BIHAR BUDGET 2015-16. EFFECT ON BUSINESS.

A final project submitted in fulfillment of the course

Business Environment, Semester IV during the academic year 2017-18

Submitted by-
Shubham Mishra
Roll No. - 1649
B.B.A LL. B

Submitted to-
Dr. Manoj Mishra

April, 2018.

Chanakya National Law University,

Mithapur, Patna, 800001
BUSINESS ENVIRONMENT

Table of Contents
Acknowledgment ....................................................................................................................... 3

Declaration ................................................................................................................................. 4

Research Methodology .............................................................................................................. 5

Bihar – State history on revenue Generation from different sectors ......................................... 7

Introduction to budget ................................................................................................................ 9

Government Budget ....................................................................................................... 9

Component of Budget- ................................................................................................. 10

Objectives of a Government Budget: ........................................................................... 10

Types of Budget: .......................................................................................................... 11

1. Balanced Budget: ......................................................................................... 11

2. Unbalanced Budget: ..................................................................................... 11

Summary of Bihar Budget 2015-16 ......................................................................................... 13

Analysis & Finding of Bihar Budget 2015-16 on Business..................................................... 15

Conclusion ............................................................................................................................... 18

Bibliography ............................................................................................................................ 20

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ACKNOWLEDGMENT

Any project completed or done in isolation is unthinkable. This project, although prepared by
me, is a culmination of efforts of a lot of people. Firstly, I would like to thank our Professor
of Business Environment, Dr. Manoj Mishra Sir for his valuable suggestions towards the
making of this project.

Further to that, I would also like to express my gratitude towards our seniors who were a lot of
help for the completion of this project. The contributions made by my classmates and friends
are, definitely, worth mentioning.

I would like to express my gratitude towards the library staff for their help also. I would also
like to thank the persons interviewed by me without whose support this project would not have
been completed.

Last, but far from the least, I would express my gratitude towards the Almighty for obvious
reasons.

THANK YOU

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BUSINESS ENVIRONMENT

DECLARATION

I hereby declare that the work reported in the B.B.A.LLB(Hons.) Project Report entitled “Bihar
Budget 2015-16. Effect on Business” submitted at Chanakya National Law University, Patna
is an authentic record of my work carried out under the supervision of Dr. Manoj Mishra, I
have not submitted this work elsewhere for any other degree or diploma. I am fully responsible
for the contents of my Project Report

Shubham Mishra
B.B.A LL. B (Hons.)
Roll No. 1649
CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

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BUSINESS ENVIRONMENT

RESEARCH METHODOLOGY

Method of Research

The researcher has adopted a purely doctrinal method of research. The researcher has made
extensive use of the library at the Chanakya National Law University and also the internet
sources.
Aims and Objectives

The objective of the research is –

1. To know about the importance of budget
2. The use of budget to find out the impact on economy
3. Adverse or favorable impact on business

Hypothesis- The researcher proposes to verify the following-

The budget 2015-16 makes Bihar a more Favorable state in account of business.

Method of Research- The researcher has followed doctrinal methodology

Sources of Data-
Primary Sources-
1. Books
Secondary Sources-
1. Websites
2. Articles

Literature Review-

Book-
State Government Budget Stabilization: Policy, Tools, and Impacts by Yilin Hou –

This book is the first comprehensive, full-scale treatment of the law, politics and economics
with regard to the policies and policy instruments for budget stabilization at the state level.
Covering the period from 1946 through 2008, it provides details on the methods and results
of empirical tests of the effects of budget stabilization instruments on government
operations, public service provision, and some other aspects of social and economic life. e
first contribution of the book is in public finance theory: it provides insights into the
applications of the stabilization function in the context of strong government, thereby

5
BUSINESS ENVIRONMENT

refining Keynesianism. The second aspect is in Public Choice: the creation and functioning
of budget stabilization funds offer extra evidence to demonstrate that the general public
provides input and voice in more than the conventional ways when it comes to policy
making, even in an area dominated by strong government. The third aspect is in policy
making, exploring the opportunities for refining policy tools in preparation for future
downturns.
The researcher has taken definition, importance and other general aspect of the budget in
order to understand to complete the proposal. The original contributions in this book
analyze all of the budget's components expenditures, revenues, the deficit - with special
emphasis on issues that have assumed increasing importance over the last decade or so,
such as intergenerational transfers of debt and declines in corporate tax revenues.

