What is Union Budget?

The union budget of India, also known as the Annual Financial Statement under Article 112 of the Indian Constitution, is the Republic of India's annual budget, which is submitted to Parliament by the Finance Minister of India on the last working day of February each year. The budget must be approved by the House before it can take effect on April 1, the beginning of India's fiscal year.

Kautilya's Arthashastra has references to budgets. It specifies that the Chancellor should first estimate revenue from each location and area of activity using multiple heads of accounts before arriving at a total. The real revenue is approximated by putting revenues into the treasury for the current year as well as delayed payments collected from previous years. Deduct the expenses for the king, regular rations, additional exemptions provided by the king, and permitted delay of payments into the treasury. The overdue revenues were calculated based on work that will generate income upon completion, unpaid fines, unrecoverable dues, uncollectible sums, advances to be reimbursed by officials, etc.

The contemporary budget dates back to the Norman period, when two ministries were in charge of finance: the Treasury and the Exchequer. The Treasury received and disbursed money on behalf of the king. The Exchequer had a 'lower office' that received money and a 'higher office' responsible for supervising the King's finances.

The name "budget" originates from the old French word "bougette," which refers to a leather purse or pocketbook. The term 'budget' may have originated in a financial statement issued by Walpole, Prime Minister and Chancellor of the Exchequer, in 1733. A satirical caricature portraying him opening the wares of a patent medicine merchant was published at the time, with the headline 'The Budget Opened'. ('Budge' is an older term for a bag or small case).

Initially, "budget" only referred to the Chancellor's annual address on the nation's finances. The phrase is now used to refer to the government's yearly financial account of income and spending.

About Union Budget

The union budget offers information regarding the government's estimated receivables and payables for a certain fiscal year. This budget statement is broken into two primary parts: capital budget and revenue budget.

Capital Budget

The capital budget tracks government-related capital payments and revenues. Capital revenues include loans from the public or the Reserve Bank of India (RBI), whereas capital payments comprise costs made for health facilities, equipment development and maintenance, and educational facilities.

Revenue Budget

As the name implies, a revenue budget includes all revenue expenditures and earnings. The government faces a revenue shortfall if the revenue expenditure exceeds the income.

Importance of the Union Budget

After understanding what is union budget is, let’s look into the importance of the union budget. The overall goal of the India Union budget is to achieve quick and balanced economic growth for our country while promoting social justice and equality. The following are the primary objectives that demonstrate the importance of the annual budget of India.

Ensure the Optimal Deployment of Resources

It is critical to use the existing resources in the country's best interests. Allocating resources optimally helps the government maximise profits while also promoting public welfare.

Reduce Unemployment and Poverty Levels

Another goal of the India Union budget is eliminating poverty and providing work possibilities. This would ensure that every person in the country has access to necessities such as food, housing, clothes, and medical and educational services.

Reduce Wealth and Income Inequality

The budget influences income distribution through subsidies and levies. It helps to ensure that the wealthy pay a high tax rate, lowering their disposable income. On the other hand, the lower income group is taxed at a reduced rate to guarantee enough money.

Keep an Eye on Pricing

The union budget also helps control economic volatility. It ensures effective handling of inflation and deflation, hence promoting economic stability. Surplus budget policies are executed during inflation, whereas deficit budget policies are developed during deflation. This helps to preserve price stability in the economy.

Change the Tax Structure

The union budget also specifies prospective modifications to the country's direct and indirect taxation. It causes adjustments to income tax rates and brackets. For example, this budget includes the forthcoming income tax slab for fiscal year 2024-25.

The union budget is extremely important since it affects so many different sectors. As a result, understanding what it represents and why it is so important is critical.

Conclusion

Understanding the Union Budget of India is essential for comprehending the nation's financial roadmap, fiscal policies, and economic priorities. The budget, presented annually by the Finance Minister, influences various sectors, taxation policies, and public expenditure allocations. Through its significance, citizens and businesses gauge the implications of taxation, subsidies, and sectoral allocations on economic activities and overall growth.