Gist of Union Budget 2019-20 UPSC Notes | EduRev

Environment and Additional Topics for UPSC Prelims

UPSC : Gist of Union Budget 2019-20 UPSC Notes | EduRev

 Page 1


 
1 
 
INDEX 
Section 1: Theory of Budget  
? Budget and Budgeting process 
? Concepts and terminologies related to Budget 
? Interim Budget 
Section 2: Pre-Budget Narrative 
? Universal Basic Income 
? Farm Loan Waiver 
? Employment 
? Banking Sector issues 
? Tax Reform 
? Data architecture for policy making 
? Miscellaneous issues 
Section 3: Budget 2019-20 
? Major highlights (20-points to remember) 
? Graphical bird eye view 
? Sector specific (5-pt approach) 
Section 4: Critical Analysis and Past year achievements 
  
Page 2


 
1 
 
INDEX 
Section 1: Theory of Budget  
? Budget and Budgeting process 
? Concepts and terminologies related to Budget 
? Interim Budget 
Section 2: Pre-Budget Narrative 
? Universal Basic Income 
? Farm Loan Waiver 
? Employment 
? Banking Sector issues 
? Tax Reform 
? Data architecture for policy making 
? Miscellaneous issues 
Section 3: Budget 2019-20 
? Major highlights (20-points to remember) 
? Graphical bird eye view 
? Sector specific (5-pt approach) 
Section 4: Critical Analysis and Past year achievements 
  
 
2 
Issue of Budget circular -
>
 Accumulation and authorization of 
data -
>
 Data scrutiny -
>
 Feasibility analysis -
>
 Consultations -
>
 
Revenue allocation -
>
 Preparation of estimated revenues -
>
 
Halwa ceremony   
Presentation-
>
 General discussion-
>
Scrutiny-
>
Voting on demand for grants-
>
Passing of appropriation 
bill-
>
 Passing of Finance bill 
 
Section 1: Theory of Budget 
? Budget and Budgeting process 
? Concepts and terminologies related to Budget 
? Interim Budget 
 
Q. What is Budget? What are the steps involved in the preparation of budget? Who prepares 
Budget? 
Budget is Annual Financial Statement. It encapsulates earnings from revenue and estimated 
expenditure of government during a fiscal year (1st April to succeeding 31st March). It provides a 
financial roadmap for the country in ensuing years. Department of Economic affairs Ministry of Finance 
prepares Union Budget. [Prelims] 
Organisational structure of Finance Ministry – There are five departments 
1. Department of Economic Affairs 
2. Department of Expenditure 
3. Department of Revenue 
4. Department of Financial Services 
5. Department of Investment and Public Asset Management 
Budgeting process involves three major steps namely 1. Preparation 2. Presentation 3. Implementation. 
A) Preparation:  
In case of dispute, PM, FM and 
union cabinet collectively decides 
the course of action. FM also 
consults various pressure groups 
like FICCI, CII, Cooperative associations, Farmer organizations. NITI Aayog also provides suggestions.  
B) Presentation: [Prelims] 
C) Implementation: Once the parliament approves various outlays, money is provided to different 
ministries which is further used to implement schemes. 
Q. What are different documents presented in the budget? [Prelims] 
There are 16 documents in total which are presented. The important ones include  
1. Annual Financial Statement [A.112] 
2. Demands for Grants [A. 113, 114] 
3. Receipts Budget  
4. Expenditure Budget  
5. Finance Bill [A. 110] 
6. Fiscal Responsibility and Budget 
Management [Prelims]  
(i) Macro-economic Framework Statement 
The main purpose of FRBMA is to institutionalize 
financial discipline, reduce India's fiscal deficit, improve 
macroeconomic management and the overall 
management of the public funds by moving towards 
a balanced budget and strengthen fiscal prudence.  
Page 3