Websites-

www.finance.bih.nic.in -
From this website researcher has taken the summary of the Bihar budget which is in tabular
form. It consist of all the information of Bihar budget such as revenue receipt, revenue
expenditure, capital receipt, capital expenditure, total expenditure, total receipt,
development and non- development expenditure and all the other relevant figures.
https://economictimes.indiatimes.com
From this website researcher has taken the brief of the Bihar budget for better
understanding of the budget. Some the facts which researcher has observed from this
website is the overall size of the budget is 120685.32 crore rupees that includes plan
expenditure of 57437 crore rupees and non-plan expenditure of 63259 crore rupees and
similar other facts.

www.accountabilityindia.in
This website also had the facts and figure of the Bihar Budget of 2015-16 as well as 2014-
15. From this website researcher has analyzed some qualitative information and tried to
accumulate it in the project.

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BUSINESS ENVIRONMENT

BIHAR – STATE HISTORY ON REVENUE GENERATION FROM DIFFERENT

SECTORS

The economy of Bihar is largely service-oriented, but it also has a significant agricultural base.
The state also has a small industrial sector. As of 2016, agriculture accounts for 23%, industry
17% and service 60% of the economy of the state1.
The GSDP stands at 368,337 Crores Rupees ($59.4 billion nominal GDP) as per 2013-2014.
In actual terms, as of 2012-2013, Bihar state GDP is ranked 13 out of 29 states. Corruption is
an important hurdle for the government to overcome according to Transparency International
India, which the government has also acknowledged.2
For industrial development, the NDA government has cleared a total of 135 proposals worth
Rs 71,289.64 crore, submitted by big entrepreneurs for setting up medium and large industries.
The proposals are related to sugar mills, ethanol, engineering and medical colleges and power
production in the state. A sum of Rs 602.54 crore had already been spent on various activities
pertaining to the cleared projects, which are likely to create job opportunities for over 114,000
people. The proposals include opening of 23 new sugar mills and the expansion of seven
existing ones, apart from the production of ethanol in two sugar mills and five sugarcane juice
production plants. The projects regarding five power plants, 12 food-processing units and 15
steel-processing and cement plants have also been cleared by the state.3
A consequence has been a positive improvement in the economy of the state and also of Patna.
For example, in June 2009, the World Bank reported that Patna was the second best city in
India to start a business, after Delhi.4
Patna is ahead of Mumbai but second only to New Delhi in terms of ease of starting a business,
according to a World Bank ranking announced on Tuesday.
Of the 17 cities figured in the World Bank and International Finance Corporation's "Doing
Business in India 2009" report, Jaipur, Hyderabad and Bhubaneshwar are the other cities where
it is easier to start a business.
Starting a business measures, the necessary steps to enable a small or medium enterprise in
general commercial or industrial activities to operate legally in 17 Indian cities including
permits, inscriptions, notifications and inspections.
The report further said doing business is the easiest in Ludhiana, followed by Hyderabad,
Bhubaneshwar, Gurgaon, Ahmedabad, New Delhi, Jaipur and Guwahati.
Of the 17 cities considered, Patna was ranked 14th, above Chennai, which stood at 15th
position, while Kolkata was at the bottom of the list.
The report ranks the cities based on seven parameters -- starting a business, dealing with
construction permits, registering property, paying taxes, trading across borders, enforcing
contracts and closing a business.

1
https://m.timesofindia.com/city/patna/state-records-10-2-gdp-growth-rate-in-2016-
17/articleshow/59921091.cms
2
http://www.financialexpress.com/news/doing-business-the-hard-way-in-bihar/274316/
3
Bihar budget analysis by http://www.prsindia.org
4
https://timesofindia.indiatimes.com/business/india-business/New-Delhi-Patna-best-cities-to-start-business-
World-Bank/articleshow/4720294.cms?

