The budgetary process in India refers to the method of preparation, presentation and implementation of the union budget by the central government. The union budget sets the economic trajectory for the upcoming financial year. The lengthy parliamentary procedure helps in the successful implementation of the Annual Financial Statements.

This blog takes a step-by-step look to discuss the budgetary process in India.

Process of Preparing the Budget

The budgetary process in India commences with drafting the union budget. The finance ministry and the bureaucrats finalise the budget draft after thorough analysis. A few highlights of this step are listed below.

  1. A circular is sent by the finance ministry to other central and state ministries. Circulars can be sent to some autonomous bodies that rely on government support.
  2. The circular aims to convey the financial plans and requirements of ministries to the finance ministry.
  3. The requests and circulars are then scrutinised and analysed by the finance ministry.
  4. After thorough discussions with appropriate authorities, the finance ministry formulates the budget depending upon the needs of the country.

Before the budget goes for final printing, the traditional Halwa ceremony happens. In this ceremony, the finance minister and other officials involved in the budgeting process share Halwa. This ceremony marks the end of the prolonged budget drafting process.

Presentation of the Budget

The Annual Financial Statements are floored in the Parliament on 1st February. The essential aspects of this step are discussed below.

  • Budget Speech

The budget is announced in the parliament through a speech. It is given by the finance minister. The speech encapsulates the entire budget. The budget speech happens in the Lok Sabha. After the speech, the budget goes for discussion in both Houses of the Parliament.

  • Economic Survey

The economic survey is a report that briefs about the economic state of the nation. It is drafted by the Finance Ministry for presentation in the Parliament prior to the flooring of the budget.

General Discussion

This step of the budgetary process in India helps in ensuring that the budget is democratic. Discussions about the budget take place in both Houses of the Parliament. 

  • The ministers raise concerns and make recommendations to the budget. 
  • The finance minister addresses the concerns after the discussion session.

Scrutiny

The scrutiny of the budget does not end with the discussion session. Following the discussion session, the parliament gets adjourned for some time. During this interval, the budget gets further contemplated by twenty-four departmental standing committees. 

What are Departmental Committees?

Permanent committees comprising members from both houses of the parliament are called departmental committees. The body scrutinises the work done by various ministries. 

The committee reviews and contemplates the budget. They even prepare reports that are submitted to both houses. This step of the budgetary process in India ensures that the budget prepared is fair.

Different Methods of Voting

The budget is approved if the majority of a house votes in favour of it. However, there are different kinds of approval. Each kind of approval process aims to pass a particular section of the union budget. 

  • Demand for Grants

In the union budget, a grant refers to the funds sanctioned by the central government to a particular entity or ministry. The parliament votes on the grant proposals extended through the budget.

  1. The demand for grants of each ministry is presented separately.
  2. Only the Lok Sabha can vote on this.
  3. The “Demand for Grants” becomes a “Grant” when the voting is done.
  • Appropriation Bill

The government can make withdrawals from the Consolidated Fund of India through the appropriation bill. It is also known as a spending bill or supply bill. The government can withdraw funds only if the appropriation bill is passed.

  1. It is introduced after the Demand for Grants.
  2. It is voted in both Lok Sabha and Rajya Sabha.
  3. After being passed by the Parliament, it goes to the President for approval.
  • Finance Bill

The amendment, removal and continuation of the taxation policy is communicated through the finance bill. 

  1. The finance bill requires the approval of the Parliament and the President. 
  2. A finance bill must be passed within 75 days.

Execution

After the Annual Financial Statements are approved, they reach the final stage of the budgetary process in India. 

  • It is enforced at this stage. 
  • The government continues to monitor the effect on the economy. 
  • Regular progress reports are sent to the parliament. The government can also take corrective measures if necessary.

Conclusion

The budgetary process in India is designed to ensure systemic and planned implementation of a democratically approved budget. The budget is essential to set the trajectory of the economy and has severe effects on the country. Therefore, such an elaborate system of enforcement is essential to maintain checks and balances. Moreover, budgets impact individuals directly or indirectly. Investors can understand market trends by analysing government support given to some industries.

Investors may use financial planning apps to ensure that they stay updated with the recent trends and changes in tax policies.