The Union Budget, or India’s Annual Budget, is a critical financial document detailing the Central government’s revenues and planned expenditures across various sectors. As per Article 112 of the Indian Constitution, the Central Government presents its estimated receipts and expenditures for the fiscal year (April 1 to March 31) to both houses of Parliament annually.

Prepared by the Union Finance Ministry in collaboration with the Niti Aayog and relevant ministries, the Union Budget is typically unveiled by the Finance Minister in February. This presentation includes key components such as the Annual Financial Statement (AFS), Appropriation Bill, Expenditure and Receipts Budget, Expenditure Profile, Medium Term Fiscal Policy, Fiscal Policy Strategy Statement, Macro-economic Framework, Demand for Grants (DG), and the Finance Bill. However, since this was an election year, an Interim Budget was presented in February. Now, the full Union Budget will be tabled.

The Union Budget encompasses Capital, Revenue, and Expenditure Budgets, serving the dual purpose of outlining the government’s financial strategies and fostering economic growth. It also aims to fulfill constitutional mandates, ensuring social justice and equality for all citizens.

The government presents an Interim Budget when there isn’t sufficient time to prepare the final budget, typically when general elections are approaching. This is exactly what we saw earlier this year when Finance Minister Nirmala Sitharaman presented the Interim Budget. This exercise allows the current government to leave the task of preparing a full Budget until after the election results. The Union Budget is valid until the end of the financial year, March 31, and the government’s spending rights extend only until that date.

If the Central Government cannot present the final budget before the end of the fiscal year, it requires parliamentary approval to incur expenses from the start of the new fiscal year until a new budget is passed. An Interim Budget functions much like a full budget but is intended only for a temporary period. After the Lok Sabha results were announced on June 4 and NDA came back to power for a third consecutive term, Sitharaman will be presenting the full Budget sometime later this month.

The various sources from which a government raises revenue are called government receipts. These are divided into two types:

Revenue Receipts: These are current income receipts from taxes, grants, and other sources that do not reduce the government’s assets or create liabilities. Revenue receipts are further classified into: Tax Revenue and Non-Tax Revenue

Capital Receipts: These receipts either reduce the government’s assets or create liabilities. Major sources of capital receipts include borrowings, disinvestment (resale of shares in public sector undertakings), and recovery of loans.

The Central Government’s expenditures are categorised in two ways:

Capital Expenditure: This includes government spending aimed at creating assets such as roads, railway lines, canals, hospitals, schools, etc., or reducing its liabilities, such as loan repayments.

Revenue Expenditure: This comprises government spending that neither reduces liabilities nor creates assets. Examples include salary payments to government employees, provision of free health and education services, and maintenance of public property.

Balanced Budget: This occurs when the Central Government’s estimated expenditure matches its expected receipts within a financial year. While it promotes economic stability, it can be impractical during periods of hyperinflation or recession.

Surplus Budget: This happens when the government’s expected revenues exceed its estimated expenditures in a fiscal year. This indicates that the government is generating more income from taxes than it is spending on public welfare.

Deficit Budget: This arises when the government’s estimated expenditures surpass its revenues in a fiscal year. Although this allows the Central Government to increase spending on public welfare, it also increases the burden of accumulating debt.

• Scottish economist and politician James Wilson of the East India Company presented the first Union Budget to the British Crown on April 7, 1860.
• On November 26, 1947, the first budget of independent India was presented by Finance Minister RK Shanmukham Chetty.
• The Budget was printed at Rashtrapati Bhavan until a leak in 1950. After that, it was moved to a press at Minto Road in New Delhi, and in 1980, a government press was established in the North Block.
• Until 1955, the Union Budget was presented in English. The Congress-led government then decided to print the budget papers in both Hindi and English.
• Under the Narasimha Rao government, Manmohan Singh delivered the longest budget speech by word count, totaling 18,650 words.
• For 92 years, the Railway Budget was presented separately from the Union Budget. In 2017, it was merged with the Union Budget.
• To date, only two women have presented the budget. The first was former Prime Minister Indira Gandhi, who presented the budget in 1971 while also serving as Finance Minister. In 2019, Nirmala Sitharaman became the second woman to present the budget.
• Nirmala Sitharaman introduced the tradition of presenting the budget in the traditional ‘bahi-khata’ with the National Emblem, replacing the budget briefcase.
• During the COVID-19 pandemic, India had its first paperless budget presentation for the 2021-22 Union Budget.
• Nirmala Sitharaman delivered the longest budget speech by duration, speaking for 2 hours and 42 minutes while presenting the Union Budget 2020-21 on February 1, 2020. She had to cut the speech short with two pages remaining.

The Budget preparation is a lengthy process that begins six months before the presentation date, typically in August-September. This important document outlines the government’s fiscal policies, plans, and programs.

The process starts with the Finance Ministry issuing circulars to ministries and entities, providing guidelines for submitting their financial needs. Ministries then submit their financial data and estimates, which are reviewed by top government officials. The Finance Ministry allocates revenue in consultation with stakeholders, resolving any disagreements through discussions with the Cabinet or the Prime Minister.

Pre-budget meetings are held with various stakeholders to gather recommendations. A traditional halwa ceremony marks the start of printing the Budget documents. Finally, the Finance Minister presents the Budget to Parliament, summarising key points and the rationale behind the proposals. After discussions and approval by both houses, the Budget is sent to the President for final approval.

This year, Finance Minister Nirmala Sitharaman had tabled the Interim Budget on February 1, as it was an election year. Since the Narendra Modi government has returned to power for the third consecutive term, Sitharaman will be presenting the full Budget later this month. Sitharaman has been holding several pre-budget meetings with Industry captains as well as other ministries.