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BUSINESS ENVIRONMENT

However, the rankings do not take into account the macroeconomic conditions, infrastructure,
workforce skills or security.
The economy of Bihar is largely service-oriented, but it also has a significant agricultural base.
The state also has a small industrial sector. As of 2016, agriculture accounts for 23%, industry
17% and service 60% of the economy of the state for the period 2002-2007, average growth
rate of Manufacturing in the state was 0.38%, against the national average of 7.8%. Bihar has
the lowest GDP per capita in India, but there are pockets of higher per capita income like the
southern half of the state and its capital city, Patna, had per capita income greater than that of
Bangalore or Hyderabad in 2008.
The GSDP stands at 368,337 Crores Rupees ($59.4 billion nominal GDP) as per 2013-2014.
In actual terms, as of 2012-2013, Bihar state GDP is ranked 13 out of 29 states. Corruption is
an important hurdle for the government to overcome according to Transparency International
India, which the government has also acknowledged. Since November 2005, a new government
led by Nitish Kumar has implemented a number of economic and social reforms. A
consequence has been a positive improvement in the economy of the state and also of Patna.
For example, in June 2009, the World Bank reported that Patna was the second best city in
India to start a business, after Delhi. Between 1999 and 2008, state GDP grew by 5.1% a year,
which was below the Indian average of 7.3%. However, in January 2010, the Indian
government's Central Statistics Organisation reported that in the five-year period between
2004–2005 and 2008–09, Bihar's GDP grew by 11.03%, which made Bihar the second fastest
growing economy in India during that 5-year period, just behind Gujarat's growth of
11.05%.Another survey conducted by Central Statistical Organisation (CSO) and National
Sample Survey Organisation, under MOSPI, said that Bihar saw 14.80 percent growth in
factory output in 2007-08, which was slightly less than the Indian rate of 15.24 percent5

5
“Bihar's factory output races to match India's pace'". Indian Express. 2010-01-21. Retrieved 2013-06-10.

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INTRODUCTION TO BUDGET

A budget is a financial plan for a defined period of time, usually a year. It may also include
planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities
and cash flows. Companies, governments, families and other organizations use it to express
strategic plans of activities or events in measurable terms.6
A budget is the sum of money allocated for a particular purpose and the summary of intended
expenditures along with proposals for how to meet them. It may include a budget surplus,
providing money for use at a future time, or a deficit in which expenses exceed income.
A budget helps in planning actual operations by forcing managers to consider how the
conditions might change and what steps should be taken now, and by encouraging managers to
consider problems before they arise. It also helps to co-ordinate the activities of the
organization by compelling managers to examine relationships between their own operation
and those of other departments. Other essentials of budget include:
To control resources
To communicate plans to various responsibility center managers
To motivate managers to strive to achieve budget goals
To evaluate the performance of managers
To provide visibility into the company's performance
For accountability
In summary, the purpose of budgeting tools:
Tools provide a forecast of revenues and expenditures, that is, construct a model of how a
business might perform financially if certain strategies, events and plans are carried out.
Tools enable the actual financial operation of the business to be measured against the forecast.
Lastly, tools establish the cost constraint for a project, program, or operation.

Government Budget

“A government budget is an annual financial statement showing item wise estimates of

expected revenue and anticipated expenditure during a fiscal year.”
Just as our household budget is all about what you earn and spend, similarly the government
budget is a statement of its income and expenditure. In the beginning of every year, government
presents before the Lok Sabha an estimate of its receipts and expenditure for the coming
financial year. The government plans expenditure according to its objectives and then tries to
raise resources to meet the proposed expenditure. Government earns money broadly from
taxes, fees and fines, interest on loans given to states and dividend by public sector enterprises.7

Government spends mainly on:-

(i) Securing and providing goods and services to citizens,
(ii) On law and order and
(iii) Internal security, defense, staff salaries, etc.

6
State Government Budget Stabilization: Policy, Tools, and Impacts by Yilin Hou
7
www.accountingtools.com

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BUSINESS ENVIRONMENT

In India there is constitutional requirement to present budget before Parliament for the ensuing
financial year. The financial (fiscal) year starts on April 1 and ends on March 31 of next year.
For example, fiscal or budget year 2015-116 is from April 1, 2015 to March 31, 2016.
Obviously, the budget is the most important information document of the government because
government implements its plans and programs through the budget.8
Component of Budget-
(i) It is a statement of estimates of government receipts and expenditure.

(ii) Budget estimates pertain to a fixed period, generally a year.

(iii) Expenditure and sources of finance are planned in accordance with the objectives of the
government.

(iv) It requires to be approved (passed) by Parliament or Assembly or some other authority

before its implementation.