 
1 
 
INDEX 
Section 1: Theory of Budget  
? Budget and Budgeting process 
? Concepts and terminologies related to Budget 
? Interim Budget 
Section 2: Pre-Budget Narrative 
? Universal Basic Income 
? Farm Loan Waiver 
? Employment 
? Banking Sector issues 
? Tax Reform 
? Data architecture for policy making 
? Miscellaneous issues 
Section 3: Budget 2019-20 
? Major highlights (20-points to remember) 
? Graphical bird eye view 
? Sector specific (5-pt approach) 
Section 4: Critical Analysis and Past year achievements 
  
 
2 
Issue of Budget circular -
>
 Accumulation and authorization of 
data -
>
 Data scrutiny -
>
 Feasibility analysis -
>
 Consultations -
>
 
Revenue allocation -
>
 Preparation of estimated revenues -
>
 
Halwa ceremony   
Presentation-
>
 General discussion-
>
Scrutiny-
>
Voting on demand for grants-
>
Passing of appropriation 
bill-
>
 Passing of Finance bill 
 
Section 1: Theory of Budget 
? Budget and Budgeting process 
? Concepts and terminologies related to Budget 
? Interim Budget 
 
Q. What is Budget? What are the steps involved in the preparation of budget? Who prepares 
Budget? 
Budget is Annual Financial Statement. It encapsulates earnings from revenue and estimated 
expenditure of government during a fiscal year (1st April to succeeding 31st March). It provides a 
financial roadmap for the country in ensuing years. Department of Economic affairs Ministry of Finance 
prepares Union Budget. [Prelims] 
Organisational structure of Finance Ministry – There are five departments 
1. Department of Economic Affairs 
2. Department of Expenditure 
3. Department of Revenue 
4. Department of Financial Services 
5. Department of Investment and Public Asset Management 
Budgeting process involves three major steps namely 1. Preparation 2. Presentation 3. Implementation. 
A) Preparation:  
In case of dispute, PM, FM and 
union cabinet collectively decides 
the course of action. FM also 
consults various pressure groups 
like FICCI, CII, Cooperative associations, Farmer organizations. NITI Aayog also provides suggestions.  
B) Presentation: [Prelims] 
C) Implementation: Once the parliament approves various outlays, money is provided to different 
ministries which is further used to implement schemes. 
Q. What are different documents presented in the budget? [Prelims] 
There are 16 documents in total which are presented. The important ones include  
1. Annual Financial Statement [A.112] 
2. Demands for Grants [A. 113, 114] 
3. Receipts Budget  
4. Expenditure Budget  
5. Finance Bill [A. 110] 
6. Fiscal Responsibility and Budget 
Management [Prelims]  
(i) Macro-economic Framework Statement 
The main purpose of FRBMA is to institutionalize 
financial discipline, reduce India's fiscal deficit, improve 
macroeconomic management and the overall 
management of the public funds by moving towards 
a balanced budget and strengthen fiscal prudence.  
 
3 
(ii) Medium Term Fiscal Policy Statement 
(iii) Fiscal Policy Strategy Statement 
Note: An Appropriation Act in India is an act of Parliament which allows the withdrawal of funds from 
Consolidated Fund of India or Consolidated Funds of States (in case of state budgets). Similarly, the 
Finance Act of Central Government gives effect to the taxation proposals in the beginning of every 
financial year. For taxation proposals at state levels, State Finance Acts are enacted every year. 
Q. Different terminologies you should know for better understanding of Budget document. 
The Annual financial document presents information under four broad heads.  
1. Budget estimate for the next financial year.  
2. Revised estimates for the current fiscal year 
3. Budget estimates of current year which must have been presented in the previous budget. 
4. Actual estimates for previous financial year. 
For example, for year 2019-20, budget table would contain four large columns namely 2019-20 (Budget 
estimate or BE), 2018-19 (revised estimate or RE), and 2017-18 (Actual estimates or AE). 
 
