What is Budget

Budget is the Annual Financial Statement, laid before both the Houses of Parliament constitutes the Budget of the Union Government. The Budget process of India predates Independence. The Budget was first introduced on 7th April, 1860, two years after the transfer of Indian administration from the East-India Company to the British Crown. The first Finance Member, who presented the Budget, was Mr. James Wilson.

After Independence, India's first Finance Minister, Mr. R.K. Shanmukham Chetty, presented the Budget on 26th November, 1947. Since then, the Union Finance Minister of India prepares the 'Annual Financial Statement' and presents it before the Parliament every year, usually on the last working day of February, in accordance with Article 112 of the Constitution of India.

This budget comes into effect on April 1, the start of the new financial year; and has evolved over the past six decades to reflect the strength of our democratic processes in shaping our economy.

The preparation of the Union Budget is an iterative process between the Ministry of Finance, the Planning Commission and the spending Ministries. It is a combination of top down approach with the Ministry of Finance and the Planning Commission issuing guidelines or communicating instructions to spending Ministries, and a bottom-up approach, wherein the spending Ministries present requests for budget allocation.

There is no single budget for the entire country as the states have their own budgets. Even the budget of Government of India is divided into the Railway and the General Budget.

Railway Budget

The Budget of the Indian Railways is presented separately to Parliament and dealt with separately, although the receipts and expenditure of the Railways form part of the Consolidated Fund of India and the figures relating to them are included in the 'Annual Financial Statement'.

General Budget

The general Budget is presented in Lok Sabha by the Minister of Finance. He makes a speech introducing the Budget and it is only the concluding part of his speech that the taxation proposals are made. The 'Annual Financial Statement' is laid on the Table of Rajya Sabha at the conclusion of the speech of the Finance Minister in Lok Sabha.

Stages of Budget in the Parliament:

In Parliament, the budget goes through five stages,

1. Presentation of budget with Finance Minister's speech
2. General discussion, after which there is adjournment of the Houses so that the Standing Committees scrutinizes the demands for grants for a month
3. Voting on demand for grants in Lok Sabha
4. Passing of appropriation bills
5. Passing of finance bill.

The Parliament powers in enactment of budget are given in the Constitution under Article 112 to 117. According to these, no demand for a grant or proposal for expenditure can be made except on the recommendation of the President. Parliament cannot increase tax though it can either reduce or abolish it. Charged expenditure is not to be subjected to Parliament's voting. Powers of Rajya Sabha is quite restricted in financial matters.

The Finance Minister submits the following 5 documents to the Parliament along with the Annual Financial Statement:

1. key to the budget document(various definitions and the Constitutional provisions)
2. budget at a glance( receipts and expenditure shown with various deficits and break ups)
3. receipt budget
4. expenditure budget
5. memorandum explaining the process in the financial bill( impact of tax proposals on government finance)

What is Finance Bill?

• It is a Bill which deals with the taxation proposals made by Government.
• It will be introduced immediately after the presentation of Budget.
• It is accompanied by a memorandum explaining the provisions of the Bill and their effect on the finances of the country.
• The Parliament shall pass the Finance Bill within 75 days of its introduction.

What is an Appropriation Bill?

• This bill will be introduced after the voting have been completed for Demands for Grants by late April or early  May.
• The bill is intended to give authority to Government to incur expenditure from the Consolidated Fund of India.
• The appropriation bill will appropriate the sums that Lok Sabha granted by voting demands for grants. It also includes the charged expenditure.
• The procedure for passing this Bill is the same as in the case of other money Bills.

ECONOMIC SURVEY
The Economic Survey of the year is presented to the Parliament a few days before the presentation of the Annual Budget. The Survey is a detailed analysis of the economic situation of the country for the ensuing year. It includes a Statement about the position of budgetary transactions of the Central and State Governments, and their overall surplus/deficit positions in the current year and the past trends.

In the Economic Survey, along with an analysis of the economic situation of the country, detailed analysis is given of the trends in the current year in agriculture, industry, infrastructure, employment, money supply, imports, exports, prices, foreign exchange reserves, balance of payment etc as compared to selected earlier years. This document is helpful for a better appreciation of the proposals for resource mobilisation and budgetary allocation for the ensuing year, and is therefore presented to the Parliament ahead of the presentation of the Budget.

Key Factors to influence the Fiscal Budget 2011-2012:

• The Indian economy recorded an overall GDP growth of 8.9% in the first half of 2010-11.
• The recovery has been broad based with agriculture, industry and services all contributing to the consolidation of the growth momentum.
• As global economic recovery remains fragile, financial stability has become an integral part of macroeconomic objectives and policy.
• An apex-level Financial Stability and Development Council (FSDC) has been set up to strengthen and institutionalise the mechanism for maintaining financial stability.
• Normal monsoons in 2009-10 led to a significant rebound in agriculture and allied sectors.
• Progress in reduction of fiscal deficit for the year 2010-11 is in line with the commitment made in the medium-term fiscal policy statement.
• Continuing increase in international crude oil and other commodity prices, along with rising food prices has led to inflationary pressures.
• Commitment to inclusive development - especially access to affordable financial services to empower and enrich the poorer sections of the society.