Budget key Terms India
BUDGET AT A GLANCE - Budget key facts India
Budget key facts India - Constitutional obligations
Budget key facts India:
What is budget?
Budget is the common jargon for Annual financial statement.
Constitutional obligation regarding Annual financial statement :
Art. 112 of the constitution makes it obligatory on the part of the president to assure the presentation of an annual statement of receipts and expenditure, which would be referred as Annual financial statement.
what are Components of Annual financial statement or Indian Budget?
Budget key facts India:
Components of Annual financial statement, presented in February 2023:
- Advanced estimates for the next financial year - 2023-24
- Provisional/Revised estimates of the current year--- 2022-23
- Actual/Final figures/ results for the last complete year. - 2021-22
what is purpose, approach and need for Indian Budget?
Budget key facts India:
Purpose of budget making:
- To efficiently allocate resources
- Reduce misuse
- Balance growth, inflation and job creation
Various approaches to budget allocation planning:
Incremental budgeting – Based on experience of previous accounting periods or actual from last year, this method looks for decisions such as investment increase or decrease based on market conditions, competition & margins. It is considered less ambitious.
Sudden market shift can leave businesses and countries using this method at big risk.
Zero base budgeting – Approach is opposite of Incremental budgeting approach, as it discards decision making based on past years actuals, and believes in making fresh inquiry into all kinds of expenditures.
ZBB looks to build a new budget from scratch, starting from the baseline of "zero," as the name suggests.
Performance budgeting - With Performance-based budgeting (PBB) budgeting approach, businesses first need to set out clear goals or possible or desired outcomes.
These targets will then decide the course of action to achieve above objectives.
Reasons behind need for a budget:
- Transparency in financial management of government.
- To make govt. accountable.
- Advance planning.
- To ensure legislative control over permanent executive
Budget heads of Indian budget
Budget key facts India:
Total Budget receipts = capital receipts + Revenue receipts
Total Budget expenditure = capital expenditure + revenue expenditure
Revenue receipts = Tax revenue + Non-Tax revenue
Capital receipts = Recovery of loans + Govt borrowings + other receipts
Tax Revenue receipts - All those receipts of the government that are recurring in nature & create no liability are considered revenue receipts. Excise & Customs duty, income tax, corporate tax, Goods and Services Tax (GST) are part of revenue receipts of the Government.
Capital receipts - All those receipts of the government that are not recurring in nature & create liability are considered capital receipts. Capital receipts can be debt or non-debt but they eventually lead to either increase in liability or reduction in assets. Capital receipts include loans taken by government from the public, foreign governments, banks and other institutions as IMF & IBRD & loans from RBI.
Capital expenditure – refers to creation of physical assets that increases the standard of living, incomes, social welfare of the masses, it includes expenditure on creating Dams, bridges, highways, irrigation projects, transport infrastructure, etc.
Revenue expenditure – is that part of government spending that does not result in creation of assets, one part of this goes into regular running of the government like salaries of government employees & another part is connected to certain liabilities like pensions, interest on loans taken, subsidies to the general population, etc.
Understanding deficits:
Revenue deficit – revenue expenditure(administrative expenditure i.e. salaries and pension but excluding interest payments and any capital grants to states)) – revenue receipts ( Tax + Non-Tax)
Revenue deficit tries to find revenue shortfall on current year basis by excluding any liabilities from past actions.
Fiscal deficit – Total expenditure – (Total revenue – new borrowings)
Fiscal deficit tells us about the extent of receipts shortfall over total expenditure that needs to be bridged by new loans.
kEY FACTS ABOUT INDIAN BUDGET
The first Union Budget in India was presented by the East India Company to the British Crown in the year 1860. The word Budget is derived from the French word “Bougette”, which literally translates into a small bag or a pouch. Sixteen Interesting facts about Union Budgets in India
- The first Union Budget was presented in the year 1860 by the Scottish Economist and politician, James Wilson.
- RK Shanmugam Chetty the first finance minister of free India presented first Union Budget of independent India , on 26th November 1947, exactly 2 years before Constitution Day.
- PC Mahalnobis was the man who introduced the concept of Union Budget in independent India? The credit goes to one of India’s most well-known statisticians,. He was closely involved with the preparation and tabulation of the first Union Budget. The planning commission and the five year plans were also his brainchild.
- The Union Budgets were originally presented in the evening at 5 pm on 28th February till 1998, so that the details could be simultaneously presented to the British Parliament.
- From the 1999 onwards, Union Budget, is presented at 11 am on 28th February.
- From the year 2017, the date of the presentation of the Union budget was shifted to 1st February and that practice continues. Till 2016, the railway budget was presented separately 2 days prior to the Union Budget.
- Railway budget merged with railways - From 2016, railway budget was merged into Union Budget.
- Halwa ceremony is the preparation of sweet delicacy to mark the start of printing of the Union Budget.
- Once the budget printing starts and till the Budget day, all the key members of the Budget team have to only stay at North Block and are cut off from outside communications to ensure secrecy in the Union Budget document.
- Morarji Desai, who was also the prime minister under the Janata government from 1977 to 1979, holds the record of presenting a total of 10 budgets while with the Congress party.
- Prime minister presenting the budget - The Union Budget is presented on the floor of the house by the Finance Minister. But, on 3 occasions the prime minister presented the budget. In 1958 when Pandit Nehru presented the budget , in 1970, Indira Gandhi presented the Union Budget, prime minster Rajiv Gandhi presented the budget in 1987.
- The Black Budget was presented in the year 1973 for the financial year 1973-74, by finance minister Y B Chavan. The budget was called Black Budget since the Budget deficit (fiscal deficit) at Rs550 crore was the highest ever till that date. This was to compensate for the cost of the 1971 Bangladesh war, the oil crisis created by the Arab embargo and a weak monsoon.
- Department of the Economic Affairs - The responsibility of drafting the Union Budget lies with the Department of the Economic Affairs, which is affiliated to the Ministry of Finance. The final Budget is put together by experts of the Ministry of Finance, the expenditure ministries and NITI Aayog (the new name for Panning Commission).
- Interim budget or vote on account -In years when general election is due, the government presents an interim budget or vote on account for 3 months to seek approval and sanction for expenditure to keep the government organization functioning. In these election years, the final budget is presented once again in June after the election results are out in late May. That is why there are 2 budgets presented in general election years.
The only finance minister in India to have not presented a Union Budget is Kshitish Chandra Neogy (KC Neogy), the second finance minister of independent India. He was finance minister for just 35 days, after which he resigned from the Congress party along with Shyama Prasad Mukherjee.