupees if there is a hail storm if there is a flood if there is a drought if there is some pest attack something and because of which I'm able to realize a value less than 5 lakh rupes crop Harvest I sell in the market and I get just 3 lakh rupees by selling my crop that means I get 2 lakh less than what I thought I could got because I have insured my crop for a value up to 5 lakh rupees hence now the insurance company will compensate me for the difference of that 2 lakh rupes obviously insurance company composite that Less Price should be because of some of these factors just a natural disasters poor quality it has to be because of some factors some disaster must have struck and that is why you were able to not realize the expected value of your crop then you get eligible then you get the benefit of this fala that is Insurance scheme beneficiaries are identified farmers are the beneficiaries premium has premium insurance premium premium has to be paid let's say my crop value insured was 5 lakh I want to insure my crop for let's say for 5 lakh rupees for that the premium required is 10,000 RUP what is the scheme the scheme says farmer has to pay just 1% 2% or 5% premium depending upon the crop horiculture crop commercial cr% premium and 2% so let's say 10,000 rupes is the premium 2% of that becomes 200 rupes so 9800 rupes government pay government center and state together for 49% Center 49% State so the scheme is financed by Center State and the farmer Farmer pays just 2% premium but remaining 98% is paid equally by Center and state you PM FAL beaa fertilizers Nano dap and Nano UA now this is again I'm nobody to tell I think this is something that may be asked in the exam Nano Dapo Nan nanof fertilizer Skipper this is Science and Tech but this is kind of among those favorite questions of upsc Nano nanoa they will ask what are the following which are the following are benefits of Nano fertilizers nitrogen per unit volume in Nano UA versus normal Uria nitrogen per unit of volume normal n surface area wise absorb amount of nitrogen is more in your normal fertilizer grainy fertilizer to per unit volume 1 l 1 per unit volume obviously nitrogen is more in your normal UA not in Nano UA but because it is of small particle hence its absorption is better so it becomes nanofertilizer so please this is Science and Tech question please read it develop IFCO IFCO IFCO has developed it so please read this thing this is again I don't know whether this will be asked this year next year or will it all be asked but there's something which is Science and Tech and also a question that has been many times asked in the exam regarding some fertilizer a NE coating they have asked question two times NE coating Q favorable here they asked about varieties of pulses varieties of rice developed by developed the P Institute or by ICI so they' have asked these Science and Tech questions with respect to agriculture several times so this is one of the latest things so please refer to it Nano UA and Nano M nature of questions again they have asked this question I think 2018 we have more Inland Fisheries than Coastal Fisheries yes or no area under Fisheries Inland versus Coastal Inland coal Inland it is around two times that in coastal so it is 33% 33% Coastal around 66% Inland Fisheries government started this M but government is now increasing allocation for MATA so when they they when this introduced this scheme they asked this question regarding Fisheries now because the scheme is back in news maybe again they can ask question about Fisheries right that India is let's say largest producer of Fisheries products in the world or second largest or third largest shrimp largest producer fish second largest producer export India is largest exporter of fishery product yes or no no or largest exporter shrimp shrimp huh mostly on the Eastern side east coast which is mostly on the Andra Coast so Andra Andra Pradesh as in Fisheries in Andra Pradesh are biggest producer of shrimp in India World andraes India is the largest producer of shrimp and we are the largest exporter of shrimp also less consumed in the country and therefore we export it more da development we have this Mission last year means 2022 PRS go Mission R go mission pleas R go Mission huh last year I can see some of my old students also enhancing the sir H yes somebody says indigenous cow breeds indigenous say yes increase the productivity of indigenous cow breeds that is what Google mission is take and again an allocation the Finance Minister also used the term in his speech Al in in inner speech as well the focus is on increasing productivity of our indigenous cattles so this is about farmers Capital expenses discuss nature of question increasing trend of capital expenses right ining Trend more specific question increment Capital expenses this year the increment is 11% last year the increment was around 22% before that increment was around 33% so 33 221 in percentage increase in capital expenditure percentage increase in capital expenditure has been consistently increasing in Last 5 Years yes or no percentage increase in capital expenditure has been consistently increasing in Last 5 Years yes or no false capital expenditure as a prop portion of GDP has been consistently increasing in Last 5 Years capital expenditure as a proportion of GDP has been consistently increasing in Last 5 Years yes capital expenditure May percent again economics english comprehension so not just facts but also being able to understand what kind of question is asked the first statement was fact or statement Capital expenses have been rising