GS Paper 3
Syllabus: Government Budgeting.
Source: Indian Express
Context: On February 1, Finance Minister Nirmala Sitharaman will present the Union Budget for the next financial year (2023-24). Let’s understand the basics of the Union Budget and why it is very much important for Prelims and Mains.
- According to Article 112 of the Indian Constitution, the Union Budget for a year is referred to as the Annual Financial Statement (AFS).
- It is a statement of the estimated receipts and expenditures of the Government in a Financial Year.
- The Budget Division of the Department of Economic Affairs in the Ministry of Finance is the nodal body responsible for preparing the Budget.
Any budget essentially provides some details.
- The total amount of money that the government will raise in the coming year; this is called the total receipts, Ways and means to raise the revenue.
- The total amount of money it will spend; is called the total expenditure.
- The total amount of money it will borrow from the market to plug the gap between what it spends and what it earns; this is referred to as the fiscal deficit.
- Details of the actual receipts and expenditure of the closing financial year and the reasons for any deficit or surplus in that year, and
- The economic and financial policy of the coming year, i.e., taxation proposals, prospects of revenue, spending programme and introduction of new schemes/projects.
Forces that shape a Budget
- Demand for a lower rate of taxation and/or a higher rate of exemptions. In other words, people and firms lobby to get their tax burden reduced.
- Demands from people/firms wanting higher or newer subsidies.
- Demands which are antagonistic to the first two categories. They demand that the government cuts down on its fiscal deficit (essentially the total amount of money the government borrows from the market in order to bridge the gap between its total expenditure and its total receipts).
In Parliament, the Budget goes through six stages:
- Presentation of Budget.
- General discussion.
- Scrutiny by Departmental Committees.
- Voting on Demands for Grants.
- Passing an Appropriation Bill.
- Passing of Finance Bill.
- RK Shanmukham Chetty presented the 1st Union Budget of independent India on Nov 26, 1947.
- Till 2017 Rail Budget and Union Budget came separately (Done through Acworth Committee – 1924) but now both are merged together.
- Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi are the only prime ministers to have presented a Budget.
- The date of the Union Budget presentation was changed in 2017 by then finance minister Arun Jaitley from ‘last working day of February’ to ‘February 1’.
- On 1st Feb 2021, Finance Minister Nirmala Sitharaman presented the first paperless budget. This was done due to the ongoing COVID- 19 pandemic in India.
Prelims Link: UPSC 2016
Mains Link: UPSC 2021
Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets.