Budget and its types

Budget
       Budget is the estimation of income and expenditure. Budget is prepared for proper and systematic development.

Budget represent in 3 ways
              1. Income> expenditure= surplus
              2. Income= expenditure= balance budget      
              3. Income< expenditure = deficit budget
         Note- India's budget is always deficit because India is a developing country.

Sources of Money for Government

1. Loan from RBI 
2. Government securities 
3. Loan from Asian development Bank and world bank

Categories of Budget

1. Gender Budget 
2. Zero base Budget 
3. Outcome Budget
4. Traditional Budget 
5. Performance Budget 
6. Interim Budget

• Gender Budget- When budget is female oriented is called gender budget. 
• Zero base Budget- When government form budget without considering last years budget performance that is called zero base budget. 
• Outcome Budget- When budget is result oriented(means particular sector growth related). 
• Traditional Budget- When income estimated and expenditure fixed is called Traditional budget.
• Performance Budget- When government form budget with considering last year budget.
• Interim Budget- Year 2014-15 budget is interim budget. When government is not able to prepare budget for full year is called interim budget. Example in election times , in wars. Interim Budget is for 4 months.

Note- First time budget was represented by Robert woolpoul in 1773 in U.K. Bugat is a french word for Budget.

• In India under Constitution Article 112 government present Union Budget. 
• In constitution of India annual financial statement is mentioned not budget. 
• State Legislative Assemble present their budget by article 202.
• India's First Budget was presented by James Wilson in 1860 when lord canning is viceroy of India. 

In 1921 Edward committee recommend to divide budget in two parts 

1. Rail Budget
2. Union Budget 

• First Independent India's Budget presented by Mr. R. K kshadmugam chatti (it is first interim budget) in November 1947. 
• First Republic India's Budget presented byMr. John Mathei.

Inflation Related Terms

Inflation Related Terms 

• Deflation- Deflation is the opposite of inflation -- it's when prices fall. It is caused by a reduction in the supply of money or credit . 
• Hyperinflation- Extremely rapid or out of control inflation. Hyper inflation is a situation where the price increases are so out of control that the concept of inflation is meaningless. 
• Stagflation- A condition of slow economic growth and relatively high unemployment- a time of stagnation- accompanied by a rise in rises , or inflation. 
• Disinflation- A slowing in the rate of price inflation. Disinflation is used to describe instances when the inflation rate has reduced marginally over the short term. It is used to describe periods of slow inflation. 
• Reflation- Reflation is the act of stimulating the economy by incresing the money supply or by reducing taxes. it is opposite of disinflation.

Inflation

Inflation
         Inflation is a persistent increase in the general price level of goods and services in an economy over a period of time.

Types of Inflation

1. Demand pull inflation 
2. Cost push Inflation 
3. wages Inflation 
4. Imported Inflation 

• Demand Pull Inflation- occurs demand for goods and services exceed the supply. 
• Cost Push Inflation- Price increase due to increase in price of other products. 
• Wages Inflation- It occur due to increase in wages as a result purchasing power of people increase. 
• Imported Inflation- The general price level rises in a country because of the rise in prices of imported commodities. 

Categories of Inflation

1. Creeping Inflation- When there is a general rise in prices at very low rates, which is usually between 2-4 percent annually. 
2. Walking Inflation - This type of strong, or pernicious, inflation is between 3-10% a year. It is harmful to the economy because it heats up economic growth too fast. 
3. Galloping Inflation- When inflation rises to ten percent or greater, it wreaks absolute havoc on the economy. Money loses value so fast that business and employee income can't keep up with costs and prices. 
4. Hyper Inflation- Hyperinflation is when the prices skyrocket more than 50% -- a month. It is fortunately very rare.

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RTGS

RTGS
        The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time; 'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable.
        NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually. For example, currently, NEFT operates in hourly batches. [There are twelve settlements from 8 am to 7 pm on week days and six settlements from 8 am to 1 pm on Saturdays.] Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time Contrary to this, in the RTGS transactions are processed continuously throughout the RTGS business hours.
        The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is ` 2 lakh. There is no upper ceiling for RTGS transactions.
        The RTGS service window for customer's transactions is available to banks from 9.00 hours to 16.30 hours on week days and from 9.00 hours to 14:00 hours on Saturdays for settlement at the RBI end. However, the timings that the banks follow may vary depending on the customer timings of the bank branches.
       With a view to rationalize the service charges levied by banks for offering funds transfer through RTGS system, a broad framework has been mandated as under: a) Inward transactions – Free, no charge to be levied. b) Outward transactions – ` 2 lakh to ` 5 lakh - not exceeding ` 30.00 per transaction; Above ` 5 lakh – not exceeding ` 55.00 per transaction.
       The remitting customer has to furnish the following information to a bank for initiating a RTGS remittance:
1. Amount to be remitted
2. Remitting customer’s account number which is to be debited
3. Name of the beneficiary bank and branch
4. The IFSC Number of the receiving branch
5. Name of the beneficiary customer
6. Account number of the beneficiary customer
7. Sender to receiver information, if any
       The beneficiary customer can obtain the IFSC code from his bank branch. The IFSC code is also available on the cheque leaf. The list of IFSCs is also available on the RBI website . This code number and bank branch details can be communicated by the beneficiary to the remitting customer.