government has a focus on Capital expenses right capit out of total expenses some are Revenue expenses some are capital expenses interest expense is what kind of expense Revenue expense interest is a revenue obviously interest payment is a revenue expense alone interest payment comp prises of 20% of expenses starting toal 47 rupes out of which around 10 lakh CR Rupees is interest and interest only that means around 20% expenditure is only on interest so government spends money on Revenue purposes on Capital purposes one second Revenue expenses are obviously much more than Capital expenses Capital expenses because they are asset creating they are more desirable Revenue expenses are necessary because you have to incor those expenses government has been focusing on increasing Capital expenses in last few years why because Capital expenses lead to increased productivity of the economy better infrastructure better roads better ports all these are capital expenses so government has been focusing on Capital expenses in last few years as such our capital expenses have been rising each year we see a greater outlay on Capital expenses each year we spend more on capital expenditure as compared to previous year so Capital expenses have been rising number one number two Capital expenses they have not just been rising they are also Rising as a proportion of total expenditure earlier we were spending just for example earlier we were spending let's say 6% total expenses Capital now we are spending 8% 9% 10% that means Capital expenses as a proportion of total expenses increase Capital expenses as a proportion of GDP increase now the first statement that I said was percentage increase in capital expenses has been incre increasing meaning last to last year then last year or percentage increase in capital expense year over year in 2019 we spent 100 rupees in 20120 we spent 133 rupees 33% increase in 2021 we spent 155 rupees around 22% increase we are spending more but percentage increment come we are spent this year from 155 we are spending let's say 170 rupees we are spending more but percentage increment come so Capital expenses have been rising Capital expenses as a proportion of total expenses have been rising Capital expenses as a proportion of GDP have been rising percentage growth in capital Capital expenses over last year in last 3 years has fallen because 3 years back our Capital expenses increased by 33% covid year and hence we spent lot of money on Capital expenses opportunity so where will we get money from so we are now increasing Capital expenses but relatively the pace of increment has fallen take clear Capital expenses get Trends okay some Capital expenses major expenses housing P PM we are spending money Renewables May focus on wind energy focus on rooftop solar focus on EB buses focus on some bio manufacturing and all those things three major Railway corridors under PMI scheme a portal to integrate various Ministries gy Shi is because an infra project requires multiple Ministries and departments to coordinate therefore the major time that is spent in infra project is not on construction it is on coordination there is a metro line that has to go metro line that means multiple departments have to be involved there and this coordination takes maximum time to coordinate implementation of infr projects you have this portal called as GTI Shakti portal so GTI shaki is that coordination portal that the government has set up right so we are now including three new Railway corridors in that portal so that we can Implement them on an expedited basis right viability Gap [Music] funding viability Gap funding so for example if any project is almost completed but some more money is required oh no no so when the government feels that this project is profitable but no one is uh able to pitch in that amount of investment so government almost almost good the project is desirable but it is not financially attractive you have money you are an infra developer you have two options either to build a highway or to build a rural road where will you put your money Highway because you can collect TOS from that Highway hence your returns are going to be more your potential return on a rural road is going to be less as comp to that on a highway hence everybody who has money would like to build highways from that money and not build rural roads from that money desirable but not financially viable viability Gap government will then fund some provide some funding that is called as viability Gap funding to bridge the viability gap of a project right that is called as vgf so we have vgf in right now existing is part of uran scheme development of regional connectivity between tier 2 tier three cities airport develop nobody would be willing to develop airports that is invest money in development of airports in let's say lakau or Banaras or indor or bopal people would rather build a fourth airport near Delhi rather than building airports in these tier2 tier3 cities so government says we are going to provide some kind of let's in some way we are going to make these projects financially viable tax chares so in some way we are going to reduce your cost so that the project becomes financially viable this is called as vgf so we are now introducing vgf in wind energy as well wind energy again think of it requires substantial Investments but Investments might not be fruitful for the investor as such what do we do what do the government what does the government propos it has proposed to invest some money initially by itself so that wind energy investment becomes viable and hence