Objectives of a Government Budget:

It should be kept in mind that rapid and balanced economic growth with equality and social
justice has been the general objective of all our policies and plans. General objectives of a
government budget are as under:9
(i) Economic growth:
To promote rapid and balanced economic growth so as to improve living standard of the people
Economic growth implies a sustained increase in real GDP of the economy, i.e., a sustained
increase in volume of goods and services. Public welfare is the main guide.10
(ii) Reduction of poverty and unemployment:
To eradicate mass poverty and unemployment by creating employment opportunities and
providing maximum social benefits to the poor .In fact, social welfare is the single most
important objective. Every Indian should be able to meet his basic needs like food, clothing,
housing (roti, kapda, makaan) along with decent health care and educational facilities.
(iii) Reduction of inequalities/Redistribution of income:
To reduce inequalities of income and wealth, government can influence distribution of income
through levying taxes and granting subsidies. Government levies high rate of tax on rich people
reducing their disposable income and lowers the rate on lower income group.
Again, government provides subsidies and amenities to people whose income level is low.
Again public expenditure can be useful in reducing inequalities. More emphasis is laid on
equitable distribution of wealth and income. Economic progress in itself is not a sufficient goal
but the goal must be equitable progress.11

8
www.indiainfoline.com
9
www.economicsdiscussion.net.
10
Elhanan Helpman, Assaf Razin, Efraim Sadka, Economic Effects of the Government Budget, MIT Press,
1988.
11
www.yourarticlelibrary.com/economics/budgeting/6...of-government-budget/30410.

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BUSINESS ENVIRONMENT

Redistribution of income:
Equalities in income distribution mean allocating the income distribution in such a way that
reduces income inequalities and also there is no concentration of income among few rich. It
primarily requires that rate of increase in real Income of poor sections of society should be
faster than that of rich sections of society. Fiscal instruments like taxation, subsidies and public
expenditure can be made use of to achieve the object.
(iv) Reallocation of resources:
To reallocate resources so as to achieve social and economic objectives .Again, government
provides more resources into socially productive sectors where private sector initiative is not
forthcoming, e.g., public sanitation, rural electrification, education, health, etc. Moreover govt.
allocates more funds to production of socially useful goods (like Khadi) and draws away
resources from some other areas to promote balanced economic growth of regions. In addition
govt. undertakes production directly when required,
(v) Price stability/Economic stability:
Government can bring economic stability, i.e., control fluctuations in general price level
through taxes, subsidies and expenditure. For instance, when there is inflation (continuous rise
in prices), government can reduce its expenditure. When there is depression, government can
reduce taxes and grant subsidies to encourage spending by the people.
(vi) Financing and management of public enterprises:
To finance and manage public enterprises which are of the nature of national monopoles like
railways, power generation and water lines etc.

Types of Budget:
Recall, a budget is defined as an annual statement of the estimated receipts and expenditure of
the government over the fiscal year. Budgets are of three types: balanced, surplus and deficit
budgets—depending upon whether the estimated receipts are equal to, less than or more than
estimated receipts, respectively its three types are explained hereunder.12
1. Balanced Budget:
A government budget is said to be a balanced budget in which government estimated receipts
(revenue and capital) are equal to government estimated expenditure. It ensures financial
stability and it avoids wasteful expenditure.
Estimated Govt. Receipts = Estimated Govt. Expenditure
2. Unbalanced Budget:
When government estimated expenditure is either more or less than government estimated
receipts, the budget is said to be an unbalanced budget. It may be either surplus budget or deficit
budget.
(a) Surplus Budget:
When government receipts are more than government expenditure in the budget, the budget is
called a surplus budget. In other words, a surplus budget implies a situation where in
government revenue is in excess of government expenditure.
Symbolically:

12
www.economicsdiscussion.net.

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BUSINESS ENVIRONMENT

Surplus Budget =
Estimated Govt. Receipts > Estimated Govt. Expenditure
A surplus budget shows that government is taking away more money than what it is pumping
in the economic system. As a result, aggregate demand tends to fall which helps in reducing
the price level. Therefore, in times of severe inflation, which arises due to excess demand, a
surplus budget is the appropriate budget. But in situation of deflation and recession, surplus
budget should be avoided. Mind, balanced budget and surplus budget are rarely used by the
government in modern-day world.
(b) Deficit Budget:
When government estimated expenditure exceeds government receipts in the budget, the
budget is said to be a deficit budget. In other words, in a deficit budget, government estimated
revenue is less than estimated expenditure.

