AIPPM study guide

Background Guide
AIPPM
Agenda- Reviewing Union Financial Budget for fiscal year

2024-25 with special emphasis on budget allocation disparity
between states.
Letter From the EB
It gives us immense pleasure to extend a warm welcome to each and every member of the
AIPPM at WRDAVMUN 2024. This committee will deal with a highly relevant and interesting
feature of governance of independent India i.e. Fiscal Budget. As members of the AIPPM we
expect you to maintain decorum and courtesy throughout the committee sessions. We will be
dealing with a highly sensitive agenda and any derogatory comments against one's identity,
belief and faith will not be tolerated.
As politicians we expect you to incorporate high standards of polity and law in your argument
and build upon the same in a disciplined manner. We want the committee to be a solution
oriented civilized debate and we expect all of you to come with a solution-oriented mindset
and not limit ourselves to political rhetoric. We expect member politicians to maintain a perfect
balance between constructive arguments and rhetoric, in a way where rhetoric is used as a
headstart but is not your whole speech.
This Background Guide will only serve as a starting point for you to understand what is the
issue in hand and what is expected in committee. This BG is not intended to spoon feed you
and that is the reason why we have kept it short yet precise. We will be sharing some credible
sources to research from at the end of the BG, do refer to those sources but do not limit your
research to them.
Please do not limit your research to the areas highlighted here. Instead, ensure that you logically
deduce and expand your research to include related and additional issues. The objective of this
background guide is to provide you with a foundation on the issue at hand, and it may not seem
comprehensive to some. This guide has few governmental statistics that you as members should
use for your own benefit.
It is imperative to note that this committee will differ from conventional ones. Here, your
profound comprehension of the topic will be paramount. We prioritize insightful discussions
and thoughtful analyses over mere adherence to preconceived notions. Your ability to critically
evaluate and present nuanced perspectives will greatly contribute to the success of our
collective efforts.
Furthermore, we want to emphasize the importance of factual accuracy. In this committee,
inaccuracies will not be tolerated. We expect all delegates to uphold the highest standards of
research and ensure that their contributions are rooted in well-substantiated information. We
look forward to witnessing the intellectual rigor and commitment each delegate brings to the
proceedings.
Amey Ajgar
Moderator
[email protected]
+91 9699323523
*For queries feel free to drop an email with subject line- query_aippm_wrdavmun2024.
The Finance Minister, Ms Nirmala Sitharaman presented the Budget for 2024-25 on July 23,
2024. In this note, actuals for 2023-24 are the unaudited provisional actuals.
Budget Highlights
▪ Expenditure: The government is estimated to spend Rs 48,20,512 crore in 2024-25, 8.5%

higher than the actual expenditure in 2023-24. Interest payments account for 24% of the total
expenditure, and 37% of revenue receipts.
▪ Receipts: The receipts (other than borrowings) in 2024-25 are estimated to be Rs 32,07,200
crore, 15% higher than the receipts in 2023-24. Tax revenue, which forms major part of the
receipts, is also expected to increase by 11% over the receipts in 2023-24.
▪ GDP: The government has estimated a nominal GDP growth rate of 10.5% in 2024-25 (i.e.,
real growth plus inflation).
▪ Deficits: Revenue deficit in 2024-25 is targeted at 1.8% of GDP. This is lower than the actual
revenue deficit of 2.6% of GDP in 2023-24. Fiscal deficit in 2024-25 is targeted at 4.9% of
GDP, which is lower than the actual fiscal deficit of 5.6% of GDP in 2023-24.
▪ New Schemes: Rs 62,593 crore has been allocated to the Department of Economic Affairs
for New Schemes (details not available). The allocation is for capital expenditure, and accounts
for 6.8% of the total capital outlay.
Budget estimates of 2024-25 as compared to actuals of 2023-24
▪ Total Expenditure: The government is estimated to spend Rs 48,20,512 crore in 2024-25.

