Rupee

Balance of payments (BoP)

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	The balance of payments (BoP) records all economic transactions in goods, services, and assets of the country with the rest of the world for a specified time period, usually a year. In simple terms, it is a systematic accounting balance sheet of the country and includes both debit and credit transactions. BoP is used to monitor all international monetary transactions. All trades conducted by both the private and public sectors are accounted for in the BoP in order to determine how much money is going in and out of the country.</div>
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	The basic purpose of BoP accounting is to know the strength and weaknesses of the economy. By analysing the BoP accounts of the previous year, you can know the overall gains and losses from international trade.</div>
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	There are two main accounts in the BoP &ndash; the current account and the capital account. The current account records exports and imports in goods, trade in services and transfer payments. The capital account records all international purchases and sales of assets such as money, stocks, bonds, etc. It also includes foreign investments and loans.</div>
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	The country is said to be in balance of payments equilibrium when the sum of its current account and its non-reserve capital account equals zero so that the current account balance is financed entirely by international lending. The balance of payments deficit or surplus is obtained after adding the current and capital account balances. The decrease in official reserves is called the overall BoP deficit and the increase in reserves is BoP surplus.</div>
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	Countries with current account deficits can run into difficulties. If the deficit is large and the economy is not able to attract enough foreign investment inflows, the country&rsquo;s currency reserves dwindle. In 1991, India found itself in its worst BoP crisis ever. The inflow of foreign borrowing had increased at a rapid rate during the late 1980s. Coupled with this, high oil prices and excessive domestic spending ballooned into a crisis. India was on the verge of defaulting on its international commitments and was denied access to external credit. The only way out for India was to borrow against the security of its gold reserves. The crisis paved way for the much-needed and long-overdue reforms in the industry and trade policy.</div>

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What is balance of payments (BoP), balance of payments (BoP) Definition, balance of payments (BoP) News

What is Balance of payments (BoP)

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	Revenue receipts can be defined as those receipts which neither create any liability nor cause any reduction in the assets of the government. They are regular and recurring in nature and the government receives them in the normal course of activities.</div>
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	Revenue receipts include the proceeds from taxes and other duties levied by the Centre; the interest and dividend it receives on its investments; and the fees and charges the government receives for its services.</div>
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	Simply put, <strong>revenue receipts must satisfy two basic conditions:</strong></div>
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	<strong>No liability:</strong> Revenue receipts do not create any liability for the government. For example, taxes received by the government, unlike borrowings, do not create any liabilities for it.</div>
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	<strong>No asset reduction: </strong>Revenue receipts do not lead to any reduction in the government&rsquo;s assets. So, the government cannot show its earnings from sale of stake in a public-sector undertaking as revenue receipts because the stake sale resulted in reduction of its assets.</div>
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	For the government, there are two sources of revenue receipts &mdash; tax revenues and non-tax revenues.</div>

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What are Revenue Receipts, News, Budget 2020 News, Revenue Receipts Definition

Revenue Receipts

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	Capital Budget consists of capital receipts (like disinvestment, borrowing, loans from public or foreign governments, Reserve Bank of India, etc) and capital expenditure (like expenditure on development of machinery, health facilities, etc).</div>
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	Capital budgeting comprises two words &mdash; &#39;capital&#39; and &#39;budget&#39;. It implies setting targets for projects/schemes to ensure maximum profitability.</div>
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	<strong>Parts of Capital Budget:</strong> Capital budget is divided into two parts &mdash; capital receipts and capital expenditure.</div>
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	<strong>Capital receipts in Union Budget</strong></div>
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	Capital receipts refer to incoming cash flows. They can be both non-debt and debt receipts. Loan from the general public, foreign governments and RBI form a major part of capital receipts.</div>
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	<strong>Example of capital receipts:</strong> Recovery of loans and advances given to state governments and foreign governments, disinvestment proceeds, money accrued to the government from issue of bonus shares, etc, are all examples of non-debt capital receipts.</div>
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	Debt receipts are those which the government needs to repay along with interest. Most of the government&#39;s capital receipts are debt receipts. They are shown as liabilities in the government&rsquo;s balance sheet.</div>
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	<strong>Capital expenditure in Union Budget</strong></div>
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	Capital expenditure is the expenditure on the development of machinery, equipment, building, health facilities, acquisition of assets like land, research &amp; development, education, etc.</div>
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	<strong>Examples of capital expenditure: </strong>Loans given by the government to states and public-sector undertakings (PSUs), loans that were taken in the past but are now returned, spending on infrastructure, machinery, land, road, etc.</div>
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What is Capital Budget, Capital Budget Meaning, Budget News, Capital Budget Types

