Day: February 1, 2023

The Budget At A Glance Document

Regardless of whether you are a formal student of economics or otherwise, here’s how I would recommend you start today.

  1. Visit this website.
  2. Go to the Budget at a Glance section. Search for it on Google, if you like, but make sure you open the 2023-24 document!
  3. Open up either the MS-Excel file or the PDF of the document titled Budget at a Glance. If you don’t plan on copying any data, I would recommend the PDF. It is marginally easier to read.
  4. Scroll down to the table, which is usually on page 3
  5. Remember that this is the government’s budget. Don’t confuse this with India’s GDP! But more about India’s GDP and how it relates to this document below
  6. Understand the structure of the document:
    • Note that the numbers are in Rs. crores
    • Understand the layout of the four columns:
      • The first will be the ‘actuals’ for the year 2021-22.
      • The second will be the ‘budget estimates’ for the year 2022-23 (note that this was the fourth column exactly one year ago)
      • The third will be the ‘revised estimates’ for the year 2022-23
      • And the fourth column will be the budget estimates for the year 2023-24
    • Understand the layout of the rows:
      • Line item no.8 and line item no. 9 will be exactly equal. This is not a coincidence. Our government’s ‘income’ (no. 8) must match it’s ‘expenditure’ (no. 9).
      • Both line item no. 8 and line item no.9 further decompose into revenue and capital ‘streams’. What are revenue and capital ‘streams’?
        • A one time income (or expenditure) can be thought of as a capital stream. You enrolling in a college degree is a one time expenditure, for example. But you paying your hostel mess bill is a recurring expenditure. Which do you think ought to come under the capital ‘stream’? Which do you think ought to come under the revenue ‘stream’? Why? Use your answers here to understand the structures of the rows numbered 1,4 and therefore 8. Also 10,13 and therefore 9.
      • Now let’s take a look at just line item no. 1 and its constituents:
        • How much growth has the government pencilled in for tax revenue (line item no. 2) between the third and the fourth column? Between the second and the fourth column? Scroll down to the bottom of this page and take a look at note (i). How much is nominal GDP – in one sense the income of the country as a whole – going to grow by? How much is the growth rate of tax collections? Why do you think this difference exists?
        • What are non-tax revenue receipts? They usually comprise of interest receipts, dividends and profits (whose?), external grants, other non-tax revenue and receipts of Union Territories. You can find more information about this in the Receipt Statement document on the Budget at a Glance web-page (bag5, usually).
      • Under Capital Receipts (4 and its constituents), pay close and loving attention to line item no. 6. This will disappoint all of us this year, which unfortunately has been a trend for a very, very long time. This is proceeds from disinvestment (3.A.(ii) in bag5), and now ask yourself why the second column is so very different from the third. Ask yourself how you should therefore interpret the value in the fourth column. Go back and take a look at the corresponding entry in previous Budget at a Glance documents. Ponder this issue, and read more about it. To me, it is the most crucial part of the income part of this document.
      • Line item no. 7 is the outcome of the following equation. Pay attention now! 9-1-5-6=7.
        In English: the government first figures out how much it needs to spend (9). It then subtracts from it all possible sources of income: all of revenue receipts (1), then recovery of loans (5) and then disinvestment proceeds (6). What remains needs must be borrowed. We call this the fiscal deficit. Line item no. 7 will be exactly equal to line item no. 17, and that’s not a coincidence.
      • Under line item no. 9 and its constituents, first check how large 10 is as a percentage of 9. Then check how small 13 is as a percentage of 10.
        • How much of 10 can the government afford to change? (More details in bag6)
        • How much of 13 does the government need to change? (ditto)
        • With regard to both of these points, go through the ‘expenditure of major items’ and ‘composition of expenditure’ sections of bag 6 (usually pages 10 and 11).
        • How large is line item 11? How to interpret 11? Is the government borrowing (7) to repay the interest on old loans (11)? What is the meaning of line item 18?
  7. Go over the rest of the document as well, but this will now fill in the details. Note that some of what I have mentioned is in bag5 and bag 6 can also be found over here, but it is worth your while to be aware of those documents as well.

Please, spend an hour going over this blogpost and the budget at a glance documents.

Then, if you so desire, start listening to the talking heads on your channel of choice. Then read what everybody has to say about the budget.

The first year you do this, it will seem like a lot of work. But as the structure of the document becomes clearer and more familiar, you will find it relatively easier to begin making sense of the budget on your own – at least a respectable top-level analysis. Then, depending on your political views, sectoral exposure and appetite to learn, you can choose to consume any amount of analysis on the budget. But bring to that experience your own independent analysis, and see how what you’re consuming resonates with what you think you know.

And if you ask me, everybody who has gone through a class on economics (and correct me if I’m wrong, but that ought to be everybody who has gone through school) should have undergone a session like this.

It does not necessarily happen, more’s the pity.

And of course, don’t stop here! As a serious student of economics, there is much more to do. But this? Difficult, tedious and time-consuming though it may seem, these ought to be table stakes to formulate (let alone give) an opinion about the budget.