All about our General Budget
The general budget is one of the greatest democratic instruments of growth. It helps bridge the economic disparities among different communities and sectors and helps take a step forward towards more inclusive development.
WHAT ALL does the general budget constitute?
The General Budget contains the following documents: Key to Budget, Budget Highlights, Budget Speech, Budget at a Glance, Finance Bill Memorandum Receipt, Budget Expenditure, Budget Customs and Central Excise Implementation of Budget Announcements, The Macro Economic Framework Statement, The Medium Term Fiscal Policy Statement, The Fiscal Policy Strategy Statement and The Outcome Budget.
What are sources of finance for the general Budget?
What are sources of finance for the general Budget?
Among three major accounts for the Government, the consolidated account is the main one where all receipts are intentionally mobilized for general budget. The second account is a contingency fund where Rs.500 crores is kept for unforeseen incidences and in case of any emergency, if any amount is used from this account, after approval from the Parliament the same should be transferred back to maintain the balance of contingency account. The third type of account is Public Fund where the Government keeps public funds like savings at Post offices, and EPF etc.
Since Government is supposed to be custodian of such funds, there is no need to take any approval of the Parliament to use such fund. The Major sources of receipts for the Government may be categorized as revenue receipts and capital receipts. Revenue receipts can further divided into tax revenues and non - tax revenues receipts.
All incomes generated by the government through tax, customs, excise and surcharges etc. fall under tax revenue, where as income generated through surplus of income over expenditures in public enterprises are main source of non-tax revenue receipts. The issue of securities, bonds, shares and borrowings are main sources of capital receipts.
What are major heads of expenditures in general budget?
The government proposes two types of expenses in the general budget i.e. planned expenditure and non-planned expenditure. Planned expenditures are proposed to meet the financial needs to carry the proposed plans by ministries whereas general running expenses fall under non planned expenditures.
Both planned and non planned expenditure are further categorized into capital and revenue expenditures depending on nature of expenditures. All expenses which help create asset falls under capital expenses whereas the expenses which not create assets fall under revenue expenditures. The payment of interest over government borrowings is an example of revenue expenditure whereas purchase of automobile is an example of capital expenditure.
What about constitutional provision of general budget?
Constitutionally under Article 112, the President is obliged to have the Annual Financial Statement for the ensuing financial year laid on the table of the House. But according to Article 77(3), the Finance Minister has been made responsible to prepare the Annual Financial Statement and pilot it through Parliament. The Finance Bill, Demands for Grants and Appropriation Bill are respectively provisioned under articles 110 (a), 113 and 114 (3) of the constitution.
How the general budget is prepared?
Though the Finance Minister is responsible to prepare the Union Budget and Budget of states under President Rule, following public organs are involved in budget making -The Planning Commission is responsible to set overall targets for the ministries. Comptroller & Auditor General is responsible to check the accounts. Administrative Ministries are responsible to submit their requirement and priorities. Each department in the Ministry of Finance is charged with a particular responsibility. Department of Expenditure evaluates & prepares Expenditure estimates. Department of Economic Affairs prepares the estimates for Non-Tax Revenue and Deficits budgets. Department of Revenue prepares the Tax Revenue estimates.
The budget exercise starts in September when the Budget Division of the Department of Economic Affairs (DoE) issues budget circular to all union ministers, states and UTs, autonomous bodies and departments, and the three arms of the defence forces for preparing revised estimates for the current financial year and the estimated budget for the next financial year. After the line ministries submit relevant documents, pre-budget meetings begin.
These involve extensive consultation between line ministries and the Department of Expenditure. Meanwhile the DoE and Department of Revenue engage in consultation with stakeholders such as farmers, labour unions, business enterprises, FIIs, chamber of commerce & industries, economists and NGOs etc.
The demands for grants by the state governments are sent to the concerned finance ministry for evaluation. The Finance Ministry undertakes an intense internal assessment. The DoE finalizes the spending priority and align the expenditures with policy goals. The Department of Revenue finalizes estimates about revenue mobilization.
Once the pre-budget meetings are over, the approved ceiling for expenditure as finalized in these meetings is communicated. It includes internal ceilings of revenue and capital expenditure. Based on these limits, each ministry / department prepares a final Statement of Budget Estimates (SBE) and send back to the budget division. The Revenue Department goes through all the demands and works out their revenue implications.
A final call on the tax proposals is taken by the Finance Minister. The proposals are discussed with the Prime Minister before final decision is taken. Budget Division then gets on with the task of preparing all the budget documents and converts these documents into ready to print template formats in a CD. Finally around 24th of February, the Finance Minister hands over the CD to the press for printing of budget documents.
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