On February 01,2017 Finance Minister Arun Jaitley will present the budget for fiscal year 2017-18. The making of the budget, which is the annual financial statement of the Union government, is a difficult balancing act even in regular circumstances. But this year Jaitley has to also contend with Demonetisation, and how to address the disruption caused by it.
A budget is an exercise whereby the tax and non tax revenue collected by the government is allocated to various programmes, schemes and ministries. The call on the public purse is enormous. The government has to allot money to social and economic services; infrastructure development; salaries and pensions of government employees; Defense and external affairs and more.
6 Main Numbers in the Budget and Their Importance
1)Tax Revenue: A measure of how much revenue the government expects by way of taxes, which are of two kinds: Direct (Income Tax) and Indirect (sales, VAT, excise, customs).
2)Non Tax Revenue: Any revenue the government earns which is not tax. For instance the money from spectrum auctions, coal auctions etc.
3)Fiscal Deficit/Surplus: One of the most important numbers in the budget, it is the shortfall between the total revenue and expenditure of the government. If revenue is greater there is a surplus and if expenditure is greater it is a deficit. It is the measure of whether the government has been able to balance its accounts.
4)Borrowings: The amount of money the government has to borrow to cover the fiscal deficit (expenditure – revenue). The government borrows money from financial markets by issuing bonds, which are essentially debt instruments which promise to repay the amount with an interest.
5)Subsidy: The amount of money that the government devotes to subsidies. Food, petroleum and fertilizer subsidy make up the bulk of this amount.
6)Disinvesment target: The amount of money the government expects to make from selling its equity stake in public sector units. This is non tax revenue for the government
How is the Union Budget Made?
Step 1: The Finance Ministry starts asking other ministries about their receipts and estimated expenditure for the following year (remember, this is the financial year which runs from April to March). Different departments of the Finance Ministry (revenue, expenditure, disinvestment, banking, economic affairs) finalize targets within the broad overall policy goals of the government.
Step 2: The chief economic adviser in the Finance Ministry simultaneously prepares a document called the Economic Survey, which reviews the financial year gone by. It is released a day before the budget is presented in Parliament and reviews the state of the economy and presents an economic vision for the year ahead.
Step 3: The team in the Finance Ministry prepares the budget and the Finance Minister keeps the Prime Minister updated on important policy points and allocations in the budget as well as the overall direction.
Step 4: The Budget making process is done under complete secrecy. In December the Finance Ministry is made out of bounds for journalists. North Block (where the Ministry is located) is put under close surveillance by intelligence to ensure that no details are leaked before the Budget is presented in Parliament. Officials are placed in quarantine a week before.
Step 5: Around 15 days before the Budget is unveiled, a halwa ceremony in the Finance Ministry marks the start of printing of the budget documents in a press located in the basement of north block.
Step 6: On budget day the Finance Minister sets out for Parliament with his team. This marks the onset of the Parliamentary budget session. The rest of the cabinet is given a gist of the budget before the Finance Minister reads out the budget speech.