Explained: The Union Budget Of India And What All It Includes

Union Finance Minister Nirmala Sitharaman will introduce the Union Budget 2022 to Parliament next month. Because of the pandemic threat, the Budget is expected to be paperless.

While the Budget is presented in parliament in just one day, it takes several months to prepare. Let's have a look at the definition and sorts of Indian budgets ahead of the announcement of the Union Budget 2022-23.

What does it mean to have a budget?

Simply put, a budget is a projection of revenue and expenditure for a specific period of time. A budget is a systematic list of revenue and spending, or a plan for income and expenditure, in economics.

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The English word "Bowgette," which is derived from the French word "Bougette," was used to coin the term "budget." The name "Bougette" comes from the French word "Bouge," which means "leather bag."

The Union Budget, also known as the yearly Financial Statement under Article 112 of the Indian Constitution, is the Republic of India's annual budget, which is presented to Parliament by the Finance Minister of India before the start of each fiscal year. Before it can take effect on April 1, the budget must be approved by the House.

Budget documents are also more than just numbers. By scrutinising them, one can learn about the government's intentions, priorities, policies, and financial resource distribution.

Types of budget

1. Traditional or General Budget: The Traditional Budget is the original structure of the current general budget. The major goal of the General Budget is to provide financial control over the Executive and Legislative branches of government.

The details of the government of India's expenditure in several areas are included in this budget. The outcome of this expenditure, however, is not described in this Budget. As a result, the necessity and value of writing a "Performance Budget" was recognised, and it was provided as a supplement to the previous Traditional Budget.

2. Performance Budget: A 'Performance Budget' is one in which the outcome of an activity is used as the basis for a budget. The performance budget was created in the United States for the first time ever. In 1949, Sir Hooper established an Administrative Reforms Commission in America. This commission suggested that the United States create a 'Performance Budget.'

The government is obligated to report on "what is done" and "how much is done" for the good of the people in the Performance Budget. The 'Outcome Budget' is how the Performance Budget is referred to in India.

3. Zero-based Budget: There are two main reasons for India's adoption of this budgeting method.

(i)The country's budget continues to have a revenue deficit.

(ii) The Performance Budget was poorly implemented.

In a zero-based budget, neither previous year's expenses nor last year's expenditures are taken into account.

4. Outcome Budget: Every year in India, development-related schemes such as MGNREGA, NRHM, Mid Day Meal, PMGSY, Digital India, Prime Minister Skill Development Council, and others are launched, and a significant amount of money is spent on them. However, the government currently lacks any metrics by which to assess the effectiveness of these programmes.

The cost of these initiatives might sometimes rise as a result of delays in their implementation. As a result, the Indian government developed the Outcome Budget in 2005 in order to save costs.

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5. Gender Budget: A gender budget is one in which the schemes and plans for the welfare of children and women are described. The Government declares an amount to be spent on female development, welfare, and empowerment plans and programmes through the Gender Budget.

Who is in charge of the budget?

The budget is developed through a consultation process that includes the finance ministry, the NITI Aayog, and the expenditure ministries. The Finance Ministry sets expenditure recommendations based on the requests of the other ministries. The Budget section of the Finance Ministry's Department of Economic Affairs is the main organisation in charge of preparing the budget.

What is the process for creating a budget?

The Budget Division sends a circular to all union ministries, states, UTs, autonomous bodies, departments, and the armed forces, instructing them to prepare estimates for the coming fiscal year. Following the submission of demands by ministries and departments, intensive negotiations are held between Union ministries and the finance ministry's Department of Expenditure.

Simultaneously, the Departments of Economic Affairs and Revenue engage with stakeholders such as farmers, businesses, FIIs, economists, and civil society organisations to hear their perspectives. After the pre-Budget discussions, the finance minister makes a final decision on the tax measures. Before the Budget is frozen, the proposals are discussed with the Prime Minister.

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To prepare revised budget estimates, the finance ministry gathers data on receipts and expenditures from several departments. Pre-budget meetings are also held with stakeholders such as state legislators, bankers, agriculturists, economists, and trade unions to better understand their requests, which include tax incentives and fiscal support.

Budget printing

The finance minister and other officials take part in the 'halwa ceremony,' which kicks off the printing of Budget materials. Following the serving of the meal, a substantial number of officials and support employees closely involved in the Budget-making and -printing process are required to remain in the ministry and be cut off from their families until the finance minister presents the Budget to Parliament.

What format is the budget presented in?

In the Lok Sabha, the Finance Minister presents the budget, covering significant estimates and initiatives. Just ten days before delivering the budget to parliament, he or she briefs the cabinet on the budget ideas in a "summary for the cabinet." After the minister's speech, the budget is presented to Parliament.

The Railway Budget and the Union Budget were amalgamated by the Modi government in 2017-18. Minister of State for Finance Anurag Singh Thakur and Chief Economic Advisor Krishnamurthy Subramanian are part of Finance Minister Nirmala Sitharaman's budget team.

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