[Prelims] 
 
In each column, various figures are listed like revenue receipts, capital receipts and various deficits. 
Each is explained in short below: [Prelims, Interview] 
Revenue account Current accounts (Income and outgoing of current year) 
Capital account Long term accounts (Income and outgoing beyond one year) 
Revenue Income includes tax and non-tax receipts which do not add up to liabilities 
Tax receipts Include Direct and Indirect tax 
Non-Tax receipts PSU profits/Interest or loans received/Fees, fines and penalty/User charges 
Revenue expenditure subsidy/defence/salaries and pensions/law and order/interest payments 
Capital receipts 
Market borrowing/Proceeds from disinvestment/Recoveries of past 
loans/Proceeds from asset sale 
Capital Expenditure Expenditure on infrastructure/loans to state/repayment of past loans 
 
Term Description 
Budget Deficit Total Expenditure – Total Receipts 
Monetized Deficit Government borrowing from RBI and RBI printing fresh notes 
Fiscal Deficit Total expenditure – (revenue receipts + Non-debt creating capital receipts) 
Primary Deficit Fiscal Deficit - the interest payments 
Revenue Deficit Revenue expenses- Revenue receipts 
Effective Revenue Revenue Deficit - Grants for creation of capital assets 
Page 4


 
1 
 
INDEX 
Section 1: Theory of Budget  
? Budget and Budgeting process 
? Concepts and terminologies related to Budget 
? Interim Budget 
Section 2: Pre-Budget Narrative 
? Universal Basic Income 
? Farm Loan Waiver 
? Employment 
? Banking Sector issues 
? Tax Reform 
? Data architecture for policy making 
? Miscellaneous issues 
Section 3: Budget 2019-20 
? Major highlights (20-points to remember) 
? Graphical bird eye view 
? Sector specific (5-pt approach) 
Section 4: Critical Analysis and Past year achievements 
  
 
2 
Issue of Budget circular -
>
 Accumulation and authorization of 
data -
>
 Data scrutiny -
>
 Feasibility analysis -
>
 Consultations -
>
 
Revenue allocation -
>
 Preparation of estimated revenues -
>
 
Halwa ceremony   
Presentation-
>
 General discussion-
>
Scrutiny-
>
Voting on demand for grants-
>
Passing of appropriation 
bill-
>
 Passing of Finance bill 
 
Section 1: Theory of Budget 
? Budget and Budgeting process 
? Concepts and terminologies related to Budget 
? Interim Budget 
 
Q. What is Budget? What are the steps involved in the preparation of budget? Who prepares 
Budget? 
Budget is Annual Financial Statement. It encapsulates earnings from revenue and estimated 
expenditure of government during a fiscal year (1st April to succeeding 31st March). It provides a 
financial roadmap for the country in ensuing years. Department of Economic affairs Ministry of Finance 
prepares Union Budget. [Prelims] 
Organisational structure of Finance Ministry – There are five departments 
1. Department of Economic Affairs 
2. Department of Expenditure 
3. Department of Revenue 
4. Department of Financial Services 
5. Department of Investment and Public Asset Management 
Budgeting process involves three major steps namely 1. Preparation 2. Presentation 3. Implementation. 
A) Preparation:  
In case of dispute, PM, FM and 
union cabinet collectively decides 
the course of action. FM also 
consults various pressure groups 
like FICCI, CII, Cooperative associations, Farmer organizations. NITI Aayog also provides suggestions.  
B) Presentation: [Prelims] 
C) Implementation: Once the parliament approves various outlays, money is provided to different 
ministries which is further used to implement schemes. 
Q. What are different documents presented in the budget? [Prelims] 
There are 16 documents in total which are presented. The important ones include  
1. Annual Financial Statement [A.112] 
2. Demands for Grants [A. 113, 114] 
3. Receipts Budget  
4. Expenditure Budget  
5. Finance Bill [A. 110] 
6. Fiscal Responsibility and Budget 
Management [Prelims]  
(i) Macro-economic Framework Statement 
The main purpose of FRBMA is to institutionalize 
financial discipline, reduce India's fiscal deficit, improve 
macroeconomic management and the overall 
management of the public funds by moving towards 
a balanced budget and strengthen fiscal prudence.  
 
