What is the budget, why is it presented on February 1 & what are its objectives?

The Union Budget 2023-2024 is all set to be presented by Finance Minister Nirmala Sitharaman on February 1 (Wednesday), her fifth presentation since she took over the Ministry of Finance. It is also the last full budget by the Modi 2.0 government before India heads into general elections in May 2024. Sitharaman also tabled the Economic Survey 2022-23 on Tuesday at a joint sitting of both houses in the Indian parliament after President Droupadi Murmu and Vice President Jagdeep Dhankar addressed the gathering.

The presentation of the Union Budget at the commencement of the Financial Year is a momentous moment as it sets the financial agenda of the entire country and directly affects every citizen who is part of the subcontinent. Many countries also await India's budget presentation to note which industries and economic areas will the nation focus on, in the coming years. The budget displays the country's economic growth and stability while highlighting the economic path the nation would follow to become an 'advanced economy'.

It is essentially the 'blueprint' of the Indian Economy for the upcoming financial year. Various sections of society in the country have varied expectations of the budget, hoping that a few provisions will benefit them directly. With the elections in the government's sights next year, it is safe to say that the budget will be focused on appeasing the voters of the subcontinent.

Republic takes a look at what the Union budget essentially is and what are its objectives.

What is the Union budget?

In accordance with the Constitution of India's Article 112, "a statement of estimated receipts and expenditure of the Government of India has to be laid before the Parliament in respect of every financial year which runs from 1st April to 31st March". This 'statement' that is mentioned in the constitution of India is titled the "Annual Financial Statement" as refers to the main Budget document. The Annual Financial Statement shows the receipts and payments of the Government under the three parts in which Government accounts are kept: 

1. Consolidated Fund,
2. Contingency Fund and
3. Public Account.

The Union Budget is allotted for the upcoming fiscal year. Under the Constitution, the Budget has to distinguish expenditure on revenue accounts from other expenditures. Government Budget, therefore, comprises Revenue Budget and Capital Budget. 

Revenue Budget

Going by its name, the revenue budget accounts for all the revenue expenditure and receipts of the government and the expenditure met from those revenues (tax revenues and other revenues). Tax revenues consist of proceeds of taxes and other duties levied by the Union government. Revenue expenditure is for the normal running of Government departments and various services, interest charges on debt incurred by Government, subsidies, etc. If the revenue expense is in excess of the receipts, the government suffers a revenue deficit.

Capital Budget

The Capital Budget consists of capital receipts and payments. Capital receipts include loans from the Reserve Bank of India (RBI) or from the public which includes loans from "other parties through the sale of Treasury Bills, loans received from foreign Governments and bodies and recoveries of loans granted by Central Government to State and Union Territory Governments and other parties. Capital payment includes expenses sustained towards healthcare facilities, development and maintenance of equipment, and educational facilities. The Capital Budget also incorporates transactions in the Public Account. 

If Fiscal Year begins on April 1, why is the budget presented on February 1?

The budget was presented annually by the Indian government at 5:00 pm on the last working day of February until 1999. This was a custom that was inherited from the British colonial era. The colonial Briishers had set that time as the local time in Britain would be 11:30 am. This custom was challenged by then-Finance Minister Yashwant Sinha under Prime Minister Atal Bihari Vajpayee. Sinha changed the ritual by announcing the 1999 Union Budget at 11 am after which the convention officially began in 2001. 

In 2017, major changes were in the Budget presentation by Prime Minister Narendra Modi-led government. The then-Finance Minister Arun Jaitley announced that the budget would be presented annually on February 1, regardless of the day. In addition to this, the 92-year-old tradition of presenting the Railway Budget separately was extinguished, and it was merged with the Union budget. This is the practice followed now. 

Defending this decision, the government said that presenting the budget two months before the start of the Financial Year on April 1, enabled the government to better prepare for the implementation of the estimates that they have given in the budget. The change would also enable a wide analysis of numbers prompting a more informed debate and discussion. 

What are the objectives of the budget?

The main objectives of the budget range from the reallocation of resources and economic growth to making sure that India remains economically stable without getting majorly affected by external and internal factors. Many sectors like infrastructure, technology-enabled development, energy transition, and climate action are brought into focus in line with various government schemes that are used to benefit the citizens of the country. 

The reallocation of resources is done keeping in mind that the country benefits socially and economically while creating profit. This can include tax concessions or subsidies on certain products and industries while also imposing heavy taxes on other industries. For example, electric vehicle buyers may receive tax concessions to promote green energy while the tobacco industry may face heavy taxes to curb harmful consumption that is detrimental to health. 

Bridging the income disparity is also a major objective of the Union Budget. This comprises imposing various tax slabs according to various incomes in the salaried industry of the country. Imposing taxes on the wealthy while spending more on rural development schemes balances costs for the government. 

Many factors affect the economic stability of a country, one of which includes the current Ukraine-Russia conflict which has, directly and indirectly, contributed to major economic turmoil across the planet. Therefore, the government budget is set to prevent business volatility in inflation or deflation.

National industries that rake in large amounts of finance come under the ambit of the Union government. Whether it is the Railway sector or the Energy sector, the government puts a priority on these sectors in its budget as these industries are directly linked to public welfare. Reducing regional disparities is also another objective of the Union Budget as it attempts to encourage industry in economically poorer areas.

The biggest overall objective would be to keep the country's economy growing. As long as the nation's savings and investment rates remain boosted, the country's Gross Domestic Product (GDP) remains stable. The budget concentrates on increasing local production and manufacturing of goods and services in the country which eventually sets the country on a path of fast-paced economic growth. India is currently the fastest-growing economy on the planet.