Symbolically:
Deficit Budget = Estimated Govt. Expenditure > Estimated Govt. Receipts
These days’ popular democratic governments adopt mostly deficit budget to meet the growing
needs of the people. It may be mentioned that Keynes had advocated a deficit budget to remedy
the situation of unemployment and under-employment.
Government covers the gap either through borrowing or through withdrawals from its reserves.
Thus, a deficit budget implies increase in government liability and fall in its reserves. When an
economy is in under-employment equilibrium due to deficient demand, a deficit budget is a
good remedy to combat recession.13

13
https://www.britannica.com/topic/government-budget

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SUMMARY OF BIHAR BUDGET 2015-16

Government of Bihar14
Finance
Department
Main Features-Budget 2015-16
Rs. in Crore
2012-13 2013-14 2014-15 2015-16 2015-16 %
Receipts Chan
& ge
Particulars Actuals Actuals
Budget Budget
Expenditu over
Estimate Estimate
re 2014-
% of 15
Revenue Budget
& Capital. Estima
te
1 2 3 4 5 6 7
1 Revenue Receipts 59566.66 68918.65 101939.46 103189.06 98.32 10.94
2 Tax Revenue (a+b) 48153.47 54789.79 67438.00 81622.58 79.10 21.03
(a) State's share of Central Taxes 31900.39 34829.11 41775.05 50747.58 45.24 21.48
(b) State's Own Taxes 16253.08 19960.68 25662.95 30875.00 27.52 20.31
3 State's own Non tax Revenue 1135.27 1544.83 3081.68 3395.86 3.03 10.20
4 Grants-in-aid from Central Govtt. 10277.92 12584.03 31419.78 18170.63 16.20 -42.17
5 Capital Receipts (6+7+8) 9578.66 9922.12 14743.31 17725.33 104.90 20.23
6 Recoveries of Loan & Advances 24.70 15.03 15.97 16.52 0.10 3.44
Public Debt(7+8) 9553.96 9907.09 14727.34 17708.81 104.81 20.24
7 Internal Debt of State 9045.94 9357.43 12878.15 14920.13 88.30 15.86
8 Loans and Advances from GOI 508.02 549.66 1849.19 2788.68 16.50 50.81
9 Total Receipts 69145.32 78840.77 116682.77 120914.40 100.00 9.29
10 Non-Plan Expenditure 40825.41 46727.61 59231.04 63259.59 100.00 6.80
11 On Revenue Account of which 37573.69 43381.03 55426.51 59054.52 93.35 6.55
12 (a) Interest Payment 4428.31 5459.04 6581.46 7220.77 12.23 9.71
(b) Pension 8363.53 9481.73 11666.33 12979.67 21.98 11.26
(c) Salary 12874.38 13337.27 18204.75 17757.90 30.07 -2.45
13 On Capital Account(a+b+c+d) 3251.72 3346.58 3804.52 4205.07 6.65 10.53
(a) Internal Debt of the State 2585.23 2558.83 2973.06 3176.63 75.54 6.85
(b)Loans And Advances from GOI 484.72 560.73 589.83 718.65 17.09 21.84
(c) Capital Expenditure 93.15 117.19 151.00 144.95 3.45 -4.01
(d)Loans and Advances 88.62 109.83 90.63 164.84 3.92 81.88
14 Plan Expenditure 28381.16 33677.56 57655.12 57425.73 100.00 -0.40
(a)State Plan 25658.59 30707.27 57392.44 57137.62 99.50 -0.44
(b)Central Sponosered Scheme&C.P. Sch. 2722.57 2970.29 262.68 288.11 0.50 9.68
15 On Revenue Account 16892.45 19096.20 36338.92 32153.59 55.99 -11.52
16 On Capital Account 11488.70 14581.35 21316.21 25272.14 44.01 18.56
17 Total Expenditure(10+14) 69206.57 80405.17 116886.16 120685.32 100.00 3.25
18 Revenue Expenditure(11+15) 54466.14 62477.23 91765.43 91208.11 75.58 -0.61

14
finance.bih.nic.in/Old-Budgets/Bud2015-16/Highlights/Budget-Highlights-English.pdf