3 
(ii) Medium Term Fiscal Policy Statement 
(iii) Fiscal Policy Strategy Statement 
Note: An Appropriation Act in India is an act of Parliament which allows the withdrawal of funds from 
Consolidated Fund of India or Consolidated Funds of States (in case of state budgets). Similarly, the 
Finance Act of Central Government gives effect to the taxation proposals in the beginning of every 
financial year. For taxation proposals at state levels, State Finance Acts are enacted every year. 
Q. Different terminologies you should know for better understanding of Budget document. 
The Annual financial document presents information under four broad heads.  
1. Budget estimate for the next financial year.  
2. Revised estimates for the current fiscal year 
3. Budget estimates of current year which must have been presented in the previous budget. 
4. Actual estimates for previous financial year. 
For example, for year 2019-20, budget table would contain four large columns namely 2019-20 (Budget 
estimate or BE), 2018-19 (revised estimate or RE), and 2017-18 (Actual estimates or AE). 
 
[Prelims] 
 
In each column, various figures are listed like revenue receipts, capital receipts and various deficits. 
Each is explained in short below: [Prelims, Interview] 
Revenue account Current accounts (Income and outgoing of current year) 
Capital account Long term accounts (Income and outgoing beyond one year) 
Revenue Income includes tax and non-tax receipts which do not add up to liabilities 
Tax receipts Include Direct and Indirect tax 
Non-Tax receipts PSU profits/Interest or loans received/Fees, fines and penalty/User charges 
Revenue expenditure subsidy/defence/salaries and pensions/law and order/interest payments 
Capital receipts 
Market borrowing/Proceeds from disinvestment/Recoveries of past 
loans/Proceeds from asset sale 
Capital Expenditure Expenditure on infrastructure/loans to state/repayment of past loans 
 
Term Description 
Budget Deficit Total Expenditure – Total Receipts 
Monetized Deficit Government borrowing from RBI and RBI printing fresh notes 
Fiscal Deficit Total expenditure – (revenue receipts + Non-debt creating capital receipts) 
Primary Deficit Fiscal Deficit - the interest payments 
Revenue Deficit Revenue expenses- Revenue receipts 
Effective Revenue Revenue Deficit - Grants for creation of capital assets 
 
4 
Deficit 
 
 Revenue Expenditure   Capital Expenditure 
1. Expenditure for items which are used for the day-to-day 
running expenses of the business. They are normally 
used up in less than one accounting period and 
therefore, only temporarily increases the profit-making 
capacity of the business. 
Expenditure on assets which last for a 
long time and permanently increase the 
profit-making capacity of the business.  
2. Appears in the Trading and Profit and Loss Accounts as 
a reduction to profits. 
Appears in the Balance Sheet as an 
increase in the value of assets. 
3. Examples: 
Goods bought for resale, all running expenses such as 
rent, interest, etc., decoration to premises, depreciation. 
Examples: purchase of land, premises, 
vehicles, office equipment, extension to 
premises, renovation to premises, legal 
fees involved in purchase of fixed assets. 
Other estimates used in GDP calculations: 1
st
 advance estimates/2
nd
 advanced estimates/Provisional 
estimates/budget estimates/Actual estimates/Quick estimates 
Q. What is GDP and which among the four GNP, GDP, NNP and NDP is best measure of growth 
of a country?  
GDP is sum total of all the goods and services produced in an economy in a given financial year. GDP 
does not reflect the true value of national assets as it does not count the net factor income from abroad. 
Therefore, we have concepts of GNP, NNP etc.  
However, NNP/GNP are gradually becoming less relevant because most countries are running on high 
external debts that are serviced through internal resources which tend to increase outflows and reduce 
GNP of a country. Further, variable and volatile nature of remittances makes it difficult to judge the 
correct state of economy. Therefore, GDP is considered more stable measure. [P] 
 
where, 
GNP- Gross National Product 
GDP- Gross Domestic Product 
NNP- Net National Product 
NDP- Net Domestic Product 
FC- Factor Cost 
MP- Market Price 
 
