Contents

Chapter-1
1.introduction
2.Objective
3.Limitation
4.Scope
5. Methodology

Chapter-2
1.Overview Of the Economy
2. GDP growth
3. Agricultural Production
4.Prices
5.Industry and services
6.External Sector
7. Money banking capital markets
8. Central government finances

Chapter-3
1.Findings
2.Suggestion
3.conclusion
4.Bibiliography

CHAPTER-1
1. Introduction
The backdrop for last year budget and the governments
fiscal consolidation efforts is an economy that is growing at a
below at trend rate as we transactions from the largest
resources investment boom in our history to broader based
growth. Over the past decade, investment in the resources
sector has more than quadrupled as a share of GDP and its
capital stock is now three times larger. However from 2014-15,
resources investment is expected to start sharply subtracting
from growth. We are seeing some positive sign, particularly in
household sector. But with business in the non-resources sectors
continuing exercise caution in their investment and hiring
decisions, the forward indicators suggest that it will be at least
another year or two before strong board-based growth takes
hold. Against this backdrop, the government fiscal consolidation
measures are weighted towards medium term structural savings
that build over time with the 2014-15 budget imposing modest
additional fiscal consolidation over the next three years relating
to the 2013-14 MYEFO.

2. Objective:2.1. There are

different types of policies adopted by a

government. This policy concerning the revenue
expenditure and the debt of the government for achieving
certain important objective like control of inflation public
expenditure etc. various objective of macroeconomic of
union budget are discussed below.
2.2. Economic developed: - Economic development is an
important feature of under developed countries. To achieve
development of a country macroeconomic acts as a source
of capital formation because as capital formulation is
increases production and employment also increases.

Appropriate fiscal policy is required for development

countries like India.
2.3. Reduction in economic inequality: - In democratic
country like India the prominent aim of fiscal policy is to
remove economic inequality. The income generated from
these taxes id used for the welfare of the poor masses.
2.4. Full Employment: - The main aim of the every
government is to attain full employment level. Full
employment simply means that man power is ready to
work at prevailing wage rate without any dispute. Total
production increases and as a result employment will also
increase.
2.5. Price stability: - Another objective of macroeconomic is
price stability when price rise i.e., inflation exists in an
economy. Fiscal policy aims at decreases in demand and
aggregate expenditure and tax rate is also raised. Extra
purchasing power of people goes into the hands of general
publics and demand decreases because of excess. Supply,
price automatically goes down because of fear of stocks.

3. Limitation:3.1. In adequate

statistics: - In the countries like India

adequate and reliable data is not available. Because of in
availability of reliable and accurate data the area of fiscal
policy is not judged properly.
3.2. Lack of elasticity: - The tax system in India is not that
elastic as it is supposed to be. Moreover in this economy
because of huge tax evasion it is difficult to earn revenue
from taxes. The spread of tax is vary few.
3.3. Non monetize sector: - Although each and every
activity is how awarded in term of money. But still a major
part of economy of UDCS like India is non monetized.

3.4.

Delay in decision :- Fiscal policy decision needs

approval by the government lot of time is required for
approvals that is why decision are not taken at proper time.
3.5. Limited sector: - Fiscal policy only affects few sectors of
the economy. Most of the sectors remain untouched.

4. Scope :4.1. The outlay

of the new budget stands at TK 2.5 trillion,

up by 12 per cent from the previous TK 2.22 trillion.
4.2. The GDP growth targets are 7.3 percent in the last
budget, this target was 7.2 percent, but was later revised
down to 6.5 percent.
4.3. It plans to keep the average inflation within six percent.
In the last budget this target was 7 percent. By the end of
April, the average inflation was 7.47 percent.
4.4. Revenue target is set at TK 1.82 trillion, almost 73
percent of the budgetary outlay.
4.5. Budget deficit stands at TK 1.82 trillion, which is five
percent of the GDP.
4.6. Borrowing from the banking sector stands at TK 312.21
billion down from TK 550.32 billion in the last budget.
4.7. TK 12.56 billion is set to be sourced from savings
certificates and non-banking sources.
4.8. The size of the annual development programme for the
coming fiscal id TK 803.15 billion.
4.9. The share of Human Resources Sector, which includes
education and health, in the ADP is 24.3 percent.
4.10.
The overall agriculture sectors share is 25.8
percent, power and energy sectors allocation will be 14.3
percent.