This is an increase of 8.5% over the actuals of 2023-24.
▪ Revenue expenditure is estimated to grow at 6.2% and capital expenditure at 17.1%. The
revenue expenditure growth has been kept in check due to pension, defence expenditure,
subsidies, and major schemes (MGNREGS, Jal Jeevan Mission, and PM-KISAN) together
being allotted roughly the same as the actuals for 2023-24.
▪ Total Receipts (excluding borrowings) are estimated to be Rs 32,07,200 crore, 15% higher
than the actuals of 2023-24. The gap between these receipts and the expenditure will be plugged
by borrowings, budgeted to be Rs 16,13,312 crore, 2.4% lower than the actuals of 2023-24.
▪ Transfer to states: The central government will transfer Rs 23,48,980 crore to states and
union territories in 2024-25, an increase of 11.9% over the actuals of 2023-24. Transfer to states
includes devolution of Rs 12,47,211 crore out of the divisible pool of central taxes and grants
worth Rs 11,01,769 crore.
▪ Deficits: In 2024-25, revenue deficit is targeted at 1.8% of GDP, lower than the deficit of
2.6% of GDP in 2023-24. Fiscal deficit is targeted at 4.9% of GDP in 2024-25, lower than the
actuals for 2023-24 (5.6% of GDP). The lower fiscal deficit is on account of receipts growing
at 15%, which is higher than the expenditure growth of 8.5%.
▪ GDP growth estimate: The nominal GDP is estimated to grow at a rate of 10.5% in 2024-
25.
Receipts Highlights for 2024-25
▪ Receipts (excluding borrowings) in 2024-25 are estimated to be Rs 32,07,200 crore, an
increase of 15% over the actuals of 2023-24. This is primarily due to an 11% growth in centre’s
net tax collection.
▪ Gross tax revenue is budgeted to increase by 10.8% in 2024-25, over the actuals of 2023-24.
This is slightly greater than the estimated nominal GDP growth of 10.5% in 2024-25.
Corporation tax is estimated to grow at 12%, whereas income tax is estimated to register a
growth of 13.6%. GST revenue is budgeted to increase by 11%.
▪ Devolution to states from centre’s tax revenue is estimated to be Rs 12,47,211 crore in 2024-
25, an increase of 10.4% over the actuals of 2023-24. In 2023-24, according to the actuals,
devolution to states is estimated to be Rs 1,08,046 crore more than the budget estimate of Rs
10,21,448 crore (increase of 10.6%) .
▪ Net tax revenue (excluding states’ share in taxes) is estimated to be Rs 25,83,499 crore in
2024-25, which is 11% higher than the actuals for 2023-24. Actual net tax revenue in 2023-24
is roughly same as the budget estimate for the year.
▪ Non-tax revenue consists mainly of interest receipts on loans given by the centre, dividends,
license fees, tolls, and charges for government services. It is estimated at Rs 5,45,701 crore in
2024-25, an increase of 36% over the actuals of 2023-24.
▪ Capital receipts (excluding borrowings) are targeted at Rs 78,000 crore, an increase of 29%
over the actuals of 2023-24. Note that the 2023-24 actuals for capital receipts are 28% lower
than the budgeted amount. Lower receipts were on account of disinvestment targets not
being met (46% lower).
Expenditure Highlights for 2024-25 Unaudited actuals for 2023-24 are not available for some
expenditure items and revised estimates are used for comparison.
▪ Total expenditure in 2024-25 is expected to be Rs 48,20,512 crore, which is an increase of

