What is the Union Budget?
The Union Budget of India is an extensive annual financial report drawn and tabled in the Parliament by the Finance Ministry of India. It spells out the revenue the Government of India expects to raise over the course of the financial year and how it will allocate its expenditure.
The Budget is much more than just an accounting document. It serves as a measure of where the government’s policies are leaning. It is prepared by the finance ministry after extensive consultations with other ministries and the NITI Aayog. It also takes into account spending estimates from various departments, the defence forces and union territories.
Why is it important?
In a democratic country like India, the government must allocate the desired budgets for various social and economic activities and be held accountable for all spending, taxing and borrowing activities required for that. The Union Budget performs some such vital functions.
Allocation of resources
The Union Budget helps the central government distribute its limited resources equitably. It gives the government a sense of direction for its initiatives throughout the year. With the budget acting as a guiding light, the GoI can maximise profits while also investing in public welfare.
The Union Budget allows the government to regulate prices for economic stability. During inflation, surplus budget policies can be implemented and in times of deflation, the Centre can put into practice deficit budget policies.
Check unemployment and poverty
A major goal of the Union Budget is to create opportunities for employment and thereby reduce poverty. Jobs created by initiatives spelt out in the budget can help individuals meet their basic needs.
Close the income gap
The Union Budget aims to equalise income distribution and close wealth disparities. It achieves this by laying out taxation rules and subsidies. Lower-income groups are charged lower taxes and given higher subsidies.
Things to know about the Union Budget
With the Union Budget 2022-2023 slated to be introduced in Parliament in the upcoming session, there are a few things you should know. Here’s your cheat sheet on the Indian Union Budget:
Parts of the Budget
Earlier, the central government used to table a separate railway budget as well, but since 2017 it has been merged with the Union Budget itself. Now, the Union Budget of India is composed of two major parts – the Capital Budget and the Revenue Budget.
This portion of the budget concerns the government’s capital receipts and payments. Capital receipts refer to the loans raised from the Reserve Bank of India (RBI) as well as the public. Capital payments include government money spent on healthcare, infrastructure and other similar facilities.
The revenue budget incorporates the revenue expenses and receipts of the government. It helps determine whether the government has a surplus or deficit of revenue. Revenue deficit occurs when receipts are lower than expenses.
The Economic Survey of India is a document that encompasses an analysis of the macroeconomic conditions of India over the previous financial year. It includes statistical data from various industries. Usually, the Economic Survey is presented in Parliament a day before the Budget is tabled.
Consolidated Fund of India
All the revenues received by the government are kept under the Consolidated Fund of India.
Contingency Fund of India
The Contingency Fund of India is an emergency fund that can be created at the discretion of the President in the event of disasters and unexpected expenses.
Public Account of India
The Public Account of India refers to the fund with the Government of India that holds money received in the form of provident funds and savings. It also includes that portion of the revenue earmarked for education, other reserves and building roads.
Drafting and presenting the Union Budget is a crucial yearly milestone. It helps lawmakers take stock of the previous year’s economic activities and lay the roadmap for the upcoming year. It is also highly anticipated by the public as it informs them of their future tax liabilities.
When is the Union Budget announced and who announces it?
The Union Budget for the upcoming financial year will be announced by our Finance Minister on 01 Feb 2022.
What is going to be different about the Economic Survey document in Budget 2022?
The Economic Survey for 2021-22 is expected to be different from the usual documents released in the past. It is expected to contain only one volume consisting of data for the fiscal year across various sectors and industries. The policy prescriptions which form part of the main Volume-1 will not be included due to the unavailability of the chief economic advisor (CEA) under whose purview this falls.
How much money is there in the Contingency Fund of India?
The Contingency Fund of India is an emergency. In the past, it has had a fixed corpus of INR 500 crore used for any unforeseen expenditures.
What is the Consolidated Fund of India used for?
The Consolidated Fund of India is where all the revenues received by the government are credited. It is used to pay for all expenditure incurred by the government including the salary and allowances of the President, chairpersons, speakers and their deputies of both the houses of the Parliament (Lok Sabha and Rajya Sabha), judges of the Supreme Court judges, and members of the CAG, Lok Pal etc. The pensions of the Supreme Court and High Court judges are also drawn from this account. No amount can be withdrawn from this fund without authorization from the Parliament.