5. Methodology
The data have been collected from secondary sources like
reports, monthly bulletins, journals, magazines, annual report
etc. They have been analyzed with help of important statistical
techniques. It may also collect from the web site of central
government.

Chapter-2
Macroeconomic budget 2014-15

he present government has inherited an economy

characterized by low growth, high inflation, high current
account deficit and large fiscal in balances at the union
level. What was struck me about union budget 2014-15
is not the fiscal arithmetic, but the macroeconomic framework.
The Fiscal Responsibility and Budget Management (FRBM) Act,
2003 and the Fiscal Responsibility and Management Rules, 2004
made under section 8 and of the Act has come into force with
effect from 5th July, 2004. In sync with the changed
macroeconomic circumstances after global financial crisis. The
FRBM (Amendment) Act, 2012 was passed by the parliament
and got the assent of the President of India on 28 th may, 2012.
Accordingly revised targets were set for various fiscal indicators.
New rules under amended FRBM Act, 2012 were notified on May
2013.Under section 7 of the Act no deviation is permissible in
meeting the obligations caste on the central government under
the act, without the approval of parliament. With moderation in
economic growth from the level of 9 percent in 2010-11 to 4.5
percent in 2012-13. Government was steadfast in its
commitment to words fiscal rectitude a consolidated further in
financial year 2013-14. The economic growth rate has remained
below 5 percent level for past two successive years. General

budget 2014-15 is being presented against early signs of

economic recovery. Budget 2014-15 steps towards fulfilling the
commitment set in the new FRBM regime. There are various
step of macroeconomic of union budget are as follows:-

Overview of the economy

Growth of Gross domestic Product (GDP) at factor cost at
constant 2004-05 prices decline from 8.9% in 2010-11 to
6.7 % in 2011-12 and further to 4.5% in 2012-13. There was
a marginal improvement in 2013-14 with GDP growing at
4.7%. Macroeconomic stabilization in 2013-14 had to
balance the concerns of containg elevated inflation and
promoting growth.

GDP Growth
As per the provisional estimates relised by the central
Statistics Office (CSO), the Indian economy grew 4.7% in
2013-14 (in terms of GDP at factor cost a t 2004-05 prices).
The sub 5% growth of the economy in 2013-14 was
primarily result of the slowdown in the industry for the
second year in succession that registered a growth rate of
0.4% in 2013-14. On the other hand sectors viz. agriculture,
electricity, gas and water supply, finance insurance, realestate and business services have grown at faster rates in
2013-14 Vis-a-Vis 2012-13. As per the quarterly estimates
of GDP growth in GDP recorded a modest pick of Q2 201314 with a growth of 5.2%. This compared to 4.7% in Q1
2013-14. This decline to 4.6% each in Q3 and Q4 of 201314. The contraction in manufacturing noticed in all quarters
except Q2 of 2013-14, remains a cause for concern.