8.5% over the revised estimates of 2023-24. Out of this: (i) Rs 15,16,176 crore is proposed to
be spent on central sector schemes (4.8% increase over the revised estimates of 2023-24),
and (ii) Rs 5,05,978 crore is proposed to be spent on centrally sponsored schemes (9.8%
increase over the revised estimates of 2023-24).
▪ Interest expenditure is estimated to be 9.3% higher than the actuals of 2023-24. It is
estimated to be 24% of the government’s total expenditure. Grants to states for creating
capital assets is Rs 3,90,778 crore, an increase of 28.6% over the revised estimates for 2023-
24. Net of these items, revenue expenditure is set to increase by 1.4%.
▪ Expenditure on pensions is estimated to be Rs 2,43,296 crore, which is 2.2% higher than the
revised estimates of 2023 24. Other grants, loans and transfers (Rs 3,91,776 crore) include Rs
1,50,000 crore as special loans to state for capital expenditure. This is 42% higher than the
revised estimates for 2023-24 (Rs 1,05,551 crore).
Factors Contributing to Budget Disparity
1. Economic Development: States with higher economic development often have better
revenue-generating capabilities, leading to larger budgets. For example, states like
Maharashtra and Gujarat have more robust economies compared to states like Bihar
and Uttar Pradesh1.
2. Population Size: States with larger populations require more resources to provide
public services, which can lead to higher budget allocations. However, this doesn't
always translate to equitable distribution of funds.
3. Revenue Generation: States with higher tax bases and better infrastructure for
revenue collection can generate more funds. This includes both tax revenues and non-
tax revenues like royalties from natural resources.
4. Expenditure Needs: States with higher needs in terms of infrastructure, healthcare,
education, and social welfare programs may require larger budgets. This can lead to
disparities as some states have more pressing needs than others.
5. Central Transfers: The central government provides financial assistance to states
through various schemes and grants. However, the distribution of these funds can be
uneven, leading to disparities.
Impact of Budget Disparity
1. Public Services: Disparities in budget allocations can lead to differences in the quality
and availability of public services such as healthcare, education, and infrastructure2.
States with lower budgets may struggle to provide adequate services to their
residents.
2. Economic Growth: States with higher budget allocations can invest more in
infrastructure and development projects, leading to better economic growth and job
creation2.
3. Social Equity: Budget disparities can exacerbate social inequalities, as states with
lower budgets may not be able to address the needs of their most vulnerable
populations effectively.
Measures to Address Disparity
1. Fiscal Federalism: Ensuring a fair distribution of resources through fiscal federalism

can help address budget disparities. This involves a more equitable distribution of
central transfers and grants.
2. Revenue Sharing: Implementing a more transparent and fair revenue-sharing
mechanism can help ensure that states receive their fair share of national revenues.
3. Capacity Building: Assisting states with weaker revenue-generating capabilities
through capacity-building initiatives can help them improve their fiscal health.
4. Policy Reforms: Implementing policy reforms to enhance the efficiency of public
spending and improve revenue collection can help reduce budget disparities.
Important Resources
1. Ministry of Statistics and Programme Implementation (MoSPI) https://mospi.gov.in
2. Department of Economic Affairs (DEA), Ministry of Finance https://dea.gov.in/data-

statistics
3. Reserve Bank of India (RBI) https://www.rbi.org.in/scripts/Statistics.aspx
4. Handbook of Statistics on Indian Economy (RBI)

https://www.rbi.org.in/Scripts/AnnualPublications.aspx?head=Handbook%20of%20S
tatistics%20on%20Indian%20Economy
5. Central Statistics Office (CSO) https://mospi.gov.in
6. Economic Survey of India (Ministry of Finance) https://dea.gov.in/data-statistics
7. Comptroller and Auditor General of India (CAG) https://cag.gov.in
8. Public Financial Management System (PFMS) https://pfms.nic.in
9. National Sample Survey Office (NSSO) https://mospi.gov.in/national-sample-survey-

office-nsso
10. ndia Budget (Union Budget and Economic Survey) https://www.indiabudget.gov.in

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Background Guide

Agenda- Reviewing Union Financial Budget for fiscal year

▪ Expenditure: The government is estimated to spend Rs 48,20,512 crore in 2024-25, 8.5%

Budget estimates of 2024-25 as compared to actuals of 2023-24

▪ Total Expenditure: The government is estimated to spend Rs 48,20,512 crore in 2024-25.

▪ Total expenditure in 2024-25 is expected to be Rs 48,20,512 crore, which is an increase of

Impact of Budget Disparity

Measures to Address Disparity

1. Fiscal Federalism: Ensuring a fair distribution of resources through fiscal federalism

1. Ministry of Statistics and Programme Implementation (MoSPI) https://mospi.gov.in

2. Department of Economic Affairs (DEA), Ministry of Finance https://dea.gov.in/data-

3. Reserve Bank of India (RBI) https://www.rbi.org.in/scripts/Statistics.aspx

4. Handbook of Statistics on Indian Economy (RBI)

5. Central Statistics Office (CSO) https://mospi.gov.in

6. Economic Survey of India (Ministry of Finance) https://dea.gov.in/data-statistics

7. Comptroller and Auditor General of India (CAG) https://cag.gov.in

8. Public Financial Management System (PFMS) https://pfms.nic.in

9. National Sample Survey Office (NSSO) https://mospi.gov.in/national-sample-survey-

10. ndia Budget (Union Budget and Economic Survey) https://www.indiabudget.gov.in

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