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 BUSINESS ENVIRONMENT

19 Capital Expenditure(13+16) 14740.42 17927.93 25120.73 29477.21 24.42 17.34

20 Revenue Deficit (18-1) -5100.52 -6441.42 -10174.03 -11980.95
21 Fiscal Deficit {17-(1+6+13(a)+13(b)} 6545.26 8351.93 11367.84 13584.46
22 Primary Deficit(21-12) 2116.95 2892.89 4786.38 6363.69
23 G.S.D.P 296153 343054 383709 455451
24 G.F.D/G.S.D.P 2.21% 2.43% 2.96% 2.98%
25 Interest Pay./Total Rev. Receipt 7.43% 7.92% 6.46% 7.00%

The department wise allocation for State Plan including Centrally Sponsored Schemes
which are the part of State Plan from 2015-16 has been made as follows:15

Rs in Crore
Percentage total
SL.No. Name of Department Plan Outlay
outlay

1 Education 10950.14 19.16

2 Rural Works 5612.30 9.82

3 Rural Development 5420.13 9.49

4 Road Construction 4856.22 8.50

5 Social Welfare 4132.77 7.23

6 Energy 4058.60 7.10

7 Health 2372.00 4.15

8 Agriculture 2342.35 4.10

9 Food & Consumer Protection 2121.63 3.71

10 BC & MBC Welfare 1970.03 3.45

11 Others 13301.45 23.28

TOTAL 57137.62 100.00

15
finance.bih.nic.in/Old-Budgets/Bud2015-16/Highlights/Budget-Highlights-English.pdf

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ANALYSIS & FINDING OF BIHAR BUDGET 2015-16 ON BUSINESS

Revenue Surplus: - If revenue receipt is more than revenue expenditure the surplus amount is
called revenue surplus. For the year 2015-16 revenue surplus is Rs.11980.95 crore and revenue
surplus for the year 2014-15 was Rs.10174.03 crore. There is increase in revenue surplus which
is beneficial for the state. This revenue surplus will be used for investment in physical
infrastructure generating productive capital assets like roads, buildings, power, schools, health
Centre’s, irrigation schemes etc. By investing revenue surplus better condition for business will
be created as there will be better infrastructure. A better infrastructure attract investor to invest.
Thus it will have positive effect on business.16

Fiscal Deficit: - Fiscal deficit is the amount left by subtracting revenue receipt, recoveries of
loans and advances and repayment of public debt from total expenditure. For the year 2015-
16, estimated Fiscal Deficit is Rs 13584.46 crore, which is 2.98 percent of GSDP Rs 455451
crore and for the year 2014-15 it was 2.6 percent.17 The Budget for 2015-16 strikes a balance
between fiscal prudence and growth, and a "slight" slippage in fiscal deficit has no material
impact on overall economic strength. Higher government expenditure will push up demand and
generate more money in the economy. This may lead to higher inflation. As there will be
increase investment and it will have positive effect.

Road Sector- Departments of Road construction and Rural works are involved in this sector.
For the year 2015-16 the proposed expenditure is estimated at Rs. 12616.17 crore. For the year
2015-16 the total amount includes Rs 1703.00 crore for maintenance of road. This shows that
govt. is spending considerable amount on construction and maintenance of road. This would
help in transportation of goods and would also help general public. Improvement in basic
infrastructure such as road, irrigation would help business sector as it would reduce cost. It
would have positive effect on business sector.

Development and Non-Development expenditure for the year 2015-16 Development

expenditure is Rs 82391.82 crore and Non-Development expenditure Rs 38293.50 crore
respectively. The total expenditure is Rs 120685.32 crore. The percentage of Development
expenditure and Non- Development expenditure in total expenditure is 68.28 and 31.72
respectively.

Public expenditure in India is broadly categorized as

(1) development and (2) non-development expenditure.

The important heads of developmental expenditure within the revenue account are

(i) social and community services,

16

http://www.prsindia.org/administrator/uploads/general/1457088027~~Bihar%20Budget%20Analysis%202015-
16.pdf
17
http://www.prsindia.org/administrator/uploads/general/1457088027~~Bihar%20Budget%20Analysis%202015
-16.pdf –Budget analysis by PRS India

15
BUSINESS ENVIRONMENT

(ii) economic services and

(iii) grants- in-aid to states and union territories. The largest component in this group is
economic services.

