Updated Feb 24, 2022

What is Union Budget?

What is a Union Budget?

 

The Union Budget 2022 will be presented by Finance Minister Nirmala Sitharaman, and it is expected to last between 90 and 120 minutes. The Finance Minister's address during the Union Budget of 2020, which lasted about two hours and forty minutes, was the longest in the history of Independent India.

 

According to the Ministry of Parliamentary Affairs, the Union Budget will be presented to the Lok Sabha on February 1 at 11 a.m. before being submitted to the Rajya Sabha. As is customary, the Economic Survey before the Budget Session will be delivered on January 31, 2022.

 

The union budget is a budget that the central government prepares for the entire country. The railway budget and the main budget are presented in two parts.

 

The railway budget, on the other hand, simply shows the details of the estimated receipts and proposed expenditures, as well as the payout by the railway ministry for Indian railways. The major budget depicts financial planning for the entire economy, including expected receipts and proposed expenditures for the entire economy.

 

 

What are the types of the Union Budget?

 

The budget of the union is divided into two parts:

 

Capital Budget:

 

The capital budget, like the revenue budget, includes the government's capital receipts and payments for the fiscal year.

Capital receipts either raise or decrease the government's financial holdings and liabilities. The following are some of the government's key sources of capital receipts:

 

• Public-sector loan
• Loans from states and federally recognized territories
• Loan from other countries
• Loans through Reserve Bank of India
• Treasury bill sales
• Debt collection
• Capital payments, on the other hand, refer to the costs incurred by the government to construct long-term assets and facilities for the public good. Capital payments can be made in the following ways:
• Building roads, schools, and hospitals, among other things
• Equipment development and maintenance
• Equipment and infrastructure development and acquisition
• Loans to states and territories of the United States

 

Revenue Budget-

The revenue budget is made up of revenue receipts and revenue expenditures. The government is said to be in a ‘revenue deficit' which occurs when tax receipts fall short of revenue expenditures.

 

 

Importance of Union Budget

 

The following are some of the reasons why a union budget is important:

 

Approach to government activity that is well-planned:

Due to a significant increase in government activities, the relevance of a budget has increased. This necessitates the mobilization of significant resources to cover the costs of these initiatives. There must be a clear plan in place for the anticipated revenue and intended expenditure.

 

Taking a holistic approach to financial operations:

Taxation, borrowing, spending, and other fiscal policies cannot be decided at random by the government. All of these decisions and policies are intertwined, and they must be considered as part of the government's broader goals. This can be accomplished with the help of a union budget.

 

Economic policy instrument:

A budget is more than just a tool for raising money and arranging to spend; it's also a potent tool for achieving the government's numerous economic and social goals. It is a key tool for fostering economic development, eliminating income disparities, and efficiently allocating resources, among other things.

 

Index of government working:

A budget is a key indicator of how well a government is doing. The efficiency of the government is reflected in its revenue and expenditure planning. The absence of revenue and expenditure budgeting could lead to government corruption, inefficiency, and insolvency. The budget is a reflection of the government's performance.

 

Effective economic activities: 

The budgetary operations of the economy have a significant impact on the economy's functioning. Since the beginning of planning, the size of the government's revenue and expenditure in India has grown dramatically. Such large-scale public transactions through the budget have a significant impact on the economy.

 

 

Who is in charge of preparing the union budget?

 

The budget is a government's yearly financial declaration that lays out the country's fiscal blueprint for the coming year.

 

It is created by the Finance Ministry in collaboration with the Niti Aayog and other relevant ministries. The budget division of the finance ministry's department of economic affairs (DEA) is the nodal entity in charge of budget preparation.

 

 

What is the process for preparing the Union Budget?

 

The Department of Economic Affairs Budget Division sends a notice to all Union Ministries, States, UTs, autonomous entities, government departments, and the armed forces, instructing them to prepare budget projections for the coming year. Following the submission of the estimates, lengthy negotiations between the Union Ministries, other departments, and the Finance Ministry's Department of Expenditure commence.

 

In the meantime, the Departments of Economic Affairs and Revenue is holding meetings with various stakeholders. Farmers, businesses, FIIs, economists, and civil society organizations are among them. The purpose is to incorporate their input into the preparation of the Union Budget. Following the conclusion of these discussions, the Finance Minister makes a final decision on the year's tax proposal. Before the budget is frozen, all suggestions are discussed with the Prime Minister.

 

 

Highlights of the Union Budget for 2022

 

• Plans to re-ignite India's CAPEX cycle and define a fiscal reduction strategy will be included in the upcoming Union Budget session, which Finance Minister Nirmala Sitharaman will give on February 1, 2022.
• The Union Budget anticipates significant spending on healthcare initiatives and capital expenditures to strengthen India's further inclusion into the global supply chain.
• In her first year as finance minister, she implemented significant tax reforms, including lowering corporate income tax to 25% and establishing a very competitive 15% tax rate for new manufacturing businesses.
• As India's economy continues to struggle with the outbreak, the Finance Minister has the authority to grant tax cuts. Relief will boost money and boost demand for the salaried class, which has been hit hard by the epidemic.
• In the Union Budget session of 2022, the focus will be on speeding up India's recovery from the epidemic. It is also likely to prioritize the improvement of India's educational system.
• Employees are eligible for tax breaks. The current standard deduction should not be used to cap the amount that can be deducted from the work-from-home allowance.

 

 

The Union Budget's Structure

 

India's Union Budget, or financial statement, is divided into three sections:

 

The Indian Consolidated Fund (CFI)

It covers all of the information on the government's anticipated revenues for the current fiscal year. After Parliament's approval, all government expenses are paid from this fund.

 

India's contingency fund

Under Article 267 of the Indian constitution, the government established and maintained this fund to cover any unexpected expenses. This fund can only be used with the President's approval, and it must be replenished from the CFI after each use.

 

Public accounts

For public accounts, a fixed amount of money is set aside. This money is utilized for a variety of things, including the construction of roads and buildings. Money from the CFI can only be transferred to public accounts with Parliament's permission.

 

 

 

Conclusion

 

The Government's annual practice of presenting the Union Budget is significant. It assists the government in carrying out its constitutional responsibilities and allocating resources in the country's best interests. Understanding the components and structure of the Union budget is critical since it can assist you in determining the budget's consequences for the economy and the general population.

 

The Union Budget is a financial statement of the government for the fiscal year that runs from April 1 to March 31. In addition, the Union Budget is divided into two sections: revenue and capital.

 

The revenue budget shows the government's revenue inflows and expenditures. There are two sorts of revenue: tax and non-tax revenue. The costs of the government's day-to-day operations and the myriad services it delivers to its citizens are referred to as revenue expenditures. When revenue expenditures exceed income inflows, the government has a revenue deficit.