Also known as Annual Financial Statement
If you are following news and social media, by now you might be aware that Union Budget is coming on the 1st of February. Do you realize that it has an impact on everyone directly or indirectly? Curious to know how? Let's first understand what is Union Budget and what is inside it.
What is a Union Budget?
To understand it, first, let's see how budgeting works. Imagine you are head of your family and want to plan a monthly household budget. First, you will consider various sources of income like salary, income from the business, rent from any lease, etc. And then, you will tally your expenses like rent, groceries, education fees, travel commutes, etc. Ideally, you would try to avoid spending more than your income. For that, you need to plan at the start of the month and allocate money properly.
That is exactly what happens in the Union Budget. The Union Budget is essentially the statement of the Government's income and expenditure for the upcoming year. For every Financial year, the Government of India prepares the Union Budget to allocate resources judiciously and ensure financial stability.
Components of Union Budget
The Union Budget is divided into two major parts:
To run and prosper a country, the government allocates money for creating assets like health facilities, education, infrastructures, etc. These are termed as the payments of the government. The government gets money from various sources like loans from the public, foreign governments, RBI, etc. These are called the receipts of the government.
Like any other institution, the government also has revenue and expenditures. There are two streams of revenue - tax, and non-tax. The expenditure incurred on day to day functioning of the government is referred to as the revenue expenditure. If the expenditure is larger than the revenue, it is termed as revenue deficit and if the opposite is the case then it is referred to as revenue surplus.
Why do we need a budget anyway?
When total expenditure is greater than the total revenue, we call it a Fiscal deficit. The Budget Surplus occurs when the total revenue exceeds the total expenditure.
A fiscal deficit might arise due to overspending on the needs of the government. At first, it might look good that we are allocating much for the development of the country but overspending might put the government under the burden of the loan. It might lead to financial as well as social instability.
On the other hand, budget surplus happens when it earns more than it spends. This also might seem lucrative that government can generate more wealth than it needs, but one can also think of this as there might be some areas that could have been allocated more resources for the welfare of the states and their citizens. In short, there is always a scope for improvement.
Maintaining a balance between fiscal deficit and budget surplus is not an easy task. That is where the need for Union Budget comes. In Union Budget, the government plans its upcoming revenue and expenditures for the financial year.
How Union Budget is made?
Since this is a budget for a country, there are lots of moving parts involved. The Finance Ministry is in charge of presenting the Union Budget. To present the budget on time, the process starts nearly five to six months earlier. The Finance Ministry takes input from other ministries, states, departments, defense forces, etc to evaluate their needs. It consults with the Government’s think tank NITI Aayog, and different spending ministries to arrive at the budget document.
Finance minister Nirmala Sitharaman will present the Union Budget 2022 on February 1st. With the Economic Survey (2022-23) estimating a positive growth of 8-8.5% investment sector is bound to witness exponential growth.
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Union Budget Trivia
Till 1950, the budget was printed at Rashtrapati Bhavan till it got leaked and the venue of printing had to be shifted to a press at Minto Road in New Delhi. In 1980, a government press was set up in the North Block - the seat of the finance ministry.