Economic services include general economic services, agriculture and allied services, industry;
and minerals, water and power and power development, transport and communication,
railways, post and telegraphs etc.

Non-development expenditure on revenue account is divided into two classes,

(i) the general services and
(ii) (ii) the grants-in-aid to states and union territories and also to other countries.

The percentage of Development expenditure and Non- Development expenditure in total

expenditure is 68.28 and 31.72 respectively.
Therefore spending on development expenditure is beneficial for business sector.

Total Revenue
Overall Revenue18
REVENUE RECEIPTS (IN ` CRORE)
2014-15 (Actuals) 2015-16 (RE) 2016-17 Budget
Estimates (BE)
Share in Union taxes 36,963 50,748 58,360
Grants in Aid (GIA) 19,146 21,785 34,142
Own taxes 20,750 25,656 29,730
Own non-tax revenue 1,558 1,996 2,358
Total 78,418 1,00,184 1,24,590

Revenue receipts for the state of Bihar grew by 28 per cent between FY 2014-15 (Actuals) and
for FY 2015-16 Revised Estimates (RE). Union Government transfers for the year increased
by 29 per cent during the same period. Untied funds accounted for 74 per cent of the total
transfers received from the Government of India (GOI) in FY 2015-16 (RE). There is
significant increase in revenue receipt. Increase in revenue receipt would mean there is would
be decrease in deficit which would be beneficial for state. The more receipt, the more govt. can
spend.

Total Expenditure
Overall Expenditure: 19
EXPENDITURE IN BIHAR’S BUDGET (IN ` CRORE)
Type of expenditure 2014-15 (Actuals) 2015-16 (RE) 2016-17 (BE)
Total expenditure* 91,089 1,28,706 1,40,622

18
http://www.prsindia.org/- Budget analysis by PSR India
19
http://www.prsindia.org/- Budget analysis by PSR India

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BUSINESS ENVIRONMENT

Revenue 72,570 1,01,667 1,09,941

expenditure
Capital 18,519 27,038 30,681
expenditure*
Social sector 33,386 48,593 51,071
expenditure
General sector 28,157 34,781 39,145
expenditure
Residual
expenditure 29,546 45,332 50,407
(Economic + Grants)
Fiscal Deficit 11,179 28,505 16,014

The state’s total expenditure in FY 2015-16 grew by 41 per cent over FY 2014- 15 (Actuals).
Specifically, social sector expenditure increased by 45 per cent in the same period. While
expenditure for “Social Welfare and Nutrition” dipped significantly by 17 per cent, expenditure
under the head “Welfare on Scheduled Castes, Scheduled Tribes and Other Backward Classes”
increased by 81 per cent. There is significant increase in total expenditure which would be
beneficial for both the business sector as well as general public as it would mean more of asset
creation, improvement of infrastructure.

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CONCLUSION

Budget is a statement of estimated receipts and expenditure of the government in respect of

every financial year. It plays a very important role because it is a framework on which
government applies the policies related to revenue and expenditure. It helps the economy to
work in an efficient way and to identify the weakness.

Bihar budget 2015-16- Estimated Revenue receipt (2015-16)- Rs.103189.06 crore &
Estimated Revenue Expenditure (2015-16)- Rs. 91208.11 crore. Revenue receipt (2014-15) Rs.
101939.46 crore & Revenue Expenditure (2014-15) Rs. crore 91765.43. From this the
inference which can be drawn is that there is 10.94 % increase in revenue receipt, however
there has been decrease in the revenue expenditure by 0.61%.

Capital Budget- Capital budget shows the requirement of the government and the pattern of
their financing. It consist of capital receipts and capital expenditure of the government.

Bihar Budget 2015-16- Estimated Capital receipt (2015-16) - Rs.17725.33 crore & Estimated
Capital expenditure (2015-16) – Rs. 29477.21 crore. Capital receipt (2014-15) - Rs. 14743.31
crore & Capital expenditure (2014-15) – Rs. 25120.73 crore. From this inference which can be
drawn is that there is increase of 20.23% in capital receipt and 18.56% increase in capital
expenditure.
When a government spends more than its collects by the way of revenue, it incurs the budget
deficit.
Revenue deficit – The revenue deficit refers to the excess of the government revenue
expenditure over revenue receipts.
Estimated Revenue surplus for the year 2015-16 is Rs.11980.95 crore. This revenue surplus
will be used for investment in physical infrastructure generating productive capital assets like
roads, buildings, power, schools, health Centre’s, irrigation schemes etc.

