How Indian Economy Works? By Adarsh Gupta

Summary

This video explains the current state of the Indian economy, which ranks as the 5th largest globally, and the projections for it to become the 3rd largest by 2030. The script covers how the Indian government generates revenue through taxes (Income Tax, Corporate Tax, GST, etc.), non-tax revenue, and borrowing. It also explores government expenditure on sectors like defense, public services, and subsidies. The video emphasizes the importance of balancing revenue and expenditure to achieve economic growth and fiscal stability, ultimately aiming for India to become one of the world's leading economies.

Takeaways

• 😀 India is currently the 5th largest economy in the world, with projections to become the 3rd largest by 2030, surpassing Japan and Germany.
• 😀 The Indian government plans to drive economic growth through continuous reforms and by improving the balance between income and expenditure.
• 😀 The basic concept of managing a country's economy is similar to household finances, involving income, expenditure, and savings.
• 😀 The primary revenue sources for the Indian government include taxes such as Income Tax, Corporate Tax, Goods and Services Tax (GST), and Customs and Excise duties.
• 😀 The income tax system in India is progressive, with higher earners paying higher taxes, and the government collected ₹960,764 crores in income tax for the fiscal year 2022-23.
• 😀 Corporate tax is another major source of revenue for the government, with ₹1,04,18,000 crores collected in 2022-23, reflecting a growth of 6.91% compared to the previous year.
• 😀 GST, a single tax on goods and services, contributed ₹14.97 lakh crore to the government's revenue in 2023, with a 12% year-on-year growth.
• 😀 Non-tax revenue, generated from government-owned businesses like ONGC and BPCL, as well as loans and investments, plays a crucial role in funding government activities.
• 😀 The government also generates revenue from disinvestment, such as selling shares in public sector companies like Coal India and Hindustan Aeronautics.
• 😀 Borrowing, both internal and external, helps the government fill the gap when income does not cover the total expenditure, and is a significant part of the revenue mix.
• 😀 Government expenditure is allocated to various sectors, with major portions directed towards interest payments on debt, pensions, defense, subsidies, and social welfare schemes.
• 😀 The Indian budget, presented annually by the Finance Minister, outlines the country’s financial plan, with inputs from economists, industrialists, and experts, and is crucial for balancing revenue and expenditure.

Q & A

What is the current position of India's economy globally?

India is currently the fifth-largest economy in the world, with the USA, China, Germany, and Japan ahead of it. However, experts predict that India will become the third-largest economy by 2030.

What basic concept is used to run a country's economy?

The basic concept of income and expenditure is used to manage a country's economy, similar to how a family manages its income and expenses.

What are the main sources of revenue for the Indian government?

The main sources of revenue for the Indian government include taxes (such as income tax, corporate tax, GST, customs duty, and excise duty) and non-tax revenues (such as earnings from government-owned corporations like ONGC, BPCL, and IOC).

How does the Indian government earn from income tax?

Income tax is collected from individuals or businesses based on their annual income. The Indian tax system is progressive, meaning that higher-income individuals pay a higher rate of tax.

How has the corporate tax collection changed in recent years?

In the financial year 2022, the Indian government collected ₹10,418 crore in corporate taxes, which was a 6.91% increase from the previous year's collection of ₹8,588 crore.

What is the Goods and Services Tax (GST) and how much has the government collected through it?

GST is a single tax applied to the supply of goods and services, from manufacturers to consumers. From April to December 2023, the Indian government collected ₹14.97 lakh crore from GST, with a 12% year-on-year growth.

What are non-tax revenues and how does the government earn them?

Non-tax revenue refers to earnings from government-owned businesses (like ONGC and IOC), interest on government loans, penalties, fines, and other investments. These sources contribute to the government's revenue.

How does the government manage its expenditure?

The government manages its expenditure by budgeting for various sectors such as defense, pensions, subsidies, and public services. A significant portion of expenditure goes towards paying interest on public debt.

What role do loans (borrowing) play in government expenditure?

Loans, both internal (from within the country) and external (from foreign countries), are used to cover any deficit between government revenue and expenditure. In the financial year 2022, the Indian government raised ₹14.2 lakh crore through borrowing.

How is the Indian budget prepared and who is involved in the process?

The Indian budget is prepared by the finance minister with the help of advisors and bureaucrats. Before finalizing the budget, the finance minister consults economists, industrialists, and other organizations to gather suggestions. The budget must be approved by Parliament before the start of the new financial year.