New Delhi: On 1 February, finance minister Arun Jaitley will present Union Budget 2018, the fifth and final full budget of the Narendra Modi-led National Democratic Alliance (NDA).

The government will have to tread a fine balance between political and economic interests.

Not only is 2018 a busy election year with eight assembly elections, the NDA will also have to prepare for 2019 Lok Sabha elections.

Despite the introduction of the goods and services tax (GST) last year, the budget is still the most keenly awaited policy document in India’s economic calendar. It is not just a statement of accounts but a charter of the government’s economic policies. Behind the budget document is a long and complex policymaking process. Mint attempts to decode the process.

BUDGET GLOSSARY

Gross domestic product (GDP): The added value of output of all productive sectors in the economy as measured by the Central Statistics Office.

Fiscal deficit: Total additional borrowings made by the government every year to bridge the gap between its income and expenditure.

Capital and revenue expenditure: Expenditure that does not create any asset, such as subsidies and interest payments, is revenue expenditure. Spending to create assets such as highways, buildings and dams as well as loans given by the centre to the states come under capital expenditure.

Subsidies: Economic benefits given by the government in cash or kind to help individuals or families in poverty. Companies also receive subsidies in the form of tax rebates to encourage industrialization and employment generation.

Tax revenue: The primary source of income for the government. The government funds its expenditure by either directly taxing income of individuals/companies or by taxing goods and services consumed by people (indirect taxes).

Non-tax revenue: Additional sources of revenue for the government other than taxes. This includes revenues from interest receipts, spectrum auction and disinvestment, among other things.

Debt servicing: Like individuals, who pay off existing loans through periodic repayment of the principal and interest amount, the government also repays borrowings it has made from (i) outside the country from multilateral agencies and (ii) within the country through bond issue.

Market borrowing: The government issues sovereign bonds to borrow from the market to meet its additional expenditure or to service existing debts.

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