Agricultural production-

During the South-west monsoon of 2013, the country

received 6% higher rain fall than the long period average.
As per the 3rd advance estimated (15/05/2014), the
production of food grains during 2013-14 is placed at

264.38 million tons (rice at 106.29 million tones and wheat

at 95.85 million tons), vis--vis 257.13 million tons in 201213 (final estimates). The production of pluses is estimated
st 19.57 million tones, sugar can at 348.35 million tones. Oil
seeds at 32.41 million tones and cotton at 36.50 million
bales of 170 kg each. The flow of agriculture credit increase
to 67375 crore in 2012-13 in comparison to Rs.511629
crore in 2011-12 and Rs.86981 crore in 2003-04.
PricesHeadline WPI inflation moderated to 5.98% in 2013-14
due to lower international commodity prices and sharp
correction in vegetable prices in Dec 2013 and Jan 2014
overall WPI food inflation (comprising primary food article
and manufactured and food products). Remained
elevated and averaged 9.43% in 2013-14 as compare to
9.28% in 2012-13. However in 2013-14, the primary
contributors included cereal, vegetables and egg, meat
and fish. Food inflation moderated to 6.98% in may 2014
from a peak of 13.61% in Nov 2013. All India general
inflation for consumer price index. New series (CPI-NS)
averaged 9.49% in 2013-14 as against 10.21% in 201213. The inflation as per CPI-NS has decline from a peak of
11.16% in Nov 2013 to 8.295 in May 2014.
Industry and servicesAs per the Index of Industrial Production (IIP), Industrial
output decline by 0.1% during 2013-14 as compaired to a
growth of 1.1% in the previous year. Manufacturing, the
dominant sector within industry, witnessed contraction of
0.8% in 2013-14 as compaired to a growth of 1.3% in the
previous year. The output of the capital goods sector
contracted by 3.65% in 2013-14 Vis-a-Vis a contraction of
6% in the previous year.
External sectorDuring 2013-14 experts was valued as US$ 312.6
billion, registering a growth of 4.1% over the level of US$
300.4 billion in 2012-13. Value of imports during 2013-14

was US$ 450.1 billion; showing a decline of 8.3%

compared with the level of US$ 490.7 billion in the
corresponding period of 2012-13. Poll imports accounted
for 36.7% on the total import in 2013-14. Non-poll
imports during 2013-14 were 12.8% lower than the level
of US$ 326.7 billion in 2012-13. On BOP basis, the value
of exports and imputes was US$ 318.6 billion and US$
466.2 billion respectively in 2013-14, yielding a trade
deficit of US$ 147.7 billion.

Money banking and capital marketThe RBI, in its annual monetary policy statement on 3 rd may
2013. Announced a reduction in the policy repo rate by 25
bps form 7.50% to 7.25% to support growth in the face of
gradual moderation of headline inflation. The MSF rate was
reduced from 10.25% to 9.5% of the CRR was reduced from
9% of requirement to 95% effective from the begging 21 st
Sep, 2013. Considering the evolving liquidity condition. The
RBI reduces the MSF rate from 9.5% to 9% on 7th Oct, 2013.
Provision of additional liquidity through term repose of 7 days
and 14 days. In the secondary quarter review of 29 th Oct,
2013, the RBI carried forward the calibarated on winding of
exceptional of majors with the reduction of the MSF rate from
9%, to 8%. With indications that inflation is likely to remain
elevated in the months ahead, the key policy repo rate was
increased from 7.50% to 7.75%.
Central government finances
The central government finances by the budgeted level
of the fiscal deficit except for 2011-12 when the deficit
was 5.7% GDP (1.1% point higher than the budgeted
estimates). Fiscal deficit was contained at 4.9% in 201213 (below the budgeted level of 5%) and 4.5% in 201314, (provisional)(below the budgeted) targeted level of
4.8%. As a proportion of BE, gross tax revenue grew year
on year, by 9.9% in 2013-14 to each 1138882 crore.
Gross tax revenue was 92% in 2013-14. Non tax revenue
in 2013-14 was placed at 199233 crore, that was 115.7%

of BE. The combine fiscal deficit of center and states

6.9% of GDP in2013-14(BE) as against 7.4% in 2012-13
(RE).