Fiscal deficit - Fiscal deficit is the difference between the government’s total expenditure and
its total receipts excluding borrowing.

Estimated Total revenue for year 2015-16 is Rs. 120914.40 crore and Estimated Total
expenditure for year 2015-16 is Rs. 120685.32 crore. For the year 2015-16, estimated Fiscal
Deficit is Rs 13584.46 crore, which is 2.98 percent of GSDP Rs 455451 crore and for the year
2014-15 it was 2.6 percent. The Budget for 2015-16 strikes a balance between fiscal prudence
and growth, and a "slight" slippage in fiscal deficit has no material impact on overall economic
strength. This deficit is financed by the government by increasing the tax burden on the public
and the organizations or by disinvestment in PSUs. However, in the case of Bihar Budget 2015-
16 no new taxes have been imposed neither any disinvestment has been made.

The hypothesis which the researcher made was “The budget 2015-16 makes Bihar a more
Favorable state in account of business” is proved as there is revenue surplus and also fiscal
deficit stand as low as 2.8%. The percentage of Developm-+ent expenditure and Non-

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Development expenditure in total expenditure is 68.28 and 31.72 respectively. This show there
is positive effect on business as spending on development expenditure is 68.28%.
Developmental expenditure within the revenue account are (i) social and community services,
(ii) economic services and (iii) grants- in-aid to states and union territories. The largest
component in this group is economic services. The greater share economic services has, the
better it becomes for both household sector as well as business sector. So positive effect on
business can be seen.

This budget may well be remembered for what it did not do rather than for what it did. The
former was uncertain, while the latter was more or less a given.

Bihar finance minister Bijendra Prasad Yadav on Thursday presented the state budget of Rs
1.2 lakh crore for 2015-16, Rs 4000 crore up from last year. He did not propose fresh taxes,
maintaining the state's tax receipts have shown sustained increase over the last eight years.

The estimated revenue receipts for 2015-16 were been put at Rs 1.03 lakh crore, which includes
the state's share in central taxes, state's taxes and non-tax revenue as well as grants-in-aid from
the Centre. The budget has a revenue surplus of Rs 11,980 crore since the revenue expenditure
is only Rs 91,208 crore.

The surplus revenue would be invested in creation of "physical infrastructure like roads,
buildings, power, schools, health centres, irrigation schemes etc" so as to generate productive
capital assets. Further, the minister said, fiscal deficit has been maintained at Rs 13,584 crore,
which is 2.98% of the GSDP of Rs 4.55 lakh crore. It's in sync with the Fiscal Responsibility
and Budget Management Act. Towards the end of 2015-16 fiscal, the state would have public
debt of Rs 89,239.86 crore; that is, 19.58% of GSDP.

Therefore, after the whole research done it was proved that budget 2015-16 was a good call
and it had a positive impact on business but budget being just a part of planning, when it
comes to implementation it is totally different. Yes, budget 2015-16 had a good impact on
business but due to corruption practices and inefficiency among government officers the
budget could not perform its purpose as a whole, the best example is the road construction
outside our college (CNLU) for which the inauguration was done in 2011 and still it is not
completed.

Therefore, I suggest that for implementation of budget, certain new provisions under law
are necessary. There are already plenty of provisions made for companies and other sectors
but when it comes to state the provisions aren’t clear and are inefficient.

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BIBLIOGRAPHY

Books and journals

 Elhanan Helpman, Assaf Razin, Efraim Sadka, Economic Effects of the Government Budget,
MIT Press, 1988.
 Jayant Parikshi, Economic Survey and Budget, Eolas Publications; Second edition (2018)
 State Government Budget Stabilization: Policy, Tools, and Impacts by Yilin Hou
 Yozna magazine 2016-17
 Business today magazine

Websites

 www.finance.bih.nic.in
 www.jagranjosh.com
 www.accountabilityindia.in
 www.yourarticlelibrary.com
 www.businessmanagementideas.com
 www.businessmanagement.wordpress.com
 www.economicsdiscussion.net
 www.psrindia.com
 http://www.finmin.nic.in/
 http://www.indiastat.com/default.aspx
 http://socialjustice.nic.in/

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