cost of wind power reduces people are more willing to adopt wind power as a source of energy to viability Gap funding some expenses on States for some schemes development of Tourism expenses States will be asked again this results from recent developments with respect to Many religious places of historical significance so government says that we now have to pitch these places for international tourism pitch aodha pitch Sarat pitch kushinagar pitch all these places for international religious tourism and states will be given some funding for these purposes branding marketing purposes Plus at the same time there is one more expenditure central government does on states which is for this viasit bat a this is thee which was central government provides loans to States given that states undertake certain reforms conditional loan to State Center lends to States given that states undertake certain reforms for example state power sector May reform up distribution companies independent distribution power distribution companies loan States One Nation one ration scheme One Nation one ration card schemes Implement so these are some conditions that Center imposes upon States and says if you implement these reforms we will lend additional money to you interest fre for a long term so states are being nudged to undertake certain reforms and that Corpus of money that's Center's lending has now increased to around 75k crores Center is lending this much amount of money to States for a long term based on certain desirable reforms that they undertake so this is one more expens to States okay CH now we'll start with debt financing last part debt and deficit before that if anybody has any question P expenses say related expenses Trends components Revenue expense Capital expense [Music] our purpose is that this should be interactive session to you should be asking some questions difference between difference between vgf and revamped vgf ramp which re vgf comp I don't know what is revamped bgf first honest confession second I can take a guess what would be revamped bgf it would simply be that the manner of making a project viable would be different this timee we are not going to Levy airport development charges versus in revamp vgf government will say we'll make the land available to your or can Indian estate borrow from other countries no you should know the answer to this question 293 Indian state state governments please States cannot borrow directly from outside the Country 2015 Indian government allowed states to borrow directly article 293 prohibits that states cannot borrow from outside that is the rule exam listen again States cannot borrow from outside the country that is the rule article 293 Constitution bars it second to ease money available to States from International financing institutions such as World Bank central government allowed that states given certain conditions can then directly negotiate negotiate loans with foreign borrowers foreign lenders but then ultimately permission will have to come from Center jar negotiate K loan jaran wants to borrow money for development of for for some let's say developmental program like addressing Mal nment in some districts World Bank is willing to lend to jarand for this purpose so jarand and World Bank can directly negotiate a loan World Bank ENT permission it cannot directly so an important reform for borrowing for States borrowing by States for from outside the country they are barred but now there are greater flexibilities given to them by the C last part because it is a debt of the country sovereign debt that is why states are not allowed to borrow directly from outside the country but if States fulfill certain conditions then they can negotiate these loans with the foreign borrower foreign lender and then with the permission of Center they can borrow money making it easier Center would borrow States had no power center would borrow from World bank and then Center would decide this is fiscal federalism cooperative federalism earlier Center would borrow from World bank and then Center would decide where will this money be spent in chattis Gad or jarand or Rajasthan where will this money be spent now chattis gar government can directly go and talk to World Bank that we want this loan World Bank can agree to provide that loan to chhattis Gar government and because World Bank has agreed therefore now World Bank can lend but obviously Cent permission requ the initiative comes from State not from the Center this is the key difference permission hello sir second sir State PS State PS through yes sir PSU ultimately is part of State no again doctr of what you can't do directly you can't do indirectly colorable legislation huh you can't do indirectly last question B yes sir central government or state government ele central government spends money it spends money as part of some scheme it will come with let's say quote unquote some loan waver scheme and it spends money loan wer is announced till now government announc that part of St Revenue expenses okay thank you sir deficit Trends sir please either we have these various deficits fiscal Revenue ER and primary deficit question may be with respect to arrange the following deficits in order of magnitude you see fiscal Revenue effective revenue and primary effec Trends observe Trends as in for example simply arrange the following in order of magnitude when you see for example fiscal deficit is this this is primary this is effect this is sorry this is revenue this is primary and this becomes effective Revenue quickly what is fiscal deficit what is deficit excess