What Is Union Budget of India

Finance Minister Nirmala Sitharaman is going to present the Union Budget 2023 on 1^st February 2023. This will be her fifth straight budget presentation and the last full budget of the present government before the 2024 general election. In this blog we will discuss the meaning, importance and how is the union budget prepared.

Meaning of Union Budget

The Union Budget is referred to as the Annual Financial Statement in Article 112 of the Constitution of India and is the annual budget of the Republic of India. The budget is presented for a fiscal year that starts on 1^st April and ends on 31^st March of the next year.

The term ‘budget’ originates from the French word Bougette which means leather briefcase. Before 2019 the finance ministers used leather bags to unveil the budget but in 2019 Nirmala Sitharaman replaced it with ‘bahi khata’.

The union budget is divided into two parts:

• A capital budget accounts for government-related capital payments and receipts.
• A revenue budget accounts for all the revenue expenditures and receipts.

Importance:

The main aim of the Union Budget is to get India on a road of rapid and balanced economic growth. Our country has a parliamentary democracy where the government cannot randomly spend, borrow, or tax money. Thus, making budgeting and planning necessary for the development of the economy. Some of the points that explain the importance of the union budget are:

• The available resources should be allocated optimally to achieve profit maximization so that the government can focus on public welfare.
• One of the important duties of the budget is to ensure proper handling of inflation and deflation which helps bring economic stability to the country.
• The union budget also influences the distribution of income through subsidies and taxes which helps in the reduction of income disparity between the rich and the poor.
• One of the objectives of the union budget is to eradicate poverty and create job opportunities so that every Indian citizen can meet their basic needs like food, shelter, clothing, etc.
• The union budget also decides the tax structure of the country whether it be direct tax or indirect tax. High tax rates are levied on the rich class while low rates are charged on the lower income group.

How Is The Union Budget Prepared?

Before the presentation of the budget, the preparation of it takes a lot of planning which starts approx. 5 – 6 months before the presentation. It is prepared by the Ministry of Finance in consultation with Niti Aayog and other concerned ministries. The steps followed in the preparation of the budget are as follows:

1. A circular is issued to all the ministries, states, and union territories, to prepare estimates for the coming year.
2. After receiving the circular, the ministries provide estimates of the plan and non-plan expenditures and also assess the revenues that are expected to flow into the government.
3. After the requests are made on the revenues and expenditures, they are scrutinized by the top government officials. Once the approval is given the data is then sent to the finance ministry.
4. The estimates of revenue and expenditure are then compared by the finance ministry which provides the estimate that expenditure will be more than revenue. The government then decides the optimum level of borrowing.
5. The shortage after the targets for the fiscal deficits and budget deficit are decided is met through a change in tax rates if possible.
6. The finance ministry allocates the revenues to the various departments after going through all the recommendations.
7. Next the finance minister holds a pre-budget meeting with the stakeholders to know their proposals.
8. After the consultations are done in the pre-budget meeting a final call on demands is taken by the finance minister and it is also discussed with the Prime Minister.
9. At last, the Union Budget is presented in the Lok Sabha by the Finance Minister.

Some Facts About Indian Budgets

• Independent India’s first budget was presented on 26^th November 1947 by R. K. Shanmukham Chetty.
• Morarji Desai holds the record for presenting the most number of budgets as the Finance Minister. He presented 10 Union Budgets.
• In 1991 Manmohan Singh delivered the longest speech in terms of words where his speech had 18,650 words.
• Nirmala Sitharaman has the record of delivering the longest speech on 1^st February 2020 where she spoke for 2 hours and 42 minutes.
• Before 1999 the Union Budget was presented at 5 PM on the last working day of February. Former Finance Minister Yashwant Sinha changed the time to 11 AM.
• In 2017 Arun Jaitley changed the date of presenting the Union Budget to 1^st February.
• Before 2017 the railway and the union budget were presented separately. It was presented together for the first time in 2017.
• In 2019 Nirmala Sitharaman replaced the budget briefcase with Bahi Khata and then in 2021, she presented a paperless budget.

Wrapping Up

The Union Budget is an important part of the economy and has an impact on many areas. The upcoming budget is to be presented on 1^st February 2023 by Nirmala Sitharaman. She is the second woman to present the budget after Indira Gandhi who presented in 1970-71. This budget will be presented at a time when there are mass layoffs and a global recession in the world.

We at Lakshmishree will be covering the budget so stay tuned. Let’s hope that this budget helps India push toward economic growth.

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