Significance of knowing Budgetary Process in India for UPSC
- What is Budgetary Process in India?: Knowing Budgetary Process in India is important to clear our concept regarding preparation of Union Budget.
Union Budget is one of the most essential part of UPSC CSE preparation and it covers a huge portion of UPSC Prelims examination as well as UPSC Mains examination.
Under UPSC Mains Syllabus, it shall cover GS Paper3: Growth & Development, Planning, Government Budgeting, Inclusive Growth, Government Policies & Interventions.
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What is Budget?
Budget is the Annual Financial Statement or the Statement of the Estimated Receipts and Expenditure of the Government of India in respect of each financial year is popularly known as the Budget.
Why budgetary Process is in News?
- On October 10 this year, the preparations for the Union Budget 2023-24 began in full earnest.
- From then till February 1, various departments of the government, especially Finance Ministry, will be engaged in relentless activities.
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What Budgetary Process does it takes to prepare union budget in India?
Most of the us just sees the Finance Minister’s speech in Lok Sabha on February 1, but the budget itself is more than that. And it takes a lot of preparation, planning, coordination and forecasting to get to that day.
Budgetary Works in September
- The budget process officially begins in September when a Budget Circular is issued, signed by Joint Secretary (Budget division) in the Finance Ministry.
- In it are formats and timelines for submitting the relevant information with the Finance Ministry.
- For example, this year, the pre-budget circular was issued on September, giving officials and financial advisors of other ministries more than a month to draw up a list of their requirements for revised estimates of the current year (FY23) and budget estimates for FY24.
- These would include whatever the various central government ministries plan to spend on schemes, programmes, capital expenditure and administrative expenditure for the remainder of the current financial year and what they project to spend in the coming year.
Budgetary Works in October-November
- From October 10 to November 10, officials from the Expenditure and Economic Affairs Departments are meeting representatives from all the central governments, ministries, agencies and union territories.
- The aim of these meetings will be to set RE for FY23 and BE allocations for FY24.
- It is clear that allocating sums for the flagship schemes and for major welfare and economic ministries like agriculture, highways, power, railways, food distribution, education, health, and of course defence, among others, requires more of policymakers’ attention than that of other departments.
Budgetary Works from mid-November
- From mid-November onwards, the Finance Minister will start her own set of pre-budget consultations with various stakeholders and interest groups, like industry bodies, representatives from sectors such as agriculture, social and welfare sector, labour bodies, economists and others.
- Each of these interest groups present their own set of demands on what issues they would like the budget to focus on.
Budgetary Works in December
- The Finance Ministry, by this time, goes into ‘quarantine’ and is shut to all outsiders.
- Paramilitary guards and Intelligence Bureau officials are placed in North Block, and especially outside the offices of key budget-makers. Secrecy becomes paramount.
- Meanwhile, the Revenue Department starts drawing up its own estimates of what the revised tax proceeds could be for the current fiscal year and the projected revenue for the coming fiscal year, from income tax, corporate tax, Goods and Service Tax, custom duties and various cesses.
- Estimates are also drawn up by the relevant departments on what non-tax revenues will be for the current and next year, including spectrum sales, divestment, and dividends from the Reserve Bank of India, state-owned financial institutions and from the state-owned companies in various sectors.
- The underlying assumptions for the coming financial year, including what could be the nominal GDP growth, the macro-economic state of play, and other such details are provided by the economic division, headed by the Chief Economic Advisor.
- At this time, the division is also working full-tilt on the Economic Survey, which is tabled in Parliament a day before the budget.
- It should be remembered that the budget is not just a statement of accounts of the central government, but also a political document, which lays down the socio-economic vision of the Prime Minister.
- There are inputs received from the ruling party’s economic wing, and a lot of the overseeing of the budget-making does happen in the Prime Minister’s Office.
- So, a lot of inputs also come in from PMO.
- By mid-December, all of the processes mentioned above start coming together.
Budgetary Works in January
- The Finance Minister’s speech is written by many people, but the personal, finishing touches come from her. Part B of the speech, which mentions taxation announcements, is written by the Revenue Secretary.
- Part A of the speech, which contains views on the state of the economy, and announcements on various schemes and initiatives, is written primarily by the Economic Affairs Secretary.
- In many cases, the Chief Economic Advisor also drafts part of the speech. For example, Sri Arvind Subramanian did contribute to Sri Arun Jaitley’s budget speeches. It is expected that Sri Nageswaran could do the same for Sitharaman.
- Activity reaches fever-pitch in this month.
- In early January, the National Statistical Office releases the advanced estimates for GDP for the current financial year. These assumptions are also worked into the budget calculations by budget-makers.
- Estimates, like fiscal deficit, capital expenditure, revenue expenditure, centre’s gross borrowing, tax revenue, non-tax revenue and others are worked and re-worked.
- Work continues on drafting of all documents (and there are many, apart from the budget speech).
- The final contours of the shape of the centre’s economic vision are drawn up.
- In mid-January, the process of printing the budget begins. The printing press is underground, below North Block. It starts with a traditional halwa ceremony. A number of key officials and printing staff are locked up in the Finance Ministry, where they will stay for the next couple of weeks.
Presentation of Budget on February 1
All of this culminates on February 1, when the Cabinet approves the budget, the Finance Minister presents it to the President, then proceeds to Lok Sabha, where she rises at 11 am to begin her speech.
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What Kind of Budgetary Process does Lok Sabha Follows?
- The Budget is presented to Lok Sabha on such day as the President may direct.
- Immediately after the presentation of the Budget, the following three statements under the Fiscal Responsibility and Budget Management Act, 2003 are also laid on the Table of Lok Sabha:—
- (i) The Medium Term Fiscal Policy Statement;
- (ii) The Fiscal Policy Strategy Statement; and
- (iii) The Macro Economic Framework Statement.
- In 2019, however, only two statements, namely: (a) Medium Term Fiscal Policy cum Fiscal Policy Strategy Statement and (b) Macro-Economic Framework Statement were laid.
- Simultaneously, a copy of the Budget is laid on the Table of Rajya Sabha.
(Important Note: In an election year, the Budget may be presented twice—first to secure a Vote on Account for a few months and later in full.)
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Few other Important Facts about Budgetary Process in India
- Till 2016, the Budget was presented to Lok Sabha in two parts, namely, the Railway Budget pertaining to Railway Finance and the General Budget which gave an overall picture of the financial position of the Government of India, excluding the Railways.
- Since the year 2017-18, with the merger of the Railway Budget with the General Budget, a single document titled ‘Union Budget’ is presented by the Minister of Finance.
- By convention the Railway Budget was presented sometime in the third week of February at 1200 hours after the Question Hour.
- The General Budget was presented by convention, till 1998, on the last working day of February at 5 P.M. This convention was changed in 1999 when the General Budget was presented at 11 A.M. Since then the General Budget is presented at 11 A.M. on the last working day of February (except in 2000 when it was presented at 2 P.M.).
- However, since 2017-18, the date of presentation of Union Budget has been advanced to 1st February.
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FAQs on Budgetary Process in India
Q. In which month the budgetary process officially begins?
Ans. The budgetary process officially begins in September when a Budget Circular is issued, signed by Joint Secretary (Budget division) in the Finance Ministry.
Q. What is Halwa Ceremony during Union Budgetary process?
Ans. In mid-January, the process of printing the budget begins. It starts with a traditional halwa ceremony. A number of key officials and printing staff are locked up in the Finance Ministry, where they will stay for the next couple of weeks.
Q. In which year, the date of presentation of Union Budged changed?
Ans. Since 2017-18, the date of presentation of Union Budget has been advanced to 1st February.
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