What is the Budget? Union Budget for Beginners
Everyone requires a budget to take their financial planning forward. It contains an estimation of revenue and expenses during a specified period in the future. A budget can be made for an individual, a group of people, small business firms, large corporate entities, and the Government.
In this article, we will discuss the Union Budget of India, its components, and various other details about it. Let's get started.
What is Union Budget?
Also known as the annual financial statement, the Union Budget of India is the summary of the estimated revenues and expenditure of the Government for the applicable financial year. It keeps the account of the Government's finances for a given fiscal year, i.e., from 1st April to 31st March. The Government's roadmap for fund collection and allocation during a given financial year.
That is similar to the monthly household budgets we prepare for our income and expenses. The Union Budget is the statement of the estimated receipts and expenditure of the Government for that particular year.
Who presents the Union Budget and when?
The Finance Minister of India presents the Union Budget in Parliament on the first day of February every year. For example, the current Finance Minister of India – Nirmala Sitharaman – would be presenting the Union Budget for the financial year 2022-23 on 1st February 2022. The Budget speech would commence at around 11 AM the morning.
Before 2017, the Governments used to present the Union Budget on the last working day of February. The tradition was changed by the then Finance Minister of India, Mr Arun Jaitley. The Railway Budget of India – which was presented separately till 2016 – was also merged with the Union Budget in the same year.
The two components of the Budget
The Union Budget of India is classified into two components – the Revenue Budget and the Capital Budget. The revenue budget includes the revenue receipts and expenses incurred by the Government for day-to-day functioning and subsidies. These revenues could be from taxes and non-taxable sources.
On the other hand, the capital budget includes the capital receipts and payments of the Government. Loans from the public, foreign Governments, and the Reserve Bank of India (RBI) are capital revenues for the Government. The capital expenditure by the Government includes the money spent on buildings, infrastructure, schools, hospitals, etc.
How does the Union Budget impact our economy?
As you know, the Union Budget acts as a blueprint for Government's revenues and expenses during a given financial year. It aims at reducing the fiscal deficit and economic inequality within the country with adequate planning and dedicated policies. Every Government tries to ensure the proper allocation of finances for various welfare activities for the country's development.
The Union Budget identifies various revenue sources for the Government and their structures. For example, income tax, GST, RBI loans, foreign loans, etc. It also provides guidelines for industries and citizens to become a part of India's growth strategy. In a way, the Union Budget helps shape up the economy and the country's economic reforms.
What is an interim budget?
When an entire budget cannot be presented in the Parliament, the Government presents an interim budget. This usually happens when the elections are due and hence, the full budget can be announced only after the formation of the new Government.
An interim budget uually doesn’t offer any fresh proposal on direct or indirect taxes.
The presentation of the Union Budget is a crucial annual exercise by the Government. Any changes or proposals made through the Budget not only affect the country's overall economic structure but also impacts the equity markets in the short term.
For common people, it means a lot as it dictates the increase or decrease in the prices of daily commodities which can affect their personal budget.
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