Introduction
- It is an annual financial statement of income (receipts) and spending (expenditure) of the government for a particular financial year.
- The financial year starts from 1st April and ends on 31st March.
- Article 112 of the Indian Constitution requires the annual financial statement to be laid before the Parliament.
- The budget is made through a consultative process involving the Ministry of Finance, NITI Aayog, and other ministries.
- The Budget Division of the Department of Economic affairs under the Ministry of Finance is the nodal body for preparing the budget.
Objectives of Budget
- To stimulate economic growth.
- Redistribution of Income (Reducing inequalities).
- Optimal allocation of resources.
- Employment generation and poverty reduction
Budget Estimates
The general budget has three sets of figures which are:
- Actual Estimates: Estimates of expenditure and receipts of the preceding financial year.
- Provisional Estimates: Estimates of revenue and expenditure of the current financial year.
- Budget Estimates: Estimates of the coming financial year.
The estimates are arrived at by one of the following three methods:
- Advanced estimates: These estimates are made before the actual occurrence of economic activity.
- Revised Estimates: Estimates which are revised in the mid-year, after the sex month’s actual economic trends. These estimates are based on changes in the economic scenario or actual occurrence of some economic activities.
- Quick Estimates: These estimates are based on sample surveys. Information gathered from the sample is used to predict the overall economic activity.
Rationale of Budget
- To ensure transparency in public finance.
- To ensure accountability of the government.
- To ensure advance planning.
- To ensure financial control of the legislation over the executive.