Capital Budget

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	Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc. It also includes the expenditure incurred on acquiring fixed assets like land and investment by the government that gives profits or dividend in future.</div>
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	<strong>Understanding capital expenditure</strong></div>
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	Capital spending is associated with investment or development spending, where expenditure has benefits extending years into the future. Capital expenditure includes money spent on the following:</div>
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		Acquiring fixed and intangible assets</li>
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		Upgrading an existing asset</li>
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		Repairing an existing asset</li>
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		Repayment of loan</li>
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	<strong>Why is capital expenditure important?</strong></div>
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	Capital expenditure, which leads to the creation of assets are long-term in nature and allow the economy to generate revenue for many years by adding or improving production facilities and boosting operational efficiency. It also increases labour participation, takes stock of the economy and raises its capacity to produce more in future.</div>
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	Along with the creation of assets, repayment of loan is also capital expenditure, as it reduces liability.</div>
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	However, the government has to be cautious with the expenditure. In the financial year 2019-20, capital expenditure was 14.2 per cent of Budget Estimates. The government had to cut public spending sharply towards the end of the financial year in order that the deficit target could be met. Total expenditure fell by 0.3 percentage points in 2018-19 over 2017-18. This includes a 0.4 percentage point slash in revenue expenditure and 0.1 percentage point hike in capital expenditure.</div>
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	<strong>How is capital expenditure different from revenue expenditure?</strong></div>
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	Unlike capital expenditure, which creates assets for the future, revenue expenditure is one that neither creates assets nor reduces any liability of the government. Salaries of employees, interest payment on past debt, subsidies, pension, etc, fall under the category of revenue expenditure. It is recurring in nature.</div>
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What is Capital Expenditure, Capital Expenditure Meaning, Budget News, Capital Expenditure Types

Capital Expenditure

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	The Union Budget, which is presented by the Finance Minister of India, comprises Capital Budget and Revenue Budget. The Capital Budget is further categorised into capital receipts and capital expenditure.</div>
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	<strong>What are Capital Receipts?</strong></div>
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	Capital receipts are receipts that create liabilities or reduce financial assets. They also refer to incoming cash flows. Capital receipts can be both non-debt and debt receipts. Loans from the general public, foreign governments and the Reserve Bank of India (RBI) form a crucial part of capital receipts.</div>
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	<strong>Understanding capital receipts</strong></div>
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	Capital receipts are loans taken by the government from the public, borrowings from foreign countries and institutes, and borrowings from the RBI. Recovery of loans given by the Centre to states and others is also included in capital receipts. In the balance sheet, capital receipts are mentioned in the liabilities section. The capital receipt has a nature of non-recurrence.</div>
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	All capital receipts are tax-free, unless there is a proviso to tax it. Capital receipts can be both non-debt and debt receipts</div>
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	<strong>Non-debt capital receipts</strong></div>
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	Non-debt receipts are those which do not incur any future repayment burden for the government. Almost 75 per cent of the total budget receipts are non-debt receipts.</div>
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	<strong>Examples of non-debt capital receipts:</strong> Recovery of loans and advances, disinvestment, issue of bonus shares, etc</div>
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	<strong>Debt capital receipts</strong></div>
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	Debt Receipts have to be repaid by the government. Around 25 per cent of government expenditure is financed through borrowing. A reduction in debt receipt (or borrowing) can be a big leap for the economy&#39;s financial health. Most of the capital receipts of the government are debt receipts</div>
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	<strong>Examples of debt capital receipts: </strong>Market loans, issuance of special securities to public-sector banks, issue of securities, short-term borrowings, treasury bills, securities against small savings, state provident funds, relief bonds, saving bonds, gold bonds, external debt, etc, are all example of debt capital receipts.</div>
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What are Capital Receipts, Capital Receipts Meaning, Budget News, Capital Receipts News

