The preparations for the next Union Budget 2023-24 are in the final leg. This year's Union Budget will be presented by the Union Finance Minister Nirmala Sitharaman in Parliament on February 1, 2023. According to an ANI report, the Parliament’s Budgetary Session is expected to begin on January 31, 2023. The first phase of the budget session is expected to continue till February 10, 2023.
The whole process of compiling the Union Budget starts almost five-six months before it is presented in the parliament as the planning, data compilation from different ministries and execution takes a long time.
The budget-making process starts in August-September, that is, about six months prior to its date of presentation.
Budget circular
As per the Finance Ministry, the budget-making process starts when a Budget Circular is issued. This is usually done in September, wherein the circular, signed by Joint Secretary (Budget division) in the Finance Ministry, is issued to different ministries.
Sometimes, like this year, pre-budget circulars were issued to officials and financial advisors of other ministries ahead of schedule to compile data for revised estimates of the current year (FY23) and budget estimates for FY24.
Task for ministries
After the budget circular is issued, the ministries prepare reports on its expenditure in the current fiscal and also list their plans, like schemes, programmes, capital expenditure, and administrative expenditures for the next financial year.
After the circulars are dispatched, officials of the Expenditure and Economic Affairs departments meet representatives from all the central governments, ministries, agencies, and union territories.
The process begins with various ministries providing initial estimates of plan and non-plan expenditures. The aim of these meetings is to set Revised Estimates for FY23 and Budget Estimates allocations for FY24.
Discussions with Planning Commission
Before tabling their expectations and estimates, the ministries discuss their plan expenditures, which include expenditures on electricity generation, infrastructure, education, and other areas with the Planning Commission of India.
Following this, the financial advisors of the ministries chalk out the non-plan expenditures, which basically look into the expenditure provided in the budget for spending during a particular fiscal.
The expenditure secretary consolidates them and after intensive discussion with financial advisors, budget estimates are set for the ensuing fiscal year.
How is the revenue estimate made?
The Finance ministry officials assess the expected revenues likely flow in the next fiscal. The revenue from income tax, corporate tax, Goods and Service Tax, customs duties, and various cesses, are taken into account.
The ministry also counts estimated amounts to be realised through divestment of public sector equity and amounts to be realised by way of repayments of loans. Along with this, dividends from the Reserve Bank of India (RBI), state-owned financial institutions, and from state-owned companies in various sectors, are also counted.
A detailed estimate of all the above is presented to the revenue secretary.
Deep dive into Revenue and Expenditure
After the ministries send in their requests and estimates, the requirements are reassessed by the top Finance Ministry officials. The final data is compiled and sent to the finance ministry after extensive consultations between the ministries.
The Finance Ministry then compares the estimates of revenue and expenditure with the previous year’s estimates and takes up the analysis with the Chief Economic Advisor, which further decides on the optimum level of borrowings to meet this deficit.
At the same time, the Economic Survey is also compiled, which is tabled in Parliament a day before the budget.
Narrowing the deficit
After the Finance Ministry set the targets for the fiscal deficits and the overall budget deficit is determined, the gap, if any, is filled through a revision in tax rates if there is room for it. The entire process is decided keeping the central government’s fiscal incentive structure in mind, whose intention is to have sound growth in different sectors.
Following the initial plans, if any changes are needed, they are made to the expenditure plan.
Revenue allocation
The Finance Ministry, after going through all recommendations, allocates revenues to various departments for their future expenditures.
Pre-Budget consultations
After compiling data and taking a note of the RE and BE, the Finance Minister, mostly after the second week of November, starts talking and discussing with various stakeholders, industry bodies, labour bodies, economists, representatives from sectors such as agriculture, social and welfare sector, and others.
The interest groups discuss their expectations and present their own set of demands and apprise the Finance Ministry about the issues the budget should focus on.
Final preparations
In the month of January, the National Statistical Office brings out the advanced estimates for GDP for the current fiscal, these modifications are then weaved into the budget document.
It is interesting to note that the Finance Minister’s speech presented at the Parliament is written by many people, though the finance minister is expected to put in her own inputs.
There are two parts to the speech. The Part A of the speech, which focuses on the state of the economy, new government schemes, and initiatives, is written primarily by the Economic Affairs Secretary.
The Part B of the speech, which contains the personal finance and taxation announcements, is written by the Revenue Secretary. Sometimes, even the Chief Economic Advisor writes down a couple of inputs of the speech.
Halwa session and printing
After the final tweaks and revision of the budget document, the process of printing the budget starts around mid-January. The process starts with a traditional halwa ceremony, which is attended by the finance minister, and other top officials.
The printing press is situated underground, below the North Block, where the printers and some of the key officials are locked up for a few weeks, till the final document is printed. The document is constantly updated, where numbers and paragraphs are revised till the last day.
Following this, a copy of the Union Budget is sent to Cabinet for approval. Once done, the Finance Minister presents it to the President on the day of the Budget, then proceeds to Lok Sabha, where she starts her Union Budget speech at 11 am.