BAJAJ BROKING
July 16, 2024
5 mins read
One important financial document that describes the Indian government's plans for revenue collection and expenditure for the upcoming year is the Union Budget. This financial document also makes it easier for us to understand the different taxes that the government collects. This guide will break down the budget process into five basic steps, making it easy for you to understand.
Read on as we will walk you through each step of the budget creation, discussion, approval, and implementation process. In case you are unfamiliar with the subject or simply want to learn more, this guide will show you how the Union Budget impacts both your daily life and the nation's finances.
The Government of India's annual financial statement, aka the Union Budget, lists the anticipated/projected income and expenditure for the forthcoming fiscal year. The Union Budget is the government's financial game plan, which determines the country’s financial goals and economic strategies.
The process of drafting, presenting, and implementing the Union Budget is a complex and multi-step approach that involves various government agencies and stakeholders. Here’s a quick rundown of the 5 steps involved in the Indian budget preparation process.
The first step involved in budget preparation is formulation. The drafting of the Union Budget kicks off a full six months before the commencement of the upcoming fiscal year. The key steps involved in this stage include:
Issuing the Budget Circulars
All government departments and ministries receive budget circulars from the Ministry of Finance. This contains instructions and deadlines for drafting and submitting their budget proposals.
Departmental Budget Proposals
Considering their financing needs, goals, and priorities, each government ministry and department drafts its budget proposal.
Excellent Consultations with Stakeholders
To get opinions, insights, and ideas, the Ministry of Finance holds consultations with several stakeholders, including think tanks, trade associations, and subject matter experts.
Macroeconomic Analysis
To strengthen the budget preparation process, the Ministry of Finance thoroughly examines the macroeconomic statistics of the country, including inflation, GDP growth, and the fiscal deficit.
According to reports, Finance Minister Nirmala Sitharaman will present the 2024 Union Budget on 23rd July. This Budget is expected to have announcements on policies, schemes, income tax rate slabs, and more that are likely to affect everything around us.
To simplify this year’s Budget and to decode its impact on your life, your investment portfolio, and all that you do, we bring you #BudgetSimpleHai!
Join us on our website or head over to any of our social handles to get the latest updates on the Union Budget as it happens. Read in-depth reports, watch videos, and get a clear understanding of what’s in store.
Kyunki Bajaj Broking ke saath, #BudgetSimpleHai
Following the budget formation process, the Union Budget starts getting prepared by the Ministry of Finance. This step will contain:
Budget Proposal Consolidation:
The budget proposals received from different government ministries and departments are combined by the Ministry of Finance.
Revenue Estimation:
The Ministry of Finance estimates the anticipated amount of money the government will receive from fees, taxes, and disinvestment.
Allocation of Expenditure:
The Ministry of Finance allocates funding to various government programmes and departments under their priorities and the resources at hand.
Deficit Financing:
The Ministry of Finance establishes the proper amount of fiscal deficit as well as how to finance it, including asset sales or borrowing.
Next in the budget process steps is the presentation. On the final working day of February, the Finance Minister presents the Union Budget to the Parliament. The key steps in this stage include:
Budget Speech:
The Finance Minister presents the Budget Speech, outlining the main points of the Union Budget as well as the government's economic objectives and priorities.
Budget Papers:
The Finance Bill, the Demand for Grants, and the Appropriation Bill are a few of the documents that tag along with the Union Budget and give specific details on the government's proposed financial plans.
Economic Survey Publication:
To provide context, the Economic Survey is published one day before the budget presentation.
Public Disclosure and Media Briefing: The Finance Minister and other top officials attend the media briefing to go over the main points and ramifications of the Union Budget following its presentation.
At this stage of budget preparation, the Union Budget is studied and approved by the legislature. This phase involves:
Discussions:
Members of the ruling party and the opposition voice their complaints, concerns, recommendations, and suggestions during the debate and discussion of the Union Budget in both houses of the Parliament.
Standing Committee Review:
The appropriate standing committees of the parliament are asked to carefully review and make recommendations about the different aspects of the proposed Union Budget.
Voting and Passage:
The prepared Union Budget is finally put to a vote in the Parliament. In case it is accepted, it becomes the official budget for the following fiscal year.
The final stage in the budget process involves implementation and execution. This involves:
Fund Allocation:
To help every government department and ministry carry out their scheduled operations, schemes, and plans, the Ministry of Finance gives authorised funds to them.
Reporting and Monitoring:
The government keeps a careful eye on how the Union Budget is being implemented. Furthermore, regular reports are sent to the Parliament on the progress, implementation, and use of the funds to review the progress of the proposed budget.
Mid-year Review:
This is an important step in the budget overview process. To evaluate the actual revenue and expenditure and make any necessary modifications, the government usually undertakes a mid-year review of the Union Budget.
Corrective Action:
Another important part of the budget process steps is correction. In case the budget is not followed appropriately, several corrective measures are conducted.
The Union Budget is key to shaping India’s India's future economic and social course. Crafting the budget presents both challenges and opportunities, especially considering current global economic trends and technological advancements. To reconcile the need for development and growth with budgetary restraint, India's budget preparation process must adjust and adapt to these adjustments.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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The Indian government releases the Union Budget each year, i.e., a financial document that lists all of the estimated income and expenditure for the next fiscal year. It provides plans for taxes, expenditures, and fiscal management to guide the country’s economic course and outlines the government's economic policy.
The Department of Economic Affairs within the Ministry of Finance is responsible for preparing the Union Budget. To cover all sectors of the economy thoroughly, the finance minister collects inputs from different government ministries and agencies and incorporates them into the budget preparation process.
The key steps in the formation of the Union Budget involve several stages. First comes the budget formulation, which involves reviewing departmental proposals; budget preparation, where the Finance Ministry drafts the budget; budget presentation in Parliament; parliamentary approval, which involves votes and discussions; and finally, the implementation and execution of the approved budget.
The Finance Minister starts with the opening speech, addressing the budget presentation before Parliament and outlining the most important fiscal initiatives and allocations. This stage is followed by the laying down of detailed budget documents, including the Finance Bill and Appropriation Bill. Immediately after, the budget is discussed by the members of Parliament.
After the Union Budget is presented, it undergoes a thorough review by parliamentary committees. There is discussion over the budget overview, and changes may be proposed. Once done, the Finance Bill and Appropriation Bill are passed by Parliament, giving legal sanction to the budget. This is followed by the implementation stage, which sees the distribution of funds to the respective departments.
The major components of the Union Budget include the revenue budget and the expenditure budget. The revenue budget describes the government’s income from taxes and other sources, and the expenditure budget outlines the expenditure on various sectors like defence, health, and education. A union budget also includes fiscal measures, economic forecasts, and policy declarations.
The economy is significantly affected by the Union Budget. This is because it influences taxation, government expenditure, and fiscal policy. It affects economic growth, inflation, and employment. Through strategic allocation of resources, the union budget seeks to promote economic stability, development, and welfare, efficiently allocate resources, reduce unemployment, address income disparities, and maintain price stability.
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