- The Union Budget of India, presented under Article 112 of Indian constitution is also referred to as the Annual financial statement (AFS) which is a statement of the estimated receipts and expenditure of the government for the upcoming financial year.
- The budget, which is presented by means of the Finance bill and the Appropriation bill has to be passed by both the Houses before it can come into effect from April 1.
- This budget brings 3 major changes with it. One, Railway Budget which used to be presented separately by the Railway Minister, is now to be presented along with Union Budget. Means no separate railway budget.
- This step take the politics and populism out of the operations of a commercial entity like Railways. It would help Railway to operate on rational and profitable grounds, and not on mindless politics.
- Second change is the advancement of Union budget presentation by a month.
- The Finance Minister presents it and for the first time in 2017, it was presented on the first day of February which was earlier presented on the last working day of February.
- This advancement was done so that allocations to different ministries could be made before the commencement of new financial year starting from April 1.
- The third, Plan and non Plan expenditure classification has been removed. The purposed for which this has been done has been discussed ahead. So keep reading.
- The printing of budget documents starts roughly a week ahead of presenting in the Parliament with a customary Halwa ceremony.
- Halwa is prepared and served to the officers and support staff involved. They remain isolated and stay in the North Block office until the Budget is presented.
Technical Definitions and Classifications
- Union Budget keeps the account of the government’s finances for the fiscal year that runs from 1st April to 31st March.
- Union Budget is classified into Revenue Budget and Capital Budget.
- Revenue budget includes the government’s revenue receipts and revenue expenditure.
- There are two kinds of revenue receipts, tax revenue and non-tax revenue. Tax revenue include revenues from taxes such as Income Tax, Corporation Tax, Customs duty, Excise duty etc.
- Non Tax revenue include revenues from Interests received by the government on the loans given, dividends, profits of Public sector units (PSUs) etc.
- Revenue expenditure is the expenditure incurred on day to day functioning of the government and on various subsidies and services offered to citizens.
- If revenue expenditure exceeds revenue receipts, the government incurs a revenue deficit.
- Capital Budget includes capital receipts and payments of the government. Loans from public, foreign governments and RBI form a major part of the government’s capital receipts.
- Capital expenditure is the expenditure on development of machinery, equipment, building, health facilities, education etc.
- Fiscal deficit is incurred when the government’s total expenditure exceeds its total revenue.
Plan and Non Plan Expenditure
- Under the non-plan expenditure the government earmarks spending to fund salaries, subsidies, loans and interest, whereas the plan expenditure is allocated for developmental projects and capacity building.
- The merger of Plan and Non Plan classification in Budget and Accounts is expected to bring an ease in resource allocation and its monitoring.
- The government was of the view that the Plan and Non-Plan bifurcation of expenditure leads to a fragmented view of resource allocation to various schemes.
- As a result, it is difficult not only to ascertain cost of delivering a service but also to link outlays to outcomes.
- It was also felt that the bias in favour of Plan expenditure by Centre as well as the state governments has led to a neglect of essential expenditures on maintenance of assets and other establishment related expenditures for providing essential social services which are actually non plan expenditures.
- The Budget documents presented to Parliament, besides the Finance Minister’s Budget Speech, comprises of various documents such as a) Annual Financial Statement (AFS), b) Demand for Grants (DG), c) Appropriation Bill, d) Finance Bill, e) Macro-economic framework for the relevant financial year, f) Medium Term Fiscal Policy Statement, g) Expenditure Profile, h) Expenditure Budget and i) Receipts Budget.
- What are these statements. follow the next post (2/n)!