Who Prepares the Annual Budget?


The Indian Union Budget is created by the Ministry of Finance, working with Niti Aayog and other relevant ministries. The Budget division of the Department of Economic Affairs (DEA) in the finance ministry is the main group responsible for making the Budget.

What is the Union Budget?

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

The roots of the modern Budget can be traced back to the Norman period, where finance was handled by two departments—the Treasury and the Exchequer. The term "budget" comes from the old French word "bougette," meaning a leather bag or wallet. Its first recorded use may date back to the 1733 financial statement by Walpole, the Prime Minister and Chancellor of the Exchequer.

Initially, "budget" only referred to the Chancellor's annual speech on the nation's finances. Today, it signifies an annual financial statement detailing a government's income and expenditure.


Understanding the Budget Process

In the Indian budget process, the Finance Minister, aided by advisors and bureaucrats, seeks input from industry leaders and economists. Various organizations related to accounting and finance share their opinions and suggestions. Bureaucrats play a significant role in influencing the outcomes of the budgeting exercise, which typically begins in the third quarter of the financial year. The budget process involves four stages: estimating expenditures and revenues, determining the initial deficit, narrowing the deficit, and finally presenting and obtaining approval for the budget.

Steps in the Preparation of the Union Budget

The preparation of the Union Budget in India involves several key steps:

  1. Step 1: Issuing Circular and Requesting Estimates

    The finance ministry initiates the budget process by issuing a circular to various entities, including ministries, states, Union territories, and autonomous bodies. The circular instructs them to prepare estimates for the upcoming year.

  2. Step 2: Providing Guidelines and Forms

    The circular contains essential elements, including skeleton forms and guidelines. These materials serve as the foundation for ministries to articulate and present their financial demands.

  3. Step 3: Detailing Revenues and Expenditures

    Ministries go beyond mere estimates, providing a breakdown of their financial activities from the past year. This includes a detailed account of both revenues generated and expenditures incurred, offering a thorough understanding of their fiscal performance.

  4. Step 4: Scrutiny and Consultations

    Upon receiving budget requests, top government officials meticulously scrutinize the submissions. This scrutiny is accompanied by extensive consultations between ministries and the Department of Expenditures.

  5. Step 5: Data Submission to Finance Ministry

    Once the budget requests receive approval, the data is compiled and forwarded to the finance ministry. This centralization of budgetary information is a crucial step in streamlining the process and facilitating further review.

  6. Step 6: Allocation of Revenues

    The finance ministry, acting as the central authority in budget allocation, reviews all recommendations. Based on this review, revenues are strategically allocated to various departments.

  7. Step 7: Pre-Budget Meetings

    The finance minister engages in pre-budget meetings with a diverse array of stakeholders. This inclusive approach involves discussions with state representatives, bankers, agriculturists, economists, and trade unions.

  8. Step 8: Gathering Proposals and Demands

    During pre-budget consultations, the finance minister actively gathers information about proposals and demands from the stakeholders. This participatory approach ensures that the budget reflects the needs and aspirations of various sectors and interest groups.

  9. Step 9: Final Decision-Making

    Armed with insights from pre-budget consultations, the finance minister makes the final decisions on budgetary allocations and priorities. These decisions are subjected to discussion with the Prime Minister before finalization.


The Indian Union Budget is a complex process involving multiple stages and meticulous attention to detail. The Ministry of Finance, in collaboration with Niti Aayog and other ministries, crafts the budget, with the Budget division of the Department of Economic Affairs playing a central role. The modern budget system has roots in the Norman period, evolving from a mere speech to a detailed financial statement outlining the government's income and expenditures. Final decisions on budgetary allocations and priorities shape the financial landscape for the upcoming fiscal year.

Frequently Asked Questions

Budget management is influenced by factors like economic conditions, government policies, and unexpected events impacting revenue and expenses, affecting financial planning and execution.

Budgeting processes provide structure, ensuring systematic planning, allocation, and monitoring of financial resources for effective organizational management and goal achievement.

The budget process is crucial for transparent financial planning, resource allocation, and goal alignment.

The budget process involves key stakeholders, including finance professionals, department heads, and executives. Collaboration with experts and relevant personnel ensures comprehensive financial planning and decision-making.

Budgets may face limitations due to unforeseen events, inaccurate predictions, and inflexibility. Over-reliance on historical data and changing economic conditions can challenge the effectiveness of budgetary plans.

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