Budgetary Procedure in India

The Union Budget of India, also known as the annual Financial Statement in Article 112 of the Indian Constitution, is a comprehensive financial plan presented by the Finance Minister in Parliament. It outlines the government's revenue and expenditure for the upcoming financial year, which begins on April 1. The budget is a critical tool for economic management, setting the fiscal policy and priorities of the government. This blog delves into the dual aspects of the budgeting process in India, the mandatory statements under the Fiscal Responsibility and Budget Management (FRBM) Act, the distribution protocol for budget papers, and the detailed discussion dynamics and stages of budget planning.

Components of Union Budget

Union budget consists of two main components revenue budget and capital budget. These budgets are designed to focus on different objectives.

·       Revenue Budget: The budget is allocated for the daily operations of the government. The revenue budget consists of two components revenue receipts and revenue expenditure. Revenue receipt includes income generated through different sources such as taxes and non-taxes revenue. This doesn’t impact the government's assets and liabilities. Revenue expenditure includes any cost that is incurred for running the government and providing essential services.

·       Capital Budget: The budget is allocated for creating a long-term impact on the country’s development. The capital budget includes capital receipts and capital expenditures. Funds collected through borrowings, loans, and asset disinvestment are categorized under capital receipts. Any expenditures incurred for any long-term development such as healthcare, building infrastructure, and any similar expenses falls under capital expenditure.

Table of Content

1. Components of Union Budget
2. Statements Under the FRBM Act 
3. Stages in Enactment of Budget
4. Distribution Protocol for Budget Papers
5. Budget Discussion Dynamics
6. Steps for Budget Planning 

Statements Under the FRBM Act 

Following the budgetary procedure in India, Lok Sabha received three statements mandated by the Fiscal Responsibility and Budget Management Act, 2003:

• Medium-Term Fiscal Policy Statement
• Fiscal Policy Strategy Statement
• Macro Economic Framework Statement

Stages in Enactment of Budget

 Once the budget is prepared, the budget moves to the enactment stages. This is the stage where the budget is discussed and passed. Stages in the Enactment of the budget include presentation of the budget, general Discussion, scrutiny by department committees, voting of demand for grants, the passing of the appropriate bill, and the passing of the finance bill.

Distribution Protocol for Budget Papers

For the Railway Budget, sets are distributed to members from the Publications Counter after the conclusion of the Railway Minister's speech. As for the General Budget, sets are dispensed to members in Inner and Outer Lobbies or State-wise booths, following the Finance Minister's speech, the introduction of the Finance Bill, and the House's adjournment.

Budget Discussion Dynamics

Budget discussion is bifurcated into two stages—initially, a General Discussion, followed by a detailed discussion and voting on the demands for grants.

Time Allocation for Discussion:

The comprehensive process of discussion and voting on the demands for grants, coupled with the passage of the Appropriation and Finance Bills, adheres to a specific timeline. Consequently, certain Ministries' demands might undergo guillotine, i.e., they are voted without discussion. Post-Budget presentation, the Minister of Parliamentary Affairs convenes a meeting with leaders of Parties/Groups in Lok Sabha to determine the ministries/departments for discussion. Proposals are then forwarded for the consideration of the Business Advisory Committee, which, after deliberation, allocates time and recommends the order for discussion. Flexibility is retained by the Government to make adjustments to the order of discussion.

Publication of Discussion Schedule:

Following time allotment by the Business Advisory Committee, a detailed timetable, indicating the dates and sequence in which the demands for grants of various Ministries will be addressed in the House, is published in Bulletin-Part II for the benefit of members.

Steps for Budget Planning 

The budget making process in India typically commences in the third quarter of the financial year and encompasses four key stages:

Stage 1: Estimates of Expenditures and Revenues

Estimating expenditures and revenues is the first step. Initial estimates of plan and non-plan expenditures are provided by each ministry. Planning Commission( now NITI Aayog) and planning commission discuss planning expenditures, including development and capital outlay, to allocate resources based on tentative estimates.

Stage 2: First Estimates of Deficit

In this stage, the revenue and expenditure estimates are matched to yield the first deficit estimate. The government, in consultation with the chief economic advisor, decides on optimal borrowings to cover the deficit. 

Stage 3: Narrowing of the Deficit

At this stage, targets for the fiscal deficit and the budget deficit overall are established. Potential tax rate adjustments or adjustments to expenditure plans are how the government addresses the shortfall. Non-plan expenditures may be adjusted, but subsidies are typically less flexible and politically sensitive.

Stage 4: The Budget Presentation and Approval

On the last working day of February, the budget for the upcoming fiscal year is presented. Both Houses of Parliament are presented with the financial statement, including tax proposals and rates, by the Finance Minister. The government's policy recommendations, funding sources, and revenue projections are included in the budget.

Conclusion
The Union Budget of India is a comprehensive financial plan that combines Railway and General Budgets. It is governed by constitutional mandates and the Fiscal Responsibility and Budget Management Act. The process involves distribution dynamics, discussions, and four stages of planning. The Finance Minister presents the Budget to Parliament, marking the start of a new fiscal year and shaping India's economic trajectory. The budget reflects the government's priorities, intentions, and resource allocations, impacting citizens' lives. It serves as a powerful tool for influencing the nation's present and future.