 
 
 
The trouble with GDP – It is increasingly a poor measure of prosperity. 
Measuring GDP requires adding up the value of what is produced, net of inputs, across a wide variety 
of business lines, weighting each according to its importance in the economy. Both the output and the 
materials (if any) used up in making it have to be adjusted for inflation to arrive at a figure that allows for 
Page 5


 
1 
 
INDEX 
Section 1: Theory of Budget  
? Budget and Budgeting process 
? Concepts and terminologies related to Budget 
? Interim Budget 
Section 2: Pre-Budget Narrative 
? Universal Basic Income 
? Farm Loan Waiver 
? Employment 
? Banking Sector issues 
? Tax Reform 
? Data architecture for policy making 
? Miscellaneous issues 
Section 3: Budget 2019-20 
? Major highlights (20-points to remember) 
? Graphical bird eye view 
? Sector specific (5-pt approach) 
Section 4: Critical Analysis and Past year achievements 
  
 
2 
Issue of Budget circular -
>
 Accumulation and authorization of 
data -
>
 Data scrutiny -
>
 Feasibility analysis -
>
 Consultations -
>
 
Revenue allocation -
>
 Preparation of estimated revenues -
>
 
Halwa ceremony   
Presentation-
>
 General discussion-
>
Scrutiny-
>
Voting on demand for grants-
>
Passing of appropriation 
bill-
>
 Passing of Finance bill 
 
Section 1: Theory of Budget 
? Budget and Budgeting process 
? Concepts and terminologies related to Budget 
? Interim Budget 
 
Q. What is Budget? What are the steps involved in the preparation of budget? Who prepares 
Budget? 
Budget is Annual Financial Statement. It encapsulates earnings from revenue and estimated 
expenditure of government during a fiscal year (1st April to succeeding 31st March). It provides a 
financial roadmap for the country in ensuing years. Department of Economic affairs Ministry of Finance 
prepares Union Budget. [Prelims] 
Organisational structure of Finance Ministry – There are five departments 
1. Department of Economic Affairs 
2. Department of Expenditure 
3. Department of Revenue 
4. Department of Financial Services 
5. Department of Investment and Public Asset Management 
Budgeting process involves three major steps namely 1. Preparation 2. Presentation 3. Implementation. 
A) Preparation:  
In case of dispute, PM, FM and 
union cabinet collectively decides 
the course of action. FM also 
consults various pressure groups 
like FICCI, CII, Cooperative associations, Farmer organizations. NITI Aayog also provides suggestions.  
B) Presentation: [Prelims] 
C) Implementation: Once the parliament approves various outlays, money is provided to different 
ministries which is further used to implement schemes. 
Q. What are different documents presented in the budget? [Prelims] 
There are 16 documents in total which are presented. The important ones include  
1. Annual Financial Statement [A.112] 
2. Demands for Grants [A. 113, 114] 
3. Receipts Budget  
4. Expenditure Budget  
5. Finance Bill [A. 110] 
6. Fiscal Responsibility and Budget 
Management [Prelims]  
(i) Macro-economic Framework Statement 
The main purpose of FRBMA is to institutionalize 
financial discipline, reduce India's fiscal deficit, improve 
macroeconomic management and the overall 
management of the public funds by moving towards 
a balanced budget and strengthen fiscal prudence.  
 
