Why the Union Budget are so crucial for the nation?

• The Union Budget’s general objective is to present the yearly financial record and plannings of the government and it helps the government in bringing out fast and all-inclusive economic growth of our country.
• It also empowers the government to carry out its constitutional duties such as providing social justice and equality for all.

Objective

• Resource allocation in the best interest of the society and the country and allocating resources optimally for public welfare.
• Uplift downtrodden sections of the society by reducing poverty levels and creating employment.
• Creating programmes for citizens so that they get basic needs such as food, shelter, education and health care.
• Union Budget makes sure that there is a fair distribution of income through taxes and subsidies.
• Union Budget takes steps to control inflation, deflation and economic fluctuations thus ensuring economic stability in the country.
• The Union Budget can bring about changes in the tax structure in the country.
• The Union Budget of any country is crucial as it has widespread implications on that country’s economic stability and general life as such.

When the first budget of an independent India represented?

On November 26, 1947, the RK Shanmukhan Chetty presented the first Union Budget of Independent India. And the Scottish economist and politician James Wilson presented the first budget of the country in 1860.

Some facts about the budget are

• Morarji Desai, the former prime minister and finance minister of the country, had presented 10 budgets in Parliament, which is the highest number by a single finance minister till date. P Chidambaram has presented the budget nine times
• Yashwant Sinha, the then finance minister in the BJP-led NDA government, had changed the ritual in 1999 by announcing the Union Budget at11. The Union Budget was announced at5 on the last working day of February until 1999. Finance minister Arun Jaitley started presenting the Union Budget on February 1 in 2017, departing from the colonial-era tradition of using the last working day of that month.
• The longest budget speech was delivered by Arun Jaitley in 2014. The speech lasted for 2.5 hours.
• In 2019, finance minister Nirmala Sitharaman became the second woman to have presented the budget after Indira Gandhi, who had presented the budget for the financial year 1970-71.
• In 2019, Sitharaman did away with the traditional budget briefcase and instead went for a Red packet with the National Emblem wrapped with a ribbon.
• The Union Budget of 1973-74 is termed as the 'black budget' of India as the budget deficit amounted to ₹550 crores. A deficit in the budget meant the estimated expenditure for that particular financial year was greater than the estimated revenue receipts by ₹550crorese.

 

From where the references for the budget can