Introduction
The Union Budget is the annual financial statement presented by the Finance Minister of India in Parliament. It outlines the government's income and expenditure for the upcoming financial year (April 1 – March 31). The Budget plays a pivotal role in economic planning, fiscal policy, and development priorities.
Governed under Article 112 of the Constitution, the Budget reflects the government’s vision and priorities for growth, welfare, and infrastructure. It is a powerful tool for socio-economic transformation and public accountability.
Components of the Union Budget
1. Revenue Budget
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Revenue Receipts: Includes tax and non-tax revenues.
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Tax Revenue: Income Tax, GST, Customs, Excise.
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Non-Tax Revenue: Dividends, profits from PSUs, interest income.
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Revenue Expenditure: Includes interest payments, subsidies, salaries, pensions.
Note: When revenue expenditure exceeds revenue receipts, it results in a revenue deficit.
2. Capital Budget
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Capital Receipts: Borrowings, loan recoveries, disinvestment proceeds.
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Capital Expenditure: Investments in infrastructure, loans to states, equipment procurement.
Capital expenditure leads to asset creation or reduction in liabilities.
Types of Budget Based on Nature
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Balanced Budget: Revenue = Expenditure (Ideal but rare).
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Surplus Budget: Revenue > Expenditure (used during inflation).
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Deficit Budget: Expenditure > Revenue (used during recession or to stimulate growth).
Stages of Budget Presentation
1. Preparation
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Handled by the Department of Economic Affairs (Ministry of Finance).
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Involves data from various ministries, NITI Aayog, and RBI.
2. Presentation
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Presented by the Finance Minister in Lok Sabha.
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Usually on 1st February every year.
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Includes:
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Budget Speech
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Annual Financial Statement (as per Article 112)
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Finance Bill
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Demand for Grants
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3. Discussion and Approval
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General Discussion in both Houses.
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Vote on Account: Grants government permission to spend until the full budget is passed.
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Department-wise Demand for Grants examined.
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Passing of Appropriation Bill: Legalizes government spending.
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Passing of Finance Bill: Enacts taxation proposals.
Important Budget Terms
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Fiscal Deficit = Total expenditure – (Revenue receipts + Non-debt capital receipts)
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Revenue Deficit = Revenue expenditure – Revenue receipts
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Primary Deficit = Fiscal deficit – Interest payments
These indicate the government's borrowing needs and economic health.
Classification of Expenditure
1. Plan and Non-Plan Expenditure (Before 2017)
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Plan: For schemes and programs.
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Non-plan: Salaries, pensions, interest, etc.
(Now replaced by Capital and Revenue classification.)
2. Charged vs. Voted Expenditure
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Charged: Non-votable by Parliament (e.g., President’s salary, loan repayments).
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Voted: Needs Lok Sabha approval (e.g., developmental schemes).
Recent Trends in Union Budgeting
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Introduction of Gender Budgeting, Green Budgeting, and Digital Budgeting.
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Merger of Rail Budget with Union Budget (since 2017).
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Shift from plan vs. non-plan to outcome-based budgeting.
Role of Budget in Economic Development
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Promotes infrastructure development.
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Allocates funds for education, healthcare, agriculture, and defense.
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Stimulates employment generation.
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Tackles inequality through subsidies and welfare schemes.
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Encourages FDI and ease of doing business.
Challenges in Budgeting
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Fiscal deficit management.
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Over-reliance on indirect taxes.
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Rising subsidy burden.
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Inadequate capital expenditure in some sectors.
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Delay in implementation of schemes.
Conclusion
The Union Budget is much more than just a financial statement. It is a policy tool that shapes India's economic direction and reflects the priorities of the government. From allocating funds to social welfare programs to maintaining fiscal discipline, the Budget plays a vital role in the nation’s progress. Understanding it is essential not only for economists but also for every informed citizen.