Budgets are announced by states and center to provide an idea as to from the money will come and where the money will go so far as government functioning is concerned. The budget is also an indicator with regard to the government’s vision as to where resources should be utilized for overall development of the economy with emphasis on specific sectors.
The first Union Budget in Independent India was presented for the period 15th Aug 1947 to 31st Mar 1948 on 26th Nov 1947.
When the budget is released, all the intellectuals start sifting through the budget documents as the real picture lies there only not what apparently starts flashing on all the channels. One can refer to the major items from the news channels/social media/news websites for summaries too however, the fine print contains the nitty-gritties of the budget announcements.
Through this note, an attempt has been made so that the readers could understand the overall structure of the Budget documents and areas one should immediately focus as finance/accounts/tax/costing person or as an economist.
The list of Budget documents as normally presented to the Parliament, besides the Finance Minister’s Budget Speech is given below. The heads have been segregated in three parts in a table here only for easy understanding.
The budget by union government as used in the Indian context has been explained in this article. The word budget comes from the Old French word bougette meaning "small leather purse", which in turn is a diminutive of the Gaulish bouge for "leather pouch, purse". Its first use in our contemporary understanding of a financial plan comes from the pamphlet The Budget Opened by William Pulteney, which uses the term budget to describe and critique the governments' fiscal policy on wine and tobacco.
The budget is normally divided into various parts and these parts have remained same for the last few years except for some changes which are as follows
A. Finance Minister's Speech
Since Independence, the activities of budget begins with Union finance Minister’s speech which contains the Budget in summarized way and encompasses the new schemes being launched by the Government, their purpose, outlay tenure etc.. It also contains the summary of the important tax proposals. The increase/decrease in the budget outlays of various sectors/ministries.
B. Demands for Grants (DG)
All the ministry wise demands for the total expenses (Revenue and Capital) are made along with the revenue generation. The details of the total funds required for the specific ministries are given in this part.
C. Finance Bill
The Finance Bill contains various Tax proposals/amendments to various acts like Income tax, Customs Act, Customs Tariff Act, CGST act, IGST Act. It also contains the proposals to amend the earlier Finance Acts wherever required. It also contains the amendments to other Acts like in the Budget presented in Feb 2021, various amendments to LIC Act, Indian Stamps Act etc. along with introduction of new Cess i.e. Agriculture Infrastructure and Development Cess as duty of customs was introduced.
It also contains STATEMENT OF OBJECTS AND REASONS which has notes on clauses explaining the various provisions contained in the Bill.
It is advised that one should immediately go through this for better understanding the intent behind the change.
D. Statements mandated under FRBM Act:
The FRBM Act mandates reduction of fiscal deficit of specific % of GDP to be achieved by the end of each year. If there is any deviation with regard to achieving the target of reduction in the fiscal deficit, a deviation statement under Sections 4 (5) and 7 (3) (b) of the FRBM Act is required to be submitted while presenting the budget. Fiscal deficit of 3% GDP was to be achieved till 2021 however which could not be achieved due to certain compelling reasons.
The Medium-term Fiscal Policy Statement sets out a three-year rolling target for prescribed fiscal indicators with the specification of underlying assumptions.
The Fiscal Policy Strategy Statement contains the policies of the Central Government for the ensuing financial year relating to taxation, expenditure, market borrowings and other liabilities, lending and investments, pricing of administered goods and services etc., the strategic priorities of the Central Government for the ensuing financial year in the fiscal area, the key fiscal measures and rationale for any major deviation in fiscal measures pertaining to taxation, subsidy, expenditure, administered pricing and borrowings. It also includes an evaluation as to how the current policies of the Central Government are in conformity with the fiscal management principles set out in the Medium-term Fiscal Policy Statement.
E. Expenditure Budget
It contains Ministry wise Summary of Budget Provisions and Detailed Statements of Budget Estimates showing schemewise outlays. It contains the actual data of the year prior to previous year, Budget and revised estimates of the previous year and estimates for ensuing year.
F. Receipt Budget
Estimates of receipts included in the Annual Financial Statement are further analysed in the document “Receipt Budget”. The document provides details of tax and non-tax revenue receipts and capital receipts and explains the estimates. The document also provides a statement on the arrears of tax revenues and non-tax revenues
G. Expenditure Profile
The "Expenditure Profile" compiles relevant data across all Ministries/Departments in order to sketch a profile of the general financial performance of the Government of India. It is one of the explanatory documents which aid economic analyses. The statements contained in this document are prepared on the basis of data/inputs given by Ministries/Departments. Some of the statements are based on the data contained in the Expenditure Budget. The statements of this document reflect budgetary trends of important policy areas
H. Budget at a Glance
Budget at a Glance presents broad aggregates of the budget for easy understanding. This document shows receipts and expenditure as well as the Fiscal Deficit (FD), Revenue Deficit (RD, Effective Revenue Deficit (ERD) and the Primary Deficit (PD) of the Government of India. It gives an illustrative account of sources of receipts and their expenditure through graphs and info-graphics. In addition, the document contains the resources transferred to States and UTs with legislature. The document also contains extracts of allocations for programmes and schemes and giving insights on sources of deficit financing and composition of important budgetary variables.
I. Memorandum Explaining the Provisions in the Finance Bill
This part is very important for the companies and common masses as it deals with the tax proposals which is further segregated into
- Provisions related to Direct Taxes
- Provisions related to Indirect Taxes
It has direct impact on the lives of taxpayers and non- tax payers too. The main amendments are shown in the Finance Bill and for better understanding the explanations are added to this part.
The various proposals for amendments in direct taxes are organized under the following heads:- (A) Rates of income-tax; (B) Tax incentives; (C) Removing difficulties faced by taxpayers; (D) Rationalisation of various provisions.
The persons interested in Income Tax amendment related to Income Tax can refer to this part first and then may refer to the Bill which encompasses the specific amendments in the sections for a better understanding.
The proposals for Indirect taxes are also given in this part with regard to Customs, Central Excise (To the extent applicable) and GST. The increase or decrease in rates has direct bearing on the lives of common masses as compared with direct taxes which impact the tax payers per se.
J. Output Outcome Monitoring Framework
Various schemes are launched by the government to achieve some results and the amount is spent on the scheme. It becomes obligatory on the part of respective ministries to ensure that the desired results are achieved so the budget document throws light on the same too.
In addition to the financial outlays of schemes of the Ministries being indicated in the Budget document, the expected outputs and outcomes of the schemes are also being presented in a consolidated Outcome Budget document, along with the Budget. These Outlays, Outputs and Outcomes are being presented to the Parliament in measurable terms, bringing-in greater accountability for the agencies involved in the execution of government schemes and projects. Outlay is the amount that is provided for a given scheme or project in the Budget; while Output refers to the direct and measurable product of program activities, often expressed in physical terms or units. Outcomes are the collective results or qualitative improvements brought about in the delivery of these services
K. Key Features of Budget
The key features of the budget are shown through the pictorial presentations/charts for easy understanding showing Revenue receipts, Revenue Expenditure, Capital Receipts, Capital Expenditure, Allocation to major schemes etc.. It also contains from where the rupee comes in and how it goes out.
L. Implementation of Budget Announcements
This part shows the steps taken to execute the budget announcements in the previous year and the status of the same. This document instills the confidence among all that whatever the government announces in the budget is taken care at the execution level too.
The article has tried to explain the total contents of the union budget in the simplest way so that it benefits all who want to understand the budget and it also explains that where should one try to find out the specific item which one wants to know in number of documents.
The readers are requested to go through the actual budget documents once the budget is released.
The author can also be reached at navneetic@yahoo.com
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