Analysis the total budget process held in the Indian Parliament
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The budget has four stages viz., (1) estimates of expenditures and revenues, (2) first estimate of deficit, (3) narrowing of deficit and (4) presentation and approval of budget. The process begins with various ministries providing initial estimates of plan and non-plan expenditures.
Answer :-
Understanding the Budget process
Budget documents are not just numbers. Scrutinising them, one can understand the intention of the government, its priorities, policies and allocation of financial resources, among different regions & industries—which create a sea change in the lives of the people affected by it, Rajkumar Adukia stresses The Union Budget of India, referred to as the annual Financial Statementin Article 112 of the Constitution of India, is the annual budget of the Republic of India, presented each year on the last working day of February by the Finance Minister of India in Parliament. The budget has to be passed by the House before it can come into effect on April 1, the start of India's financial year.
References to budget can be found in Kautilya’s Arthashastra. It states that the Chancellor should first estimate revenue from each place and sphere of activity under different heads of accounts and then arrive at a grand total. The actual revenue is to be estimated by adding receipts into the treasury for current year and delayed payments received which were due in earlier year/s. From this deduct the expenditure on king, standard rations, other exemptions granted by King and authorised postponement of payments into treasury. The outstanding revenues were estimated from work under construction for which revenue will accrue on completion, unpaid fines, unrecoverable dues, uncollectible sums, advances to be repaid by officers etc.
The origins of the modern Budget can be traced to the Norman period, where two departments dealt with finance—the Treasury and the Exchequer. The Treasury received and paid out money on behalf of the monarch. The Exchequer, had a 'lower office' which received money, and an 'upper office', concerned with regulating the Kings’ accounts.
The term ‘budget’ has been derived from the old French word ‘bougette’, which means a leather bag or wallet. The first use of the term 'budget' may date back to 1733 financial statement by Walpole as Prime Minister and Chancellor of the Exchequer. A cartoon of him opening a patent medicine seller's wares was published at the time, as a satirical comment with the caption 'The Budget Opened'. ('Budge' is an old word for a bag or small case).
Initially, “budget” referred solely to the Chancellor’s annual speech on the nation’s finances. Now, the term is used for an annual financial statement of income and expenditure of a government.
Indian Budget process
The budget is prepared by the Finance Minister with the assistance of number of advisors and bureaucrats. The Finance Minister seeks the view of the industry captains and economists prior to preparation. Various accounting and finance related organisations send in their opinions and suggestions .The budgeting exercise in India remains mainly the domain of bureaucrats to participate and influence the outcomes.
Normally, the budget-making process starts in the third quarter of the financial year. The budget has four stages viz., (1) estimates of expenditures and revenues, (2) first estimate of deficit, (3) narrowing of deficit and (4) presentation and approval of budget.
Stage 1: Estimates of expenditures and revenues
Part A: Estimates of expenditure
The process begins with various ministries providing initial estimates of plan and non-plan expenditures. The ministries discuss the plan expenditures with the Planning Commission. The Planning commission allocates resources for continuing plan programmes and decides on the new programmes that can be undertaken on the basis of a tentative estimate or resources available, that is provided to it by the finance ministry. The financial advisors of the ministries prepare the non-plan expenditures. The expenditure secretary consolidates them and after intensive discussion with financial advisors, budget estimates are set for the ensuing fiscal year.
The majority of the non-plan expenditure is accounted for by interest payments, subsidies (mainly on food and fertilisers) and wage payments to employees.
Part B: Estimates of revenue
Apart from estimating the expenditure, an assessment of expected revenues likely to flow into the government treasury has to done as a concurrent exercise. Revenue receipts are of two types - capital and current receipts.
Capital receipts include repayment of loans given by the government, receipts from divestment of public-sector equity and borrowings—both domestic and external. Current receipts include mainly, tax revenues, receipts by way of dividends from public-sector units and interest payments on loans given out by the central government.
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