Union Budget 2018: Everything Explained

The union budget is an important part of Indian economy and polity. There are some changes in the budget due to its merger with railway budget. We have elaborated the entire constitutional procedure of the budget that how it is formed and presented.

Created On: Jan 31, 2018 11:28 ISTModified On: Jan 31, 2018 12:51 IST

Budget 2018

The Union Budget is being presented on 1 February 2018 along with railway budget by the Finance Minister of India.

Here, we have explained the Union budget with above mentioned changes. We have explained how the budget is constituted and presented. We have also explained the constitutional provisions about the budget so that students could know everything which is required to be known about the Union Budget 2017.

Budget: An Overview

The constitution of India defines union budget under the article 112. It is also known as Annual Financial statement. Budget is estimated revenues and expenditure of the Government during a year. Budget is presented for the proceeding financial year. Every budget consists of Actual figures for preceding year’s budget and revised figures for the current year and budget estimates for the following years.

Under Article 112 of the Constitution, a Statement of estimated expenditure of the Union Government has to be laid before the Parliament in respect of every financial year running from 1st April to 31st March.  The union government has decided to present the budget on 1 February from 2017 before the parliament. Earlier it used to pass it on end of the February.

What are the parts of the Budget?

The Union Budget is categorized into three parts:

Consolidated Fund:  Consolidated Fund consists of revenues received by the government and expenses made by it, excluding the exceptional items. This fund was established under Article 266 (1) of the Constitution of India. All revenues received by the government by way of direct taxes and indirect taxes, money borrowed and receipts from loans given by the government come under the Consolidated Fund of India.

All government expenditure is made from this fund, excluding exceptional items which are met from the Contingency Fund or the Public Account. No money is permitted to be withdrawn from this fund without the Parliament's approval.

Public Account: Public Account of India was constituted for those transactions where the government is merely acting as a banker. This fund was established under Article 266 (2) of the Constitution.

Contingency Fund: Contingency Fund is constituted as an imprest account to meet some urgent expenditure of the government. This fund was established by the government under Article 267 of the Constitution of India. The Contingency fund is at the disposal of the President. Any expenditure drawn from this fund requires a subsequent approval from the Parliament and the withdrawn amount is submitted to the fund from the Consolidated Fund.

How budget is created?

1. Role of the Parliament

Indian parliamentary system of Government is based on Westminster model. The Constitution has vested the power over the purse in the hands of elected representatives of the people. It sanctifies the principle ‘no taxation without representation’. The government is constitutionally obliged to present the preparation of the budget for the approval of the Legislature. Legislative control over expenditure, Legislative prerogative over taxation, and executive initiative in financial matters are some of the fundamental principles of the system of Parliamentary financial control.

The Constitution of India of India has laid down specific provisions incorporating these tenets. For example, article 265 states that ‘no tax shall be levied or collected except by authority of law’, and article 266 states that no expenditure can be incurred except with the authorization of the Legislature.

2. Demands for Grants

The expenditures whose estimate gets mentioned in the budged are required to be voted by Lok Sabha. These estimates are in the form of Demands for Grants. These Demands for grants are arranged Ministry-wise and a separate Demand for each of the major services is presented. Each Demand graft carries first a statement of the total grant and then a statement of the detailed estimate divided into items.

How Budget is presented?

In India, the date of the Budget presentation in the parliament is fixed by the President. The Budget speech of the Finance Minister is divided into two parts. Part I deals with the general economic survey of the country while Part II deals with taxation proposals. The Union Budget is presented in Lok Sabha by the Minister of Finance. The minister of finance makes a speech introducing the Budget.

What are the other Documents of the Budget?

Apart from, the ‘Annual Financial Statement’ Government presents the following documents in the Union budget:

1. An Explanatory Memorandum which briefly explains the nature of expenditure and receipts during the current year and the next year and the reasons for variations in the estimates for the two years.
2. The Books of Demands which shows the provisions Ministry-wise and a separate Demand for each Department and service of the Ministry.
3. The Finance Bill which deals with the taxation measures proposed by Government is introduced immediately after the presentation of Budget. A memorandum explaining the provisions of the Bill and their effect on the finances of the country is also presented with the financial bill. We have elaborated the finance bill below in detail.

What happens after the presentation of the Budget?

Vote on Account

Discussion on Budget takes place after a few days of the presentation of the Budget. The Parliament can’t vote the entire budget before the beginning of the new financial year. This creates the requirement to keep enough finance at the disposal of Government so that it could run the administration of the country.  Therefore, there is a special provision named "Vote on Account" by which Government obtains the Vote of Parliament for a sum adequate to incur expenditure on various items for a part of the year.

Analysis of the budget in the Parliament

After the General Discussion on both General Budget as well as Railway, the House is adjourned for a certain period. During this period, the Demands for Grants of various Departments /Ministries including Railways are considered by concerned Standing Committees (Rule 331G). These Committees are responsible for making their reports to the House within a fixed period without asking for more time. The Standing Committee consists of 45 Members, 30 from Lok Sabha and 15 from Rajya Sabha. 

After the presentation of the reports to the House, by the Standing Committees, the House moves ahead to the discussion and Voting on Demands for Grants, Ministry-wise. The time for Voting of Demands and discussion for Grants is allocated by the Speaker in consultation with the Leader of the House. On the last day, the Speaker puts all the outstanding Demands to the Vote of the House. This device is commonly known as ‘guillotine’.
 Lok Sabha is given the power to assent to or refuse any Demand or even to reduce the amount of Grant sought by Government.  There is only a general discussion in Rajya Sabha on the Budget. It does not have the power to vote on the Demands for Grants. Members of both houses have full opportunity to criticize the budgetary provisions during the course of the discussion. And they also have the opportunity to make suggestions for improving the financial position of the country.

What are the Bills which are mandatory after the Budget?

1. Appropriation Bill

The Appropriation Bill is introduced by the government after the completion of the General Discussion on the Budget proposals and Voting on Demands for Grants. The Appropriation Bill is aimed to give authority to Government to incur expenditure from and out of the Consolidated Fund of India. The procedure for passing this Bill is the same as in the case of other money Bills.

2. Finance Bill
The Finance Bill seeks to give effect to the Government’s taxation proposals which is introduced in Lok Sabha immediately after the presentation of the General Budget. The finance bill is taken up for consideration and it is passed after the Appropriation Bill. Some provisions in the Bill which are related to levy and collection of fresh duties come into effect instantaneously on the expiry of the day on which the Bill is introduced under the Provisional Collection of Taxes Act.  The Finance Bill must be passed within 75 days of its introduction by the Parliament.


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