Budget - Concepts and Terminologies

Budget : Concepts and Terminologies

 

Budget of a government is a comprehensive statement of government finances relating to a particular year. Every Budget broadly consists of two parts- (i) Expenditure Budget and (ii) Receipts Budget. 

The amounts of intended expenditure by the Government in the next financial year are expressed in the Expenditure Budget. 

The entire Expenditure Budget can be divided into two distinct categories, viz. 

i) Capital Expenditure : those expenditures by the government that lead to an increase in the assets or a reduction in the liabilities of the government. It is however not necessary that the assets created should be productive or they should even be revenue generating. Only the charges towards the construction of the asset are counted as Capital expenditure, while the subsequent charges for its maintenance are considered as Revenue expenditure. Most capital expenditure is nonrecurring.  

- Examples of Capital Expenditure causing ‘increase in assets’: construction of a new Flyover, Union Govt. giving a Loan to a State Govt. 

- Examples of Capital Expenditure causing ‘reduction of a liability’: Union Govt. repays the principal amount of a loan it had taken in the past. 

READ MORE >>

Union Budget Formulation

How is the Union Budget Formulated?

 

The budget process in India, like in most other countries, comprises four distinct phases:

i) Budget formulation- preparation of estimates of expenditure and receipts for the ensuing financial year;

ii) Budget enactment- approval of the proposed Budget by the Legislature through the enactment of Finance Bill and Appropriation Bill;

iii) Budget execution- enforcement of the provisions in the Finance Act and Appropriation Act by the government—collection of receipts and making disbursements for various services as approved by the Legislature;

iv) Legislative review of budget implementation- audits of government’s financial operations on behalf of the Legislature. 

Process commences in August- September 

By convention, the Union Budget for next financial year is presented in Lok Sabha by the finance minister on the last working day of February. However, the process of budget formulation starts in the last week of August or the first fortnight of September. To get the process started, the Budget Division in the Department of Economic Affairs under the Ministry of Finance issues the annual budget circular to all the Union government ministries/departments around August- September. The Circular contains detailed instructions for these ministries/ departments on the form and content of the statement of budget estimates to be prepared by them. 

READ MORE >>