3 
(ii) Medium Term Fiscal Policy Statement 
(iii) Fiscal Policy Strategy Statement 
Note: An Appropriation Act in India is an act of Parliament which allows the withdrawal of funds from 
Consolidated Fund of India or Consolidated Funds of States (in case of state budgets). Similarly, the 
Finance Act of Central Government gives effect to the taxation proposals in the beginning of every 
financial year. For taxation proposals at state levels, State Finance Acts are enacted every year. 
Q. Different terminologies you should know for better understanding of Budget document. 
The Annual financial document presents information under four broad heads.  
1. Budget estimate for the next financial year.  
2. Revised estimates for the current fiscal year 
3. Budget estimates of current year which must have been presented in the previous budget. 
4. Actual estimates for previous financial year. 
For example, for year 2019-20, budget table would contain four large columns namely 2019-20 (Budget 
estimate or BE), 2018-19 (revised estimate or RE), and 2017-18 (Actual estimates or AE). 
 
[Prelims] 
 
In each column, various figures are listed like revenue receipts, capital receipts and various deficits. 
Each is explained in short below: [Prelims, Interview] 
Revenue account Current accounts (Income and outgoing of current year) 
Capital account Long term accounts (Income and outgoing beyond one year) 
Revenue Income includes tax and non-tax receipts which do not add up to liabilities 
Tax receipts Include Direct and Indirect tax 
Non-Tax receipts PSU profits/Interest or loans received/Fees, fines and penalty/User charges 
Revenue expenditure subsidy/defence/salaries and pensions/law and order/interest payments 
Capital receipts 
Market borrowing/Proceeds from disinvestment/Recoveries of past 
loans/Proceeds from asset sale 
Capital Expenditure Expenditure on infrastructure/loans to state/repayment of past loans 
 
Term Description 
Budget Deficit Total Expenditure – Total Receipts 
Monetized Deficit Government borrowing from RBI and RBI printing fresh notes 
Fiscal Deficit Total expenditure – (revenue receipts + Non-debt creating capital receipts) 
Primary Deficit Fiscal Deficit - the interest payments 
Revenue Deficit Revenue expenses- Revenue receipts 
Effective Revenue Revenue Deficit - Grants for creation of capital assets 
 
4 
Deficit 
 
 Revenue Expenditure   Capital Expenditure 
1. Expenditure for items which are used for the day-to-day 
running expenses of the business. They are normally 
used up in less than one accounting period and 
therefore, only temporarily increases the profit-making 
capacity of the business. 
Expenditure on assets which last for a 
long time and permanently increase the 
profit-making capacity of the business.  
2. Appears in the Trading and Profit and Loss Accounts as 
a reduction to profits. 
Appears in the Balance Sheet as an 
increase in the value of assets. 
3. Examples: 
Goods bought for resale, all running expenses such as 
rent, interest, etc., decoration to premises, depreciation. 
Examples: purchase of land, premises, 
vehicles, office equipment, extension to 
premises, renovation to premises, legal 
fees involved in purchase of fixed assets. 
Other estimates used in GDP calculations: 1
st
 advance estimates/2
nd
 advanced estimates/Provisional 
estimates/budget estimates/Actual estimates/Quick estimates 
Q. What is GDP and which among the four GNP, GDP, NNP and NDP is best measure of growth 
of a country?  
GDP is sum total of all the goods and services produced in an economy in a given financial year. GDP 
does not reflect the true value of national assets as it does not count the net factor income from abroad. 
Therefore, we have concepts of GNP, NNP etc.  
However, NNP/GNP are gradually becoming less relevant because most countries are running on high 
external debts that are serviced through internal resources which tend to increase outflows and reduce 
GNP of a country. Further, variable and volatile nature of remittances makes it difficult to judge the 
correct state of economy. Therefore, GDP is considered more stable measure. [P] 
 
where, 
GNP- Gross National Product 
GDP- Gross Domestic Product 
NNP- Net National Product 
NDP- Net Domestic Product 
FC- Factor Cost 
MP- Market Price 
 
 
 
 
The trouble with GDP – It is increasingly a poor measure of prosperity. 
Measuring GDP requires adding up the value of what is produced, net of inputs, across a wide variety 
of business lines, weighting each according to its importance in the economy. Both the output and the 
materials (if any) used up in making it have to be adjusted for inflation to arrive at a figure that allows for 
 