of expenses over your receipts what you have to spend versus what you have what you have is less what you require to spend is more that means you are in a deficit number one number two there are various ways to visualize this deficit you visualize it as most broadly speaking fiscal deficit fiscal deficit fiscal deficit is government's total expenses which exceed its total non debt receipts SAR non-bt non-borrowing receipts non debt receipt say total expend that becomes his fiscal deficit its finances are in deficit by this number government says that we expect to spend 150 rupees next year and from our taxes our fines our fees our disinvestments our collection of loans from all these sources we are going to collect let's say 120 rupes 150 120 we are in a deficit of 30 rupees this called as fiscal deficit how is fiscal deficit financed by borrowing you're going to borrow money that means fiscal deficit becomes equal to your borrowing in a particular yearor whatever your FD is that becomes the amount of borrowing of this year fiscal deficit is excess of your expenses over non debt receipts non-bt B Bor receipts from all sources from Capital Revenue sources your total non-bt receips versus your total expenses the difference becomes FD and how do you finance it you finance it by borrowing money you'll borrow from many sources you'll borrow from RBI you'll borrow from Market you'll borrow from public you're going to borrow from many sources so FD becomes equal to Total borrowing in a particular year right that is what FD is government borrows money fiscal deficit total expenses minus total non- debt receipts central government lends money as [Music] well central government lends to up government to Nepal government to a PSU central government May lend money as well it is capital expenditure had central government not money lend central government has lent money to other states to other countries to some PSU to anybody it has lent money to someone fact is it has lent money hypothetically had the central government not lent money itself then Center's expenses would have been less or not come if its total expenses would have been less then its need to borrow would have been more or less less how much it would have borrowed had it not lent itself that is called as which deficit primary that is primary deficit sorry net fiscal I'm sorry net fiscal deficit gross fiscal versus Net fiscal sorry I'll repeat central government incurs total expenses total expens revenue expense and capital expense central government has total non debt receipts let's call them as ndr not de receipts FD is TE minus ndr fiscal deficit total expense minus non-dead receipts had the central government not lend itself that means its need for borrowing itself would have been less why because it total expenses would have been less how much would the central government be in a deficit had it not itself lent money that is called as net fiscal deficit nfdd next comes primary PD Center major expense interest payment interest is paid on what debt previous borrowings Modi G is paying interest on borrowings B by manm sing G by VP by Rajiv Gandhi g by by everybody else in past the central government is liable to pay interest on its debt it can't say that I did not borrow this money and hence I'm not going to pay this interest it has to pay interest again hypothetical had the central government not paid an interest had the central government not being liable to pay an interest hypothetical to central government expenditure expenses would have been less how much deficit would the central government be in had it not been liable to pay interest on borrowings of fast deficit central government was not liable to pay interest on borrowings of pass that is called as primary deficit primary is fiscal deficit minus interest payment Prim deficit primary deficit Revenue deficit deficit on revenue account simply Revenue expenses receipt that is revenue deficit effective Revenue effective revenue is exp special treatment Central government's revenue revenue expenses Revenue expenses include all kinds of expenses on States some of those expenses are such that they are meant for creation of capital assets subtract those expenses Revenue expense me say subtract expenses given to States for creation of capital assets what does that become that becomes effective Revenue deficit Revenue exp sorry Revenue expens may say subtract expenses to States for creation of capital assets Capital assets subtract this from revenue expenses and then see how much does this number exceed your Revenue receipt this becomes your effective Revenue deficit erbm Target what is the objective under fbm act fiscal deficit has to be reduced to 3% of GDP objective is to reduce f deficit to 3% of GDP we have to specify in what terms 3% of what 3% of GDP one and to eliminate Revenue deficit Rd eliminate Revenue expenses should not be in excess of Revenue receipts frbm Act was modified to change the target from RD to ER up Target Revenue deficit eliminate the target is to eliminate effective Revenue deficit ER so this is what ER is that is why the special treatment to this thing objective under fbm is to one reduce fiscal deficit to 3% of GDP and second to eliminate effective Revenue deficit not Revenue deficit now that is why the special treatment Trends Target for FD is 3% FD 5.1 5.8 last year it was five last year it was 6.4 government projected when presenting last year's budget last 5.9 versus actual this year as in revised estimate this year is that we are going to overachieve our Target now this has happened probably for