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Explained: What ails the credibility of India's Budget numbers -Udit Misra

-The Indian Express

Advancing the Union Budget by a month has not helped fiscal marksmanship

In the first part of this series on the Union Budget, we explained how the nominal Gross Domestic Product (which is the market value of all goods and services produced within the domestic boundaries of India) is the key number that determines the shape and form of the Union Budget.

In short, the nominal GDP for the current year is used by the government to first arrive at the likely nominal GDP for the next financial year (that is, the year for which the Budget is being presented). On the basis of the next year’s likely nominal GDP, the government then calculates the maximum amount of fiscal deficit (or the money that the government can borrow from the market) it can have if it has to honour the FRBM Act. After this the government calculates the revenues it is likely to get and, finally, decides on the total expenditure it wants to make given the constraints of the maximum fiscal deficit allowable and the revenues that are likely to be available with it in the coming year.

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