Union Budget 2017 will be presented by Minister of Finance Arun Jaitley on Wednesday. Traditionally, the budget is presented at the end of February and passed by May. However, this year the date has been advanced to ensure its passage before the beginning of the fiscal year in April. This would allow early release of funds to ministries which can start their spending from April.
What is the Union Budget?
The Constitution does not mention the term "budget". The Union Budget as it is colloquially called is referred to as the Annual Financial Statement in Article 112 of the Constitution. The Annual Financial Statement is a detailed statement of the estimated receipts and expenditures of the government for that year.
The Union Budget provides direction to the government’s economic policy, allocates money to ministries for their spending and broadly outlines tax proposals for the coming year.
What does the Union Budget contain?
The budget docket contains about 16 documents. It contains the budget speech along with a breakdown of the detailed spending proposals of each ministry as well as proposals for financing them. The Finance Bill and Appropriation Bill are also included in the docket. The Finance Bill includes proposed amendments to various taxation laws, while the Appropriation Bill is a consolidation of allocations to all ministries.
Additionally, several explanatory statements such as details of expenditure, tax revenue, budget at a glance among others are also a part of the docket.
The budget speech as read out by the finance minister contains two parts: Part A and Part B. Part A covers broad outlays of each sector, introduces new schemes and is indicative of the government’s policy priorities. Part B covers taxation proposals of the government to finance the expenditure.
What happens once the budget is presented in the Parliament?
After the budget speech is presented, a general discussion on the broad budgetary measures takes place. Members participating in the debate outline principles and policies underlying the budget presented.
After this general discussion, the Parliament usually goes into recess for about three weeks. During this recess, Departmentally Related Standing Committees (DRSCs) examine the detailed estimates of ministries' expenditure called demands for grants. The DRSCs then submit reports on each ministry's demands for grants. Once the DRSCs have submitted their reports, discussion and voting take place in Lok Sabha on demands for grants of various ministries. The demands which have not been voted on by the last day fixed for passing the budget are "guillotined", ie they are voted upon together.
The demands for grants are consolidated into the Appropriation Bill. This must be passed by the Parliament to allow withdrawal of funds from the Consolidated Fund of India for the sanctioned expenditure by the government.
Finally, the Finance Bill is put to vote. The budgetary process concludes with the passage of the Finance Bill.
While Lok Sabha has a greater role in financial oversight of the budget and discusses the ministries' demands, Rajya Sabha discusses the working of ministries. A debate on the working of ministries' by the members encompasses the overall functioning of ministries, their achievements, future roadmap and shortfalls.
This year, the Railway Budget has been merged into the Union Budget — what does this mean? And how will it be different?
Since 1924, a separate Railway Budget was presented in the Parliament. With the merger, the Union Budget will now include all proposals earlier presented under the Railways Budget. However, as mentioned by the finance minister, the Railways will retain its autonomy and financial decision making powers. The Parliament will continue to discuss the ministry’s expenditure to ensure detailed scrutiny
Until now, the Ministry of Railways gets a gross budgetary support from the central government to maintain and expand its network, among other things. The Railways would then pay a return on this investment known as "dividend". From this year, the railways will no longer need to pay such a dividend back to the central government.
Why is there no longer a plan and non-plan expenditure classification?
Previously, the government expenditure was classified in two ways: plan and non-plan expenditure and capital and revenue expenditure. The finance minister in his speech last year announced the merger of plan and non-plan expenditure. Various committees examining the subject have also recommended this change. The classification of expenditure was related to the role of the erstwhile Planning Commission. The Planning Commission would make allocations for plan expenditure based on five-year plans targets, while the finance ministry would make allocations for non-plan expenditures. With the last five-year plan (12th Five-Year Plan) ending this year, this classification would no longer be relevant. Expenditure now will be classified only under capital and revenue heads.
Below are quick explanations of budgetary terms that you will come across in a budget document:
Capital expenditure: It is the outflow of funds (expenditure) which creates assets or reduces liabilities. For instance, the building of roads, or repayment of loans would be categorised as capital expenditure.
Revenue expenditure: It includes all such expenditure that is not classified as capital expenditure. It brings about no change in assets or liabilities. Salaries, interest payments or other administrative costs are examples of revenue expenditure. The revenue and capital classification apply to government receipts as well.
Revenue receipts: These are mostly revenues from taxes, dividends from companies owned by the government and interest payments on loans given by the government.
Capital receipts: These are mainly funds borrowed by the government from various sources (in India and overseas) and repayments by state governments of loans borrowed from the centre. Proceeds from disinvestment of public sector companies are also included in this category.
Fiscal deficit: The excess of total government expenditure over total receipts is called a fiscal deficit.
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Updated Date: Jan 31, 2017 11:57:18 IST