the first time in many years we projected that we will be at 5.9% of GDP next year last year bu budget estimate be of 2324 we projected that we'll be at 5.9% but we are expected to be at 5.8% this year 5.8% of GDP is our expected fiscal deficit this year that means we are overshooting our Target FD or and next year we plan to bring it down to 5.1% so that next year estimate for 25 26 4.5% our immediate Target which we set last to last year was to bring fiscal deficit from 6.8 6.3 ultimately to 4.5 4.5 road map that how are we going to reach this 4.5 5 our road map was that next year we'll be at 5.9 next year at 5.1 and then next year at 4.5 this year we have overshot to 5.8 so our FD is less than what we expected it to be question why is fiscal deficit less FD as a percentage of GDP is equals to 5 .8% fiscal deficit is 5.8% of GDP can be one reason or what else tax collection higher yes again need for borrowing is less okay what else question is our Target was that we are going to bring down fiscal deficit to 5.9% GDP and surprisingly good we have been able to bring it down to further to 5.8% of GDP why do you think what made this thing possible so foreign investments as in need to borrowing we managed cheaper bonds cheaper borrowings but Bor fiscal no principal amount so GDP is constantly increasing that is the reason the reason for the reason for fall in fiscal deficit again mathematical common questions when I look at these questions in exam when I take the discussion of prelims for you I I assume attempt because I believe that these questions if you simply understand thec deficit is equals to 5.8% of GDP meaning let's say our GDP is equals to 100 rupees our borrowing this year is equals to 5.8 rupees yog a fiscal deficit borrowing this is 5.8 given GDP is 100 we borrow 5. what will happen to fiscal deficit as a percentage of GDP will fall or not FD was 5.8 upon 100 versus now it will be 5.8 upon 110 we are borrowing the same amount but the denominator is now bigger economy is growing faster than expected economy estimates GDP estimates we estimated that GDP was growing by RBI was estimating that Indian economy will grow by 7.1% versus we surprised on the upside by growing at 7.6% GDP grows faster GDP grows faster that means denominator this question has been asked in the exam not with respect to FD but with respect to current account deficit but what cems this is more of a math question as in a simple math question something as a percentage of something simply the denominator is rising fast that means the the number the fraction that you see is going to fall down our GDP growth question simple question GDP grows faster even though the government borrows same amount fiscal deficit will now be less or not as a percentage of GDP this is what is happening here our GDP has grown faster as a result of which our FD as a percentage of GDP now is less so this is the reason for this not that we are borrowing less but we are borrowing less and the economy is growing faster than expected assume eom say eom say 11% hence the number Falls right clear okay sources of deficit financing from where does government Finance its deficit again simple the biggest source of money for government is favorite question of upsc pick up last 10 years paper you'll find one question regarding government's debt where does government borrow from what is the proportion of internal debt to external debt in which currency is external debt denominated short-term debt long-term debt internal external source of borrowing term term of borrowing currency of borrowing every year there's a question without fail where does government mostly borrow its money from One internal debt around 92% of our debt is from internal sources government of India borrows from the domestic Market very less is from outside the country number one even the debt which is from outside the country government of India external debt even that debt most of that that most of that debt is in rupees not in foreign currency most of our government debt versus SAR debt I'm talking about government's debt not country's debt most of government's debt from external sources is rupe denominator debt so one most of our debt government debt is from internal sources second most of external debt is denominated in rupees most of internal debt comes from marketable Securities meaning basically government bonds and bills treasury bills around 90% of total debt is coming from our marketable Market borrowings they this this this is Securities against small saving or short-term borrowing and these are other component very less other component most of our borrowing is coming from marketable Securities which are backed by some sort of asset this is our total government borrowing government borrowing mostly comes from marketable Securities markets marketable SEC Government Bond Government Bond government issues Bond or government issues treasury bills it sells them in the market anybody can buy I can buy you can buy RBI can buy relance Industries can buy SBI can buy anyone can buy F can buy F government a foreigner is buying government of India Bond Government Bond dollar I am purchasing government bonds face values let's say 1,000 rupes that means I'm lending 1,000 rupes to the government RBI is buying RBI is lending 1,000 rupes to the government s SBI is buying SBI lends 1,000 rupees to the government Warren Buffet is buying he's lending 1,000 rupees to the government anybody buys government of India's Bond because Government Bond is denominated in rupees domestic currency that means that is a domestic currency rupee debt an