The union budget might be the most important event in the financial year. The need and importance of Union budget do not end with tax laws. It establishes the trajectory that the economy is planning to take. 

This blog explores the importance of Union budget in India. A quick look at the basics of it might facilitate a deeper understanding of its needs.

What is the Union Budget?

The annual budget shows the anticipated revenue receipts and expenses incurred by the Indian administration within a fiscal year. The definition of the Union budget is given in Article 112.

Importance of Union Budget

The Annual Financial statements are the highlight of a financial year. The need and importance of Union Budget is extensive. The importance of annual budget is discussed through a sectoral view.

  • Economic Impact

The development of the country’s economy is the primary aim of the union budget. Listed below are the need and importance of union budget for developing the nation’s economy.

  • Economic growth: The union budget discusses the degree of economic progress attained by the nation. It sets targets for the coming financial year. The government formulates various policies to fulfil these targets.
  • Inflation: An increase in the general price level of commodities in the country is called inflation. The Annual Financial Statement discusses the prevalent rate and its economic consequences. The government also takes measures through the budget to adjust the rate of inflation according to the country’s needs.
  • Urbanisation: The mobility from rural to urban areas causes a rise in slums and poor living conditions among urban poor. Although economic progress requires growth in urban areas, it cannot be at the cost of poor living conditions. The government aims to strike a balance between these two aspects of urbanisation through various policies, like building homes and improving water supply and sanitation.
  • Resource allocation: The preparation of a budget ensures that the government allocates resources optimally. The restricted presence of resources requires judicious allocation to ensure maximum returns.
  • Infrastructure: A country’s economic development depends on the infrastructure to a great extent. It facilitates trade and commerce. The union budget allocates funds for the infrastructural development of the country.
  • Impact on Business

Enterprises operating in India act as the medium of economic progress. They not only generate profits but also employment avenues and innovation. The budget serves the business ecosystem in the following ways.

  • Government Support: The budget allocates subsidies to industries that require government support. The union budget empowers small and medium-scale enterprises through schemes like Mudra loans. 
  • Innovation: The Union budget often creates funds to perform research on current trends. This research offers valuable insights to the R&D–research and development– teams of businesses and facilitates innovation. Especially in the case of Micro, Small and Medium Enterprises (MSMEs), the government often directly aid them with research for continued innovation.
  • Future Patterns: The budget determines the trajectory of the country and gives valuable insight to businesses on future trends. These insights enable them to make prudent decisions.
  • Business environment: The union budget aims to maintain economic stability. A stable economy gives rise to a conducive business environment.
  • Foreign investments: The union budget creates regulations around foreign direct investments (FDI) and foreign portfolio investments (FPI). It directly impacts the competitiveness of Indian businesses. 
  • Impact on Individual

The union budget impacts the lives of individuals directly through various provisions. Some of the need and importance of union budget are discussed below.

  • Income tax laws: The budget formulates the income tax slabs and rates. It also makes various provisions for deductions and exemptions.
  • Investment plan: Retail investors can gauge the industries which gain government support or might perform well in the future. They can make prudent investment decisions based on these observations.
  • Employment: The rate of unemployment is a big responsibility for India’s developing economy. The budget discusses the prevalent employment rates and layout steps to address the issue.
  • Social Impact

The importance of annual budget includes the various provisions it creates to ensure social stability and progress. Some of them are listed below.

  • Human development: A large chunk of India’s population is in its youth. The government lays out various skill development schemes to increase the quality and employability of its workforce. For instance, the 2024 budget aims to provide internships in big corporations to 1 crore young citizens in 5 years.
  • Regional disparity: India faces a huge problem of regional disparity when it comes to economic growth. The Union Budget aims to take various measures to reduce this regional disparity. For instance, the 2024 budget aimed to set up over 100 branches of India Post Payment Bank in the Northeast.
  • Inclusivity: True economic progress cannot be achieved without the inclusion of all social and economic groups. For instance, the presence of females in the workforce and leadership positions is still a challenge in India. The budget aims to address these challenges as well through various provisions.
  • Energy security: India is moving towards clean energy and reducing its carbon footprint. Recent budgets have been addressing and promoting the use of clean energy sources.

Conclusion

The need and importance of Union budget are enormous. The annual financial statements floored by the government in parliament ensure stable economic growth. After the implementation of the budget, the government maintains careful observations and takes required measures. The annual budget ensures that economic growth comes along with inclusivity and social development. Investors can gain valuable insights into future trends through the budget.
Financial planning apps can help investors make prudent investment decisions based on a thorough analysis of trends.