Having a budget is an integral part of finance. It documents the expenditure or expenses while saving for future goals. This is also true when planning a budget for a country. The budget or financial plan of a country is called the Union Budget and includes the revenue (income) and expenditure of the government. The plan is made on an annual basis. The year that is taken into consideration for planning the budget is called the financial year which usually lasts from 1st April to 21st March. It is the first month of a financial year and let us see what is included in the Indian budget and how it affects the people.
Who decides the budget of the country?
The budget of a country is decided by the budget division of the Department of Economic Affairs (DEA). It comes under the Ministry of Finance. The Budget Division is the nodal body responsible for the preparation of the budget. Once all the experts finalize the budget, it is approved by both the houses of the Parliament. The writing of the budget document starts months in advance. The central government asks all states, ministries and union territories to prepare their assets for the coming year. After all the requirements and consultations, the Finance Ministry allocates funds to the Ministries, State Governments, Departments etc.
The Union Finance Minister then presents the budget for the entire country in the budget session of Parliament. Recently, Finance Minister Nirmala Sitharaman presented the budget on 1 February. He is responsible for presenting India’s first paperless budget. Earlier the budget of India was written in ‘Bahi Khata’ (a bookcase wrapped in red cloth). The first Union Budget of India was presented by RK Shanmukham Chetty on 26 November 1947.
What is written in the budget?
The budget document contains the receipts and expenditure of the government for a particular financial year. It not only has the plan for the next year but also looks at the major financial conditions of the previous year. A financial budget consists of two accounts – those relating only to the current financial year, they are included only in the revenue account (also called revenue budget) and those relating to the assets and liabilities of the government are included in the capital account. (also called capital budgeting).
Budget documents classify total expenditure into plan and non-plan expenditure. Budget is not just a statement of receipts and expenditure. Since independence, with the introduction of the Five Year Plans, it has also become an important national policy statement.
The budget should separate expenditure on revenue account from other expenditure. Therefore, budget includes (a) revenue budget and
(b) Capital Budget. According to NCERT, the revenue budget reflects the current receipts of the government and the expenditure from these receipts. Revenue expenditure relates to expenses incurred for the normal functioning of government departments and various services, interest payments on loans made by the government, and grants made to state governments and other parties (even if some are for grant creation). of property).
What are the income and expenditure sources of the government?
The Government of India gets its revenue from income tax, corporate tax, goods and services tax, customs duty, borrowings and other means. The government spends on defense expenditure, administrative expenditure, welfare schemes, subsidies, pensions etc.
The government can spend an amount equal to the revenue collected by it. This is known as balanced budget. When the tax collection exceeds the required expenditure, the budget is said to be in surplus. But the Indian budget is currently in deficit.
What is fiscal deficit?
The situation when the expenditure of a government exceeds its income or revenue is called deficit. Now, to finance the additional cost, governments opt for a variety of methods, including taxation, borrowing or printing money. Governments have relied mostly on borrowing, which is called government debt. “By borrowing, the government transfers the burden of low consumption to future generations. This is because it borrows by issuing bonds to people living in the present, but may decide to pay off the bonds by raising taxes some twenty years later,” states the Class 12 economics textbook.
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Government deficit can be reduced by increasing taxes or reducing expenditure. In India, the government is trying to increase tax revenue with more reliance on direct taxes (indirect taxes are regressive in nature – they affect all income groups equally). Efforts have also been made to increase receipts through sale of shares in PSUs.
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