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Budgetary Process in India

Budgetary Process in India

The Union Budget of India, also known as the annual Financial Statement in Article 112 of the Indian Constitution, is the annual budget presented by the Finance Minister in Parliament on the last working day of February, which must be passed by the House before it takes effect on April 1, the start of India's financial year.

Dual Aspects of Budgeting Process

The presentation of the Budget to Lok Sabha involves two components—the Railway Budget, concentrating on Railway Finance, and the General Budget, providing an inclusive overview of the Government of India's financial status, excluding Railways.

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Table of Content

  1. Dual Aspects of Budgeting Process
  2. Statements Under the FRBM Act
  3. Distribution Protocol for Budget Papers
  4. Budget Discussion Dynamics
  5. Steps for Budget Planning

Statements Under the FRBM Act

Following the Budget presentation, 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

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 typically commences in the third quarter of the financial year and encompasses four key stages:

  1. Stage 1: Estimates of Expenditures and Revenues

    Part A: Estimates of Expenditure

    • Ministries provide initial plan and non-plan expenditure estimates.
    • Plan expenditures are discussed with the Planning Commission, which allocates resources based on tentative estimates.
    • Non-plan expenditures, including interest payments and subsidies, are prepared by financial advisors and consolidated by the expenditure secretary.

    Part B: Estimates of Revenue

    • Assessment of expected revenues, categorized as capital and current receipts.
    • Capital receipts involve loan repayment, divestment receipts, and borrowings.
    • Current receipts include tax revenues, dividends from public-sector units, and interest payments on central government loans.

  2. Stage 2: First Estimates of Deficit

    • Matching revenue and expenditure estimates yields the first deficit estimate.
    • The government, in consultation with the chief economic advisor, decides on optimal borrowings to cover the deficit.
    • External borrowings are known during budget exercises, while domestic borrowing depends on the desired fiscal deficit level.

  3. Stage 3: Narrowing of the Deficit

    • Fiscal deficit and overall budget deficit targets are set.
    • The shortfall is addressed through potential tax rate revisions or adjustments to expenditure plans.
    • Adjustments may be made to non-plan expenditures, with subsidies being politically sensitive and non-plan expenses typically less flexible.

  4. Stage 4: The Budget Presentation and Approval

    • The Budget for the upcoming fiscal year is presented on the last working day of February.
    • The Parliament, under Article 112 of the Constitution, reviews the financial statement, which details estimated receipts and expenditures.
    • The Finance Minister presents the financial statement, including tax proposals and rates, before both Houses of Parliament.
    • Parliament approval is necessary for tax levies or fund disbursements.
    • The Budget becomes law when signed by the President, with Parliament scrutiny and passage usually completed in May.

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.
 

FAQs on Budgeting Process

The budgetary process in India involves the Ministry of Finance, Niti Aayog, and relevant ministries. They collaboratively prepare the Union Budget, with the Budget Division of the Department. 

The budget process is crucial as it allocates resources, sets financial priorities, and guides government activities. It ensures transparency, accountability, and effective financial management, impacting various sectors and citizens' lives.

Zero cost budgeting is a method where no additional funds are allocated. Instead, existing resources are reallocated to meet new requirements, emphasizing efficiency and cost-effectiveness in financial planning.

In India, the Parliament approves the budget. It is presented by the Finance Minister, and both Houses—Lok Sabha and Rajya Sabha—need to pass it for approval.

Morarji Desai holds the record for presenting the budget ten times in India, showcasing his significant role in shaping the country's economic policies.