2019 – Posted in: RSTV

WHAT IS PROCESS OF MAKING BUDGET

For: Preliminary & Mains

Topic covers: Union Budget, Making Process, Types, Steps and Stages

Process/ Making of Budget

Union Budget is an annual financial statement of estimated receipts and expenditures of Government of India in respect of each financial year.

Constitutional provisions of Budget are mentioned Article 112. It should be noted that word Budget is not mentioned in Constitution rather it is referred as ‘Annual Financial Statement’.

Union Budget

The Union Budget is an annual financial statement which encapsulates the estimated earnings from revenues and estimated expenditures of the government during a particular fiscal year.

Every year the Department of Economic Affairs in the Ministry of Finance prepares the Union Budget which is presented by the Finance Minister.

Process

To start the process, the budget division issues an annual budget circular around the last week of August or the first fortnight of September every year.

This annual budget circular contains detailed instructions for the Union government ministries/departments relating to the form and content of the statement of budget estimates to be prepared by them.

There are several steps involved in the preparation, presentation and implementation of the Union Budget.

Here are five essential steps involved in the development of the Union Budget:

The initial processes

The initial processes involved in the Budget-making begin in August-September, around six months prior to the presentation of the Budget.
The Finance Ministry sends Budget Circulars containing skeleton forms and necessary instructions/guidelines to concerned ministries and departments.
These circulars are then distributed amongst disbursing and field officers who provide details about financial expenditures and receipts of their department during the current and past fiscal year, and their financial requirements for the ensuing fiscal year.

Accumulation and authorization of data

The data and estimates provided by ground-level officials are then scrutinized by top officials of their departments.
Upon approval (or revision, if necessary), the data and estimates are then sent to the concerned ministries where they are examined again.
Finally, the data and estimates are sent to the Finance Ministry.
The Finance Ministry further scrutinizes these and correlates the estimates with the current economic state and the available resources to determine their feasibility.

Composing the Budget

After analyzing every aspect carefully, the Finance Ministry then allocates revenues to various administrative ministries and devises new public welfare schemes.
At times, there are disputes between ministries over the allocation of resources. In such scenarios, the Finance Ministry consults the Union Cabinet or the Prime Minister. Their decision is deemed final in such scenarios.
After completing the allocation of resources to future expenditures, the Finance Ministry in association with Central Board of Direct Taxes and Central Board of Excise and Customs prepares a report of the estimated revenues to be generated in the ensuing financial year.
In the final stage, both the reports are consolidated to generate the final Union Budget.
During this process, various departments of the Finance Ministry consult stakeholders in the public domain (such as farmers and small business owners) to gain more insights and prepare an efficient budget.

Printing the Budget

The Printing of the Union Budget begins with the observance of a tradition, ‘the halwa ceremony’.
In this, the Finance Minister along with other officials and staff involved in the process eat halwa (a traditional Indian dessert).
Post completion of the ceremony, the printing process of the Union Budget begins.
During this process, all the officials and staff involved in Budget-making remain confined to the premises of the ministry, isolated from any contact with the outside world, since they have the knowledge of what has gone into the Budget days before it is tabled in Parliament.

Presenting the Budget

The Union Budget is presented in the Parliament by the Finance Minister.
For the past few years, the Union Budget is presented on a scheduled date, February 1.
In an election year, the Budget is prepared and presented twice.
Initially, a vote on account or interim budget — which is an estimate of expenditures and receipts of the next two-four months – is presented.
After the election, the final Budget for the rest of the fiscal year is presented by the new government.

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Railway Budget

Railway budget of India was the Annual Financial Statement of the state-owned Indian Railways, which handles rail transport in India.

It was presented every year by the Minister of Railways, representing the Ministry of Railways, in the Parliament.

The Railway Budget was presented every year, a few days before the Union budget, till 2016.

BJP government on 21 September 2016 approved merger of the Rail and General budgets from next year (ending a 92-year-old practice of a separate budget for the nation’s largest transporter).

Since 2017, Railway Budget is merged with the Union Budget.

Description of Union Budget

Union Budget keeps the account of the government’s finances for the fiscal year that runs from 1st April to 31st March. Union Budget is classified into Revenue Budget and Capital Budget.

Revenue budget includes the government’s revenue receipts and expenditure. There are two kinds of revenue receipts – tax and non-tax revenue. Revenue expenditure is the expenditure incurred on day to day functioning of the government and on various services offered to citizens. If revenue expenditure exceeds revenue receipts, the government incurs a revenue deficit.

Capital Budget includes capital receipts and payments of the government. Loans from public, foreign governments and RBI form a major part of the government’s capital receipts. Capital expenditure is the expenditure on development of machinery, equipment, building, health facilities, education etc. Fiscal deficit is incurred when the government’s total expenditure exceeds its total revenue.

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