The union budget is presented every year at the beginning of the financial year in the parliament. It allocates finances to different sectors and regions for the coming fiscal year following article 112. Not only India every country presents a government budget that forecasts the expenditure and revenue for a particular period. The main reason behind the budgetary institution gaining its popularity was the struggle for power between the legislative and executive branches of the government mainly in the western countries. The kings and their princes spent money lavishly and the poor people paid taxes. This system required changes which bought around by revolution. In France Revolution of 1789 changed its course by overthrowing the monarchy and nobility's control over taxes. In many countries, the history of the evolution of budget is controversial and led to revolutions.
In some countries, the executive branch of government has a significant role in determining the government's revenues and expenditures, while the legislative branch is reduced to a mere approving as well as reviewing authority, as in the United Kingdom, where the executive branch dominates the budget process (the House of Commons). In the United States, a more equal approach to power distribution is used, with the legislature having the ability to examine and amend the President's budget, which the President then accepts when sufficient checks and balances have been completed. But who should be involved in the legislation or the executive branch in the power division over the budget is still a matter of debate.
The budgeting process is heavily influenced by a country's available resources and income. Revenue budgeting is the most widely used budgeting strategy when the country is poor but the environmental conditions are stable and predictable. When wealth is lacking, such as when a country is impoverished and the environment is unstable, the budgeting process is repetitious. For poor countries, repetitive budgeting is a regular occurrence, with budgeting occurring numerous times during the year due to shifting conditions, limited funding, and misplaced methods.
In India, the process begins with a budget speech in the parliament which has two parts, one outlining the general economic scenario and the second part which contains details of the proposed taxations for the next financial year. A general discussion on the budget happens after a few days of its presentation and voting happens on the request for grants. An important aspect of this process is the Cut Motions which allows the members of the upper house to question the policies and programs of the government where the money is being spent. The Parliamentary Committee plays a significant role only when the limited time of the parliament leads to the Guillotine situation where not all demands are discussed. In this situation, the department related standing committees and financial committees undertake the task to scrutinize, the government spending, expenditures, and performance.
In India, there are two types of budget capital budget and revenue budget.
Government related capital payments and receipts are accounted for in the capital budget. Capital receipts include public and Reserve Bank of India (RBI) loans, whereas capital payments include expenses for health care, equipment development and maintenance, and educational institutions. A revenue budget keeps track of all revenue receipts and expenditures. A revenue shortfall occurs when the government's revenue expenditures exceed its revenue receipts.
But why is it important? Budgeting helps to ensure the effective allocation of resources. It is critical to make the best use of existing resources in the country's best interests. Allocating resources optimally aids the government's profit maximization while also promoting public welfare. The Union Budget also has the goal of eradicating poverty and expanding work possibilities. This would ensure that every citizen of the country has access to necessities such as food, shelter, and clothing, as well as healthcare and educational opportunities. Through subsidies and taxes, the budget helps to influence the distribution of income. It contributes to ensuring that the wealthy pay a high tax rate, lowering their disposable income. The lower-income group, on the other hand, pays a lower rate of tax to ensure that they have enough money. The Union Budget also contributes to the stabilization of the economy. It guarantees that inflation and deflation are properly managed, hence ensuring economic stability. Surplus budget policies are used when inflation is high, while deficit budget policies are used when inflation is low. This helps to keep the economy's pricing level stable. The Union Budget also specifies any potential adjustments in the country's direct and indirect taxation. It affects the rates and brackets of income taxation. The public sector's industries contribute significantly to the country's economy by employing many people and creating cash. A budget assists the government in focusing appropriately on public-sector enterprises by implementing measures to boost their growth.
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