An annual or yearly budget outlines the Government’s income and spending in detail. It shows the changes in tax rates and all the money that the Government plans to spend in the coming fiscal year. In India, budgets exist at Union, State, and Municipal levels. 

To grasp how the Indian economy works, it is key to know who creates these budgets, how they are made, and what sets them apart from each other. This article provides insights into who prepares the annual budget. 

Who Prepares The Union Budget? 

The union budget is prepared by the Department of Economic Affairs, under the Finance Ministry. The budget gives details about the central government’s income and expenses and covers spending that affects all Indian citizens, like defense, public transport, and power generation. The Finance Minister of India presents the Union budget in parliament on February 1st of each year. The Finance Ministry also consults with NITI Aayog. Budget preparation kicks off in mid-August of the year before.

How Is The Union Budget Prepared? 

There are five major steps involved with the preparation of the Union budget: 

  • Step 1: The finance ministry sends budget proposals to all government ministries and departments. Each ministry fills these proposals based on what they expect to spend in the coming financial year. The finance ministry also asks for input from various think tanks, economists, and experts in different fields.
  • Step 2: The finance ministry then builds the budget. They figure out the total spending and income. They also make a detailed plan for the expected shortfall and how to pay for it. 
  • Step 3: The budget is then presented in the parliament. To provide more context the Economic survey is published one day ahead of the budget presentation, and after the budget is presented, the finance minister and other officials appear before the press to answer the budget-related questions. 
  • Step 4: The ruling party and the opposition discuss the budget in parliament. The budget then goes to a vote. Once approved, it becomes the official budget for the next financial year.
  • Step 5: The final step is the execution of the budget. All the concerned ministries are allocated the funds for the implementation of policies and programs. The spending done by the ministries is closely monitored.

Who Prepares The State Budget? 

A State Finance Minister and Chief Minister prepare the state budget in India. State governments can get money from the central government, state taxes, and loans. The state budget deals with matters that affect the state, like police, water supply, sanitation, and hospitals. The state assembly is where the state budget is presented once a year.

The process of making the state budget is quite similar to the union budget. The process starts with gathering information and consultations, followed by the preparation of a budget that includes describing the revenues and expenditures. This is followed by approval and implementation. 

Who Prepares the Annual Budget of the Municipal Corporation? 

A municipality, in India, is a local government body that governs the cities and urban areas. It is headed by a mayor and has the responsibility of maintenance of parks, roads, street lights, fire services, and all the matters related to the maintenance of the area. A municipality earns its revenues majorly from property tax and certain fees levied by them, like advertisement tax, tax on vehicles, etc. 

A municipality prepares its budget under the supervision of the municipal commissioner. The municipal budget outlines where the money will be spent in the municipality. The process for municipal budget starts with the preparation of a draft budget. The draft budget is presented to the Municipal Council or Corporation, which consists of elected representatives. After discussions and amendments, the budget is approved and becomes operational.

Core Difference Between Union, State And Municipal Budget

The main differences between Union, State and Municipal budgets are as follows: 

CriteriaUnion BudgetState Budget Municipal Budget
Authority responsible for preparationMinistry of Finance (Central Government)Ministry of Finance (State Government)Municipal Corporation or Municipality
Scope Covers national level expenses and revenuesCovers state level expenses and revenues Focus on local governance in urban areas 
Presented by Finance Minister of India in the Parliament State Finance Minister in the State assemblyMunicipal Commissioner or Mayor 
RevenuesIncome Tax, GST, Customs, Dividends from PSUs, Borrowings, Asset sales, etc. State GST (SGST), VAT, stamp duty, loans from the central government, etc. Property tax, Parking charges, loans from the state government, etc. 
ExpendituresNational Defence, Infrastructure, National Welfare Schemes, Foreign Affairs, etc. State Infrastructure Projects, Law and Order, Police, Waste Management, Sanitation, Water Supply, Parks, Street Lights etc. 

Conclusion

The central, state, and municipalities present their own budgets with different aims. The budget preparation is done with the aim of utilizing the resources and finances in the best possible way. The budget focuses on long-term economic growth as well as short-term welfare. The budgets at all levels of the government are prepared in almost similar manner, but the outcome is very different. A budget is closely tracked by investors to gauge government spending and economic growth in the future. 

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