Chapter 3
1. Findings:1.1. The production of food grains during 2013-14 is placed
at 264.3 million tons (rice at 106.29 million tons and wheat
at 95.85 million tons) vis--vis 257.13 million tons in 201213(final estimates). The production of pluses is estimated
at 19.57 million tons, sugar cane at 348.38 million tons, oil
seeds at 32.41 million tons and cotton at 36.50 million
bales of 170kg each.
1.2. The flow of agriculture credit increased to 607375 crore
in 2012-13 in comparision to 511029 crore in 2011-12 and
86981 crore in 2003-04.
1.3. WPI inflation moderated to 5.98 % in 2013-14 due to
lower international commodity prices and sharp correction
in vegitable prices in Dec, 2013 and Jan, 2014.
1.4. Food inflation moderated to 6.98% in May, 2014 from a
peak of 13.61% in Nov, 2013.
1.5. Industrial output declined by 0.1% during 2013-14 as
compaired to a growth of 1.1% in the previous year. The
contraction during 2013-14 was largely accounted for by
the decline in mining, capital goods, and consumer goods.
1.6. During 2013-14 exports were valued at US$312.6
billion registering a growth of 4.01% over the level of US$
300.4 billion in 2012-13. Value of imports during 2013-14
was US$ 450.1 billion, showing a decline of 8.3%
compaired with the level of us$ 490.7 billion in the
corresponding period of 2012-13.

2. Suggestion:2.1. The bold reform

measures outlined in the Economic

Survey need to be implemented on the ground to reenergize investment and revive demand in the economy. In

fact, the various measures that find mention in the Survey

raise expectations that the Budget would be a most
progressive one
2.2. It is eminently feasible to revive investment and script
a turnaround in growth provided the government adopts a
three pronged approach of creating a framework for
sustained low and stable inflation, setting public finances
on a sustainable path by tax and administrative reforms
and creating a legal framework for a well-functioning
market economy.
2.3. Indian economy is likely to grow in the range of 5.4 to
5.9 per cent in 2014-15 overcoming the sub-5 per cent GDP
growth of past two years, even as poor monsoon and
disturbed external environment remain a cause for
concern, the Economic Survey noted.
2.4. In our view, growth this year could be nearer the lower
end of the band indicated in the Economic Survey. The
outlook for agriculture is weak due to expected sub-par
monsoon. In this context, managing food inflation becomes
an even higher priority.
2.5. We hope that some of the concerns and priorities
highlighted by the Survey like controlling fiscal deficit,
better subsidy targeting and focus on
infrastructure and manufacturing are addressed right away
in the Budget tomorrow (Thursday).
2.6. Pointing out that not all the money put into subsidy
schemes reaches the poor, the survey suggested payment
of subsidy in cash for those below poverty line through
technologies like biometric identification, observing the
current methodology has led to distorted resource
allocation.
2.7. Rationalization of subsidies on inputs like fertilizers and
food is essential to achieve fiscal consolidation. Going
ahead, serious efforts are needed to rejuvenate

manufacturing sector growth trajectory since the last many

quarters.
2.8. With IMD department predicting a 71 per cent
probability of a sub-normal or deficient monsoon and
spatial distribution of rainfall, the pre-budget document
said agriculture output is likely to be impacted and
consequently food prices.

3. Conclusion:The economic growth plummeted; identifying the plausible

policy priorities from growth revival is the single most significant
agenda before the government. What was the policy priorities
highlighted in Union budget 2014? There is simultaneously
continuity and a change. The change relates to the new
macroeconomic consensus to undertake inflation management.
The finance minister has endorsed the need for an a new
monetary framework in his budget speech. This announcement
by finance minister needs to be co read with the Urjit Patel recommendations for central bank independence, and ruled based
monetary policy. A new consensus gaining momentum in India.
Union budget has set a board path to address the issues related
to policy paralysis , which include infracture investments, tax
reforms, controlling bad subsidies and governance reforms.
Though the revival of fiscal dominance is widely acknowledged,
has a new discourse in India, after match to Union Budget 2014?

4. Bibiliography:www.cbo.gov.in
www.finance.gov.ie
www.jstor.org
www.imf.org