Budget process in India
Budget process in India is a detailed concept that can be categorized into different stages:
- Formulation of Budget;
- Enactment of Budget;
- Execution of Budget; and
- Legislative review of budget implementation.
Formulation of Budget
Budget division in the department of economic affairs under the Ministry of Finance is responsible for producing the budget in consultation with NITI Aayog and spending ministries.
Drafting of Budget
An annual budget circular containing detailed instructions for preparation of estimates for the next year is issued by the Budget division. This circular is issued to all Union government ministries/departments.
The ministries shall provide following figures relating to their expenditures & receipts:
- Budget estimates;
- Revised estimates; and
- Actual figures
For example, if the union government is preparing budget for 2017-18, it would be prepared during Sept.’16 to Feb.’17. Here the estimated receipts & expenditures for 2017-18; called as budget estimates; shall be required to be approved by the Parliament. Also the revised estimates for the ongoing financial year 2016-17 shall be presented. The third figure required to be reported by the ministries shall comprise of the actual receipts and expenditures for the previous financial year 2015-16.
The budget estimates for next financial year shall be provided by ministries after discussion with the Central Planning Commission.
The finance ministry has been raising its voice for reduction of fiscal and revenue deficit from past few years; due to the targets set by the Fiscal Responsibility and Budget Management Act and its rules. Hence presently, it makes it mandatory for the Union government to show the revenue deficit as nil and the fiscal deficit as less than 3 per cent of GDP. This implies, the total revenue expenditure shall not exceed the total revenue receipts by even a rupee. Also the new borrowings by the government in a financial year shall not go beyond 3 per cent of GDP relating to that year.
Final stages of Budget Preparation
After the ministries & departments send in their demands, extensive discussions are held between Union ministries and the Department of Expenditure of the finance ministry.
Generally in the month of January, more focus is inclined towards the finalization of estimated receipts. With an estimate regarding the total resources required to meet the total expenditures in the next fiscal year, the focus of the finance ministry is on the revenue receipts for the next fiscal year.
After the completion of pre-Budget meetings by late January, the finance ministry examines the budget proposals and makes the required alterations. At this stage the proposals are then presented to the prime minister and consultations are made. In case of any conflicts between finance ministry and any other ministry relating to the budget, the resolutions are made by the Union Cabinet.
Presentation of Budget
After the compilation of all figures for budget by the budget division of finance ministry and National Informatics Centre, the budget is presented in the Lok Sabha on the day as directed by the president.
Budget is presented in Lok Sabha by the finance minister highlighting the key estimates & proposals. After the conclusion of budget speech in Lok Sabha by the finance minister, the ‘Annual Financial Statement’ is laid in Rajya Sabha.
No discussions are carried out on the day of presentation of budget.
Passing of Budget
The budget is carried out in two parts: general discussion & detailed debate.
General discussion takes place in Lok Sabha for 2-3 days after presentation of budget. The detailed debate includes discussions on demands for grants by relevant standing committees. Appropriation Bill is put up for vote in Lok Sabha, post demand for grants.
Later; Finance Bill is considered and shall be passed by Parliament as Money Bill. The bill is required to be passed by Lok Sabha & Rajya Sabha and receive consent of the President within a span of 75 days of its introduction.
The budget process finally comes to an end after being passed and signed by the President.
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