On February 28, 2007, Finance Minister P Chidambaram will present the Union Budget for the fiscal year 2007-08. We present to you some FAQs on the event.
What is Budget?
A Budget is a plan that outlines a nation's financial and operational goals. So the Budget may be thought of as an action plan; planning a Budget helps a business allocate resources, evaluate performance, and formulate plans.
The 'Annual Financial Statement', laid before both the Houses of Parliament constitutes the Budget of the Union government. This statement takes into account a period of one financial year. The financial year commences in India on April 1 each year. The statement embodies the estimated receipts and expenditure of the Government of India for the financial year.
Why do we need the Budget?
It is not as if the government can tax, borrow and spend money the way it likes. Since there is a limit to the resources, the need for proper budgeting arises to allocate scarce resources to various governmental activities.
Every item of expenditure has to be well thought out and total outlay worked out for a specific period. Prudent spending is essential for the stability of a government and proper earnings are a pre-requisite to wise spending. Hence, planned expenditure and accurate foresight of earnings are sine-qua-non of sound Governmental finance.
What is the Railway Budget?
The Budget of the Indian Railways is presented separately to Parliament and dealt with separately, although the receipts and expenditure of the Railways form part of the Consolidated Fund of India and the figures relating to them are included in the 'Annual Financial Statement'.
How much control does our Parliament have over finance?
Ours is a Parliamentary system of government based on Westminster model. The constitution has, therefore, vested the power over the purse in the hands of chosen representatives of the people thus sanctifying the principle 'no taxation without representation'.
Preparation of Budget for the approval of the legislature is a constitutional obligation of the government both at the Centre and the state levels. Legislative prerogative over taxation, legislative control over expenditure and executive initiative in financial matters are some of the fundamental principles of the system of Parliamentary financial control.
Who decides the Budget day?
In India, the Budget is presented to Parliament on such date as is fixed by the President.
The Budget speech of the finance inister is usually in two parts. Part A deals with general economic survey of the country while Part B relates to taxation proposals. General Budget was earlier being presented at 5 pm on the last working day of February, but since 1999 the General Budget is being presented at 11 am on the last working day of February, i.e. about a month before the commencement of the financial year except in the year when general elections to Lok Sabha are held.
In an election year, Budget may be presented twice -- first to secure vote on account for a few months and later in full.
Why Budget is tabled usually on the last day of February?
The finance minister is required to submit the Budget to Parliament usually on the last day of February so that the Lok Sabha has one month to review and modify the Budget proposals.
If by April 1, the beginning of the country's fiscal year, the parliamentary discussion on the Budget has been completed, the Budget as proposed by the finance minister comes into effect.
Who presents the Budget?
The General Budget is presented in Lok Sabha by the minister of finance. He makes a speech introducing the Budget and it is only in the concluding part of his speech that the proposals for fresh taxation or for variations in the existing taxes are disclosed by him.
The 'Annual Financial Statement' is laid on the Table of Rajya Sabha at the conclusion of the speech of the finance minister in Lok Sabha.
What is meant by vote on account?
The discussion on the Budget begins a few days after its presentation. In a democratic set-up, Government is anxious to give Parliament full opportunity to discuss the budgetary provisions and the various proposals for taxation.
Since Parliament is not able to vote the entire budget before the commencement of the new financial year, the necessity to keep enough finance at the disposal of government in order to allow it to run the administration of the country remains. A special provision is, therefore, made for 'vote on account' by which government obtains the vote of Parliament for a sum sufficient to incur expenditure on various items for a part of the year.
Normally, the vote on account is taken for two months only. But during election year or when it is anticipated that the main Demands and Appropriation Bill will take longer time than two months, the Vote on Account may be for a period exceeding two months.
What is meant by Budget documents?
Alongwith the 'Annual Financial Statement' government presents the following documents: an explanatory memorandum briefly explaining the nature of receipts and expenditure during the current year and the next year and the reasons for variations in the estimates for the two years, the books of demands showing the provisions ministry-wise and a separate demand for each department and service of the ministry.
The Finance Bill, which deals with the taxation measures proposed by government is introduced immediately after the presentation of Budget. It is accompanied by a memorandum explaining the provisions of the Bill and their effect on the finances of the country.
How is the Budget discussed in Lok Sabha?
The Budget is discussed in two stages in Lok Sabha. First, there is the general Discussion on the budget as a whole. This lasts for about four to five days. Only the broad outlines of the Budget and the principles and policies underlying it are discussed at this stage.
Who presented India's first Budget?
R K Shanmukhan Chetty, who served as the finance minister in Jawaharlal Nehru's Cabinet between 1947 and 1949, presented the first Budget of independent India on November 26, 1947.
Actually, it was a review of the economy and no new taxes were proposed as the Budget day for 1948-49 was just 95 days away. Chetty resigned in 1949 over differences with Nehru.
How many finance ministers have India had since independence?
India has had 28 finance ministers since independence.
Which Indian finance minister presented the maximum number of Budgets?
Morarji Desai. He was the finance minister of India from 1959 to 1964 and also from 1967 to 1970. He presented 10 Budgets -- a record that stands even today. He presented five annual and one interim Budget during his first stint, and three final and one interim in his second term.
In 1964 and in 1968 -- both leap years -- Desai presented the Budget on February 29, his birthday.
Which two Indian finance ministers presented five Budgets in a row?
Yaswant Sinha and Manmohan Singh. The first time he took over the office of the finance minister, Yashwant Sinha's government was pulled down before he could present a proper Budget and instead had to present an interim Budget for 1991-92. He was appointed Union finance minister for the second time in 1998, when the Bharatiya Janata Party was voted to power.
In the election held in May 1991, the Congress returned to power and Manmohan Singh became the finance minister. He presented the final Budget for 1991-92 in July 1991.
This was the first occasion when the interim and final Budgets were presented by two ministers of two different political parties. Consequent to the capital markets scam and UTI meltdown, Sinha was removed from the finance ministry and Jaswant Singh became India's finance minister in July, 2002.