5 
comparison with what has gone before. 
This is tricky enough to do for an economy of farms, production lines and mass markets—the setting in 
which GDP was first introduced. For today‘s rich economies, dominated by made-to-order services and 
increasingly geared to the quality of experience rather than the production of ever more stuff, the 
trickiness is raised to a higher level. 
The problem is not just that it is hard to make these calculations. It is that what the calculations produce 
is a measure put to too many purposes, and, though useful, not truly fit for any of them. And there are 
worries that things may be getting worse. These days it seems that a growing fraction of innovation is 
not measured at all. In a world where houses are Airbnb hotels and private cars are Uber taxis, where a 
free software upgrade renews old computers, and Facebook and YouTube bring hours of daily 
entertainment to hundreds of millions at no price at all, many suspect GDP is becoming an ever more 
misleading measure.  
Much that is valuable is neither tangible nor tradable. But much that is tradable is also not tangible. A 
problem with GDP even when it is being asked to do nothing more than measure production is that it is 
a relic of a period dominated by manufacturing. 
A bias toward manufacturing is not the only distortion. By convention GDP measures only output that is 
bought and sold. There are reasons for this, only some of them sound. First, market transactions are 
taxable and therefore of interest to the exchequer, an important consumer of GDP statistics. Second, 
they can be influenced by policies to manage aggregate demand. Third, where there are market prices, 
it is fairly straightforward to put a value on output. This convention means that so-called ?home 
production?, such as housework or caring for an elderly relative, is excluded from GDP, even though 
such unpaid services have considerable value. 
Q. What is the concept of GVA and how is it different from GDP? [P] 
Earlier, government was calculating all the data for GDP at factor cost. This was called GDP of India. It 
was evaluated using output method (remember three ways Output, expenditure and income method). 
Thus it was compilation of wages, interests, salaries, profits etc. This GDP at factor cost at constant 
price was used as GDP figure of the country.  
However, internationally, GDP is considered as GDP at market price Whereas GDP at factor cost is 
considered as Gross value added (GVA) at factor cost. The GVA at factor cost is compiled by 
subtracting the factor of net production taxes for each sector from sector specific GVA values. In simple 
terms, industry-wise estimates are accounted separately keeping in mind the different production taxes 
and production subsidies for each sector. This is compiled and presented as GVA at basic prices. The 
GDP at market price i.e. new GDP is evaluated by adding net product taxes (different from net 
production tax) to the value of GVA at basic prices. This could be understood from the table below: 
Term Description 
Gross value Added at Basic prices Compensation of Employees + Operating Surplus + Mixed 
Income + Consumption of Fixed Capital (CFC) + Production 
taxes – Production subsidies 
GVA at factor cost ( earlier referred 
to as GDP at factor cost) 
GVA at basic prices – (production taxes – production subsidies) 
Gross Domestic Product (GDP) GVA at basic prices + Product taxes – Product subsidies  
Q. What are the sources of income for the government for budgeting process?  
Prominently government raise money for expenditure from three sources namely Taxation (acts as glue 
to the economy), Borrowing (from citizenry, foreign investors or institutions), Printing (measure of last 
resort because it tends to have inflationary impact). 
Read More
Offer running on EduRev: Apply code STAYHOME200 to get INR 200 off on our premium plan EduRev Infinity!

Complete Syllabus of UPSC

Dynamic Test

Content Category

Related Searches

Sample Paper

,

Gist of Union Budget 2019-20 UPSC Notes | EduRev

,

Semester Notes

,

Extra Questions

,

Viva Questions

,

mock tests for examination

,

shortcuts and tricks

,

past year papers

,

Objective type Questions

,

video lectures

,

Gist of Union Budget 2019-20 UPSC Notes | EduRev

,

Important questions

,

study material

,

Summary

,

Exam

,

Gist of Union Budget 2019-20 UPSC Notes | EduRev

,

practice quizzes

,

Previous Year Questions with Solutions

,

MCQs

,

ppt

,

Free

,

pdf

;