The Union Budget of India is a significant annual event that outlines the government’s financial plan for the upcoming fiscal year. It includes details on revenue and expenditure, policy proposals, and fiscal objectives, playing a crucial role in the country’s economic planning and development.
What is the Union Budget?
The Union Budget is an annual statement presented by the Government of India, detailing its estimated revenues and proposed expenditures for the upcoming financial year. The budget aims to allocate resources effectively, manage public finances, and stimulate economic growth.
Constitutional Provisions and Statutes
Constitutional Provisions
The Union Budget is governed by various provisions of the Indian Constitution. Article 112 mandates the President to present the Union Budget in Parliament, also known as the Annual Financial Statement. Article 265 ensures that no tax shall be levied or collected except by the authority of law, emphasizing the necessity of legislative approval for taxation. Article 266 provides for the establishment of the Consolidated Fund of India, the Contingency Fund of India, and the Public Account of India, which are crucial for managing the country's finances. Additionally, Article 280 provides for the formation of the Finance Commission, which makes recommendations on the distribution of the Union’s revenues between the Centre and the States.
Statutes
Several key statutes are relevant to the Union Budget. The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, aims to ensure fiscal discipline and transparency in India’s fiscal management, mandating the government to maintain a certain level of fiscal prudence. The Government of India Act, 1935, although largely replaced, continues to influence the current budgetary process through its financial provisions that laid the foundation for financial administration in India.
Preparation of the Union Budget
Who Prepares the Budget?
The Union Budget is prepared by the Ministry of Finance, primarily by the Department of Economic Affairs. This process involves multiple stages and the coordination of various ministries and departments. Each ministry and department submits its financial requirements and estimates to the Ministry of Finance, where they are reviewed and consolidated. The Comptroller and Auditor General (CAG) audits the government’s accounts and provides insights that contribute to better financial management and budget preparation.
How is the Budget Prepared?
The preparation of the Union Budget is a meticulous process that begins months in advance. It starts with pre-budget consultations where the Ministry of Finance engages with various stakeholders, including industry leaders, economists, and the general public, to gather inputs and suggestions. This is followed by a review of past budgets, revenue collections, and expenditure patterns, helping in planning the new budget. An Economic Survey is conducted, providing an overview of the economy and informing budgetary decisions. Finally, after thorough analysis and consultations, a draft budget is prepared, reviewed, and approved by the Finance Minister.
Allocation of Funds
To Different States
Funds are allocated to different states based on various criteria. The Finance Commission makes recommendations on the distribution of revenues between the Centre and the States, ensuring a fair allocation based on factors such as population, income levels, and development needs. Centrally sponsored schemes receive specific allocations aimed at the development of various sectors in the states, addressing regional disparities. Additionally, state-specific grants are provided based on the unique needs and developmental priorities of individual states, ensuring targeted and effective use of resources.
To Other Stakeholders
Significant portions of the budget are dedicated to various stakeholders. Public sector enterprises receive funds for their operational and developmental needs, ensuring they can contribute effectively to the economy. Social welfare schemes targeting healthcare, education, and rural development are allocated substantial funding, reflecting the government’s commitment to social equity and inclusive growth. Investments in infrastructure, including roads, railways, and urban development, receive considerable funding, driving connectivity and economic growth.
Key Highlights of the Union Budget 2024
The Union Budget for the financial year 2024-25, presented today, includes several key proposals and allocations aimed at fostering economic growth and social development. One of the primary goals is to achieve a GDP growth rate of 7.5% for the upcoming fiscal year. To support this, the budget emphasizes policies that will drive economic recovery post-pandemic, with a strong focus on boosting manufacturing and supporting the MSME sector. An allocation of ₹50,000 crores has been made for the Manufacturing Incentive Scheme to encourage domestic manufacturing and attract foreign investments. Additionally, ₹15,000 crores have been allocated for the development and support of Micro, Small, and Medium Enterprises (MSMEs), which includes credit guarantees and infrastructure development to aid these businesses.
Infrastructure development is another major focus of this year’s budget. An allocation of ₹1.2 lakh crores has been made under the National Infrastructure Pipeline (NIP) to enhance the country's infrastructure, including roads, railways, ports, and airports. This investment aims to improve connectivity, reduce logistics costs, and support economic growth. The budget also emphasizes social welfare initiatives, with enhanced funding for health and education sectors. Specific schemes targeting women, children, and vulnerable sections of society have been introduced to ensure inclusive growth.
In line with the growing importance of the digital economy, significant investments have been made in digital infrastructure and technology. This includes initiatives for digital literacy, cybersecurity, and the promotion of digital transactions, aiming to create a robust digital ecosystem in the country. Sustainability and the green economy are also key themes in this year’s budget, with allocations for renewable energy projects and initiatives to combat climate change, emphasizing sustainable development. Lastly, the budget introduces new tax reforms to streamline tax administration and compliance, along with incentives for small businesses and startups, making it easier for them to operate and grow.
Conclusion
The Union Budget of India is a comprehensive financial plan that plays a pivotal role in shaping the country’s economic landscape. Governed by constitutional provisions and statutes, it is meticulously prepared by the Ministry of Finance, with inputs from various stakeholders. The budget’s allocations aim to balance the needs of states, public enterprises, and social welfare schemes, driving the nation towards inclusive and sustainable growth.
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