Union budget is a comprehensive statement of the government’s finances including spending, revenues, deficit or surplus, and debt, for the fiscal year that runs from April 1 to March 31. The budget is the government’s main economic policy document, which shows how the government plans to use public resources to meet policy goals. During the budget the Finance Minister puts down a report that has Government of India’s revenue and expenditure for one fiscal year. The budget aggregates revenues from all sources and expenses of all activities undertaken. It comprises the revenue budget and the capital budget. It also has estimates for the next fiscal year. The budget has to be passed by the House before it can come into effect on April 1, the start of India’s financial year.
The budget has following components:
a. Annual Financial statement – which sets the estimated revenue and capital account of the Govt. for the financial year.
b. Demand for grants – which details the requests for funds made by different govt. departments and ministries.
c. Finance Bill – containing the proposals for levy of new taxes and modification of the existing tax structure.
The other documents which are annexed to the budget are:
a. Budget at a glance – which presents a snapshot of the state of Govt. finances detailing plan and non-plan outlays, revenue, fiscal and primary deficit.
b. Receipts budget – which details tax, non-tax revenues and capital receipts
c. Expenditure budget – details tax, non – tax revenues and capital receipts
d. Explanatory memorandum – Which provides detailed item-wise breakup of the receipts and expenditure.
The Union budget gives the statement of receipts and expenditure of three consecutive years:
1) Actuals for the preceding year
2) Estimates for the present year
3) Estimates for the coming year
Here are some key objectives that explain the need for a Union Budget:
1. Reallocation of resources:
One of the most important factors that makes a Union Budget the need for a society is that it helps in reallocating resources for the government’s profit maximisation to push public welfare.
2. Reducing inequality in society:
Economic inequality is inherent in any society. It is through budgetary policies that the government tries to bridge the economic gap in the society. For instance, higher tax income from the rich and more welfare schemes for the poor help reduce social inequality in the society.
3. Controlling prices:
The Budget also absorbs economic fluctuations in the society. A well-drafted Budget foresees and handles inflation and deflation, thus preventing an economic stability in the country. Policies of surplus Budget during inflation and deficit budget during deflation helps maintain stability of prices in the economy.
4. Resource management:
Budget manages the demand for public enterprises which directly connects with public interest. The Union Budget also helps manage the effective and efficient use of economic resources.
A brief History of Union Budget:
R K Shanmukham Chetty was the first finance minister of India to present a Union Budget after the country’s Independence. He presented the Jawaharlal Nehru-led central government’s Budget on November 26, 1947, for the time up to March 31, 1948. That Budget had estimated the government’s total revenues at Rs 171.15 crore and fiscal deficit at Rs 24.59 crore.
When Indira Gandhi, the then prime minister who also held the finance portfolio, rose to present her government’s Budget in 1970, she became the first woman finance minister of India to present a Budget in Parliament.
In 2001, Yashwant Sinha, the erstwhile finance minister in the National Democratic Alliance (NDA) government led by Atal Bihari Vajpayee of the Bharatiya Janata Party (BJP), broke the colonial practice of announcing the Union Budget at 5 in the evening. Instead, he delivered his Budget speech at 11 am on the last working day of February.
Former prime minister of India Morarji Desai, who presented 10 Union Budgets in his role as finance minister, is crediting with presenting the highest number of Union Budgets in the history of Independent India.
The Budget presented by Finance Minister Arun Jaitley for the financial year 2017-18 was unprecedented in that, for the first time ever, a Railway Budget was not presented separately. This practice was discontinued and both Union Budget and Railway Budget were merged and presented together. Also, the Budget was advanced to first day of February from the last day.
Importance of Union Budget:
In a parliamentary democracy like India, where the Constitution is the supreme document with defined roles for the government to function effectively, it is imperative for the government to work for the welfare of the state and its citizens. The government holds manifold power in running a country – from law and order to protecting the national security, enhancing the economic stability and fostering social reforms. To discharge these functions effectively and upgrade the country’s economic and social structure, the government requires adequate resources. In India, the government cannot borrow, tax or spend money arbitrarily. A prudent planning and budgeting is required to allocate the limited resources so that they can be employed effectively and the economy can flourish. Besides, proper earning is a prerequisite to be able to allocate resources in the best interest of the country. These factors make a properly planned Union Budget necessary, besides, of the course, the fact that Article 112 of the Constitution of India mandates that the central government bring out an annual financial report.