Indian can buy internal debt a foreigner can buy external debt that why is most of government's debt external debt also in rupees because because government debt is issued mostly via marketable security that is Government Bond or GC or treasury bills is Bond anybody can purchase these bonds a foreigner or an Indian anybody buys if a foreigner buys that becomes Indian government's debt to an external entity if an Indian buys it becomes in government de to a domestic entity internal entity and therefore most of government's debt is rupe denominated debt even though some of it it is external debt clear these are sources revamp scheme okay fine clear government's debt sustainability how do we assess last how do we assess whether government debt is sustainable or not fiscal deficit of 5.9 5.8 sustainable sir it should [Music] be yes so it should be incurred on least cost H yes and in rupee denominated preferably and from domestic sources preferably yes and from um it should be the maturity of longer period and it should be uh uh the interest rate should be lesser than the expected growth rate very good good excellent last part how do we assess sustainability of government's debt government is fiscal deficit incur of 5.8 % 5.8 sustainable 5.7 5.4 sustainable government total debt when I use the word total debt what does it mean total outstanding 5.8% of GDP was what was incurred this year as I said Modi is paying interest on borrowings done by manm Singh G by V by n by Rajiv Gandhi he's paying interest on all those bonds that means that debt is still unpaid or not this year Modi G is borrowing 5 rupees but last year he himself borrowed 6 rupees last year before that he borrowed 5 rupees before that manm sing G borrowed some 10 Rupees out of which 7even rupes is still to be paid is at this moment at this point of time what is the total outstanding of government of India what are such variables called which are measured at a point of time stock variables stock versus flow flow measured over a period of time deficit is a flow variable how much is the government deficit in during this year versus stock at one point of time total outstanding that is what government debt is so government's debt percent around 82% of GDP that is total debt of the government today its deficit this year is 5.8% but but its total debt is around 82% of GDP so whether this deficit which contributes to it whether it is sustainable or not government is bound by F frbm act to reduce It ultimately to 3% but it can't simply reduce it in one go to 3% step by step how does government see one the government sees that whatever the debt is it is incurred at least cost second it sees whether the debt was incurred from domestic sources or foreign sources third it sees whether foreign debt is incurred in rupees or in foreign currency fourth it sees that whether the maturity profile of debt is long or short maity debt principal amount principal shortus longm principal amount is big or interest amount is Big principal amount obviously interest is just a small part of principal if government has to repay principle in short term that means there is going to be a huge expenditure burden upon the government or not meaning government will not be able to spend for certain necessary purposes because if there is a principle that has to be repaid versus I lend money to you for one week versus for one year risk longterm shortterm longterm longterm has more risk as compared to shortterm that means given other things as equal when will I charge High rate of interest when I lend to you for longterm or short term long term me interest I'm going to charge why because more risk I'm exposed to more I'm lending money to for longer term in short duration only limited number of things can go wrong in long duration anything can go wrong that means more risk when lending for longer longer duration hence interest rate would be charg charge would be higher for longterm sarcar for borrowing for shorter duration you pay a less rate of interest do you see the tradeoff here if you borrow for shorter duration you pay a less rate of interest versus if you borrow for shorter duration you will have a greater repayment pressure also that means I have to see when I borrow money one the cost is less first principal cost should be less but at the same time I must see whether borrowing only at less cost is desirable or not cost shortterm debt that will lead to me having a Redemption pressure a payment pressure in short duration meaning I may have to cut down on my necessary expenses in short term hence we assess debts maturity profile government debt let's say right now I look at my debt I see that 20% of my debt is maturing in next 5 years short term versus 80% is maturing in more than 5 years meaning I have some breathing space shortterm debt if I take some debt today which is going to mature in short term 20% Redemption pressure short so I can borrow for a shorter duration today versus today if I see that 60% of myt is maturing in short term that mean there is going to be a huge Redemption pressure meaning huge principal repayment pressure that I'm going to be exposed to in the short duration hence shortterm pressure so when we borrow money we look at the maturity profile of debt as well this is how we assess debts sustainability so we look at maturity profile of debt as well so when we look at government's maturity profile most of its debt is today long-term in nature therefore the very last part but Dominator our debt is one mostly incurred from domestic sources second mostly incurred in domestic currency third