Capital Receipts

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	There can be different forms of deficit in a Budget depending on the type of receipt and expenditure taken into account. Revenue deficit is that which occurs when the government&#39;s total revenue expenditure exceeds its total revenue receipts. This includes those transactions that have a direct impact on the government&#39;s current income and expenditure and happens when the actual amount of revenue and/or the actual amount of spending do not correspond with the budgeted revenue and expenditure.</div>
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	<strong>What is the difference between revenue deficit and fiscal deficit?</strong></div>
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	A revenue deficit should not be confused with the fiscal deficit. If the government has a revenue deficit, it means that its income cannot cover its expenditure. A country&rsquo;s fiscal deficit, on the other hand, is the total money spent by the government in excess of its income, with the income figure including only taxes and other revenues and excluding money borrowed to make up the shortfall.</div>
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	<strong>How is revenue deficit calculated?</strong></div>
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	Revenue deficit can be calculated by subtracting total revenue expenditure from total revenue receipts. It is important to note that revenue receipts neither create liability nor lead to a reduction in assets. The opposite of revenue deficit is revenue surplus, which arises when the actual amount of net income exceeds the projected amount of expenditure. Supposing the level of fiscal deficit remains the same, a higher revenue deficit would be considered worse because that would imply a higher repayment burden in the future not matched by benefits from investment.</div>
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	Revenue deficit can be divided into two categories &mdash; receipt from tax (direct tax, indirect tax), and receipt from non-tax revenue.</div>
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	<strong>How is revenue deficit met?</strong></div>
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	To remedy a revenue deficit, the government can choose to increase taxes or cut expenses. If not remedied, a revenue deficit can adversely affect the government&rsquo;s credit rating. Running a revenue deficit may place the government&rsquo;s planned expenditures in jeopardy, as there aren&#39;t enough funds to cover the cost. The government should try to reduce its expenditure and avoid unnecessary expenditure. By identifying and employing cost-cutting measures, the government can avoid revenue deficit.</div>
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	Revenue deficit indicates dissaving on the government account because the government has to make up the uncovered gap by drawing upon capital receipts, either through borrowing or through the sale of its assets.</div>

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What is Revenue deficit, Budget News, Revenue deficit Definition

Revenue Deficit

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	Current Account Deficit (CAD) is the shortfall between the money received by selling products to other countries and the money spent to buy goods and services from other nations. If the value of goods and services we import exceeds the value of those we export, the country is said to be in a deficit, and the difference in the two values is CAD.</div>
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	The current account includes net income, including interest and dividends, and transfers, like foreign aid.</div>
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	India&rsquo;s current account position is largely on the deficit side because of the country&#39;s dependence on oil imports. In the quarter ended September 2019, the country&#39;s CAD stood at $6.3 billion.</div>
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	<strong>What is Current Account and how is it different from Balance of Trade?</strong></div>
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	For a clear understanding of CAD, it&#39;s essential to learn about the current account. Quite similar to the balance of trade, current account maintains a record of the country&#39;s transactions with other nations.</div>
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	However, the two terms are technically different. While the balance of trade measures only the gap in earnings and expenditure on exports and imports of goods and services, current account also factors in payments from domestic capital deployed overseas.</div>
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Balance of payments (BoP)

What is Balance of payments (BoP)

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