What is the country’s budget? How is it prepared?

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Having a budget is an integral part of finance. It documents expenses or expenses while saving for future goals. This is also true when planning a budget for a country. A country’s budget or financial plan is called the Union budget and contains the revenue (revenue) and expenditure of a government. The plan is created on an annual basis. The year taken into consideration for planning a budget is called the fiscal year which usually lasts from April 1st to March 21st. This is the first month of a financial year and let’s take a look at what the Indian budget entails and its impact on people. .

Who decides the country’s budget?

A country’s budget 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 have finalized the budget, it is approved by both houses of parliament. Drafting of the budget document begins months in advance. The central government is asking all states, ministries and UTs to prepare their succession for the coming year. After reviewing all requirements and consultations, the Ministry of Finance then allocates funds to Ministries, State Governments, Departments, etc.

The Union Finance Minister then presents the budget to the whole country during the budget session of Parliament. Recently, Finance Minister Nirmala Sitharaman presented the budget on February 1. She is responsible for presenting India’s first paperless budget. Previously, India used to have its budget written in ‘bahi khata’ (a ledger wrapped in red cloth). The first Indian Union Budget was presented by R. K. Shanmukham Chetty on November 26, 1947.

What is written in the budget?

The budget document contains the revenue and expenditure of the government for a given financial year. It not only plans for the next year, but also examines the main financial conditions of the past year. There are two accounts in a financial budget – those relating only to the current financial year are included in the revenue account (also called the revenue budget) and items relating to government assets and liabilities are mentioned in the capital account framework (also known as the capital budget).

The budget documents classify total expenditures into planned expenditures and non-expenditures. The budget is not simply a statement of income and expenditure. Since independence, with the launch of the five-year plans, it has also become an important statement of national policy.

The budget must distinguish expenses in the revenue account from other expenses. Therefore, the budget comprises (a) the revenue budget and

the (b) investment budget. According to NCERT, the revenue budget shows the government’s current revenue and the expenditures that can be covered by that revenue. Revenue Expenditure relates to expenses incurred for the normal operation of government departments and various services, interest payments on debt incurred by the government, and grants to state governments and other parties (although some grants may be used for asset creation).

What are the sources of government revenue and expenditure?

The Indian government derives its revenue from income tax, corporation tax, goods and services tax, customs duties, borrowings and other means. The government spends on defense expenditures, administrative expenditures, welfare schemes, grants, pensions, etc.

The government can spend an amount equal to the revenue it collects. This is called a balanced budget. When tax collection exceeds required expenditure, the budget is said to be in surplus. But the Indian budget is currently in deficit.

What is the budget deficit?

The situation where a government’s expenditure exceeds its income or revenue is called a deficit. From now on, to finance the additional cost, governments opt for several methods including taxation, borrowing or money printing. Governments have relied primarily on borrowing, which has given rise to what is known as public debt. “By borrowing, the government transfers the burden of reducing consumption to future generations. In effect, he borrows by issuing bonds to people living now, but may decide to pay off the bonds twenty years later by raising taxes,” says the Class 12 Economics textbook.

Test your learning

A public deficit can be reduced by raising taxes or cutting spending. In India, the government has tried to increase tax revenue by relying more on direct taxes (indirect taxes are regressive in nature – they impact all income groups equally). There was also an attempt to increase revenue through the sale of PSU shares.

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