mostly of long-term in nature therefore our debt should be regarded as sustainable or unsustainable sustainable nature number one number two our deficit has been on the decline Min in Trend meaning we are borrowing less we are mending our finances so our debt right now is sustainable and second our deficit meaning need to borrow in future also looks like it is declining that means we are a worthy candidate for borrowing money or an unworthy candidate worthy a if your debt profile you go to the bank to borrow money the bank will assess current debt sustainability you you it will be assessed that your incomes are rising that means in future you need to borrow less first second it will be assessed that your current debt is such that you are you have a capability to repay that means bank will assess that you are a good customer hence Bank should lend to you at a high cost or at a low cost low cost versus when Indian government borrows despite we having a sustainable debt despite we having a falling fiscal deficit we are still able to borrow only at higher costs why because rating agencies do not rate US that well unsain even though our debt to GDP ratio is 82% America's is 110% China's around 105% Japan's around 220% their debt is around two times their GDP America's debt is more than one time as more than double their GDP versus our debt is on the lower side is on the sustainable side and is on the declining side and still we are able to borrow money at a higher cost hence a continued focus and that too in the budget as well on rating agencies debt sustainable we always make it a point to emphasize that our debt is sustainable hence our cost of debt must come down rating agencies must rate US in a more fair manner as in not treat us unfairly by rating our debt unsecure or risky they must rate it rate US in a more fair manner so this is the last point with respect to debt sustainability this is about budget analysis q and to please don't rush please don't create indiscipline just wait for five more minutes please uh so you said interim budget can be for whole year or part of it please don't talk yeah please give respect to the person interim budget can be for whole part or whole year or part year or part of it then sir if it is for whole year though all the things are not included in the budget interium budget so how the things take place if if it's going to take part for whole year good really good really good so now government has government has proposed the interim budget let us assume this will be passed let us say please let us say anyway let us say we have a hung Parliament let us say no government is able to win a clear majority no part is able to win a clear majority and nobody is able to decide as to who is going to form the government because government has not yet been formed therefore will expenses stop or expenses continue to be incurred what gives them the authorization the interim budget passed will give them the authorization because interim budget has been passed it may well be valid for the entire year because the bill has been passed that means it is Val valid but because chances are this is not going to happen some of the other party will be in majority they will present then a full-fledged budget so therefore in this interim budget the outgoing government generally restrains from presenting some major schemes or sir please sir on central government loans the interest received is revenue receipt but the princip received is capital yes yes yes interest received by Center would be Revenue receed but principal receipt would beital receip budget you are reading newspapers every day you will continue to see analysis of budget for next five four for 5 six days as well so just read that don't need to read some anything else with respect to that b deficit trends important this is again this is this is conceptual understanding so when you look at these deficit Trends what you should look for is what you should look for is one comparative deficits as Inc revenue and more importantly the concept must be clear effective primary Concepts Trend visual memory that it is cons consistently declining it is every deficit cons consistently declining next you also know what the concepts are you can arrange them in an order when you have conceptual Clarity trust me you will be able to attend these questions number 5.8 [Music] 51 one you can't remember all the facts second you don't have to remember these facts budget summary upload if you try to memorize that budget summary you have lost it already pd5 will be given to you if you try to memorize those facts one your objective should be to read it not to remember it this is where your hard work of entire year is going to pay off trust that you have read entire all the newspapers during the year you may have or may not have read let's say mon monthly current affairs now when you read pt65 or let's say economic survey summary or let's say budget summary then you are going to recollect all these Trends in your mind without explicitly trying to remember them please then from now onwards trust yourself so be it PM exam PM exam you have spent your time on that invested your time but if there is some scheme that you have not spent your time there is no point of going to the internet looking at a document and then trying to remember all those things it's not it's not possible and it's not required also so don't waste your time like that anything else n take care [Music] bye-bye [Music]

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Length: 184min 27sec (11067 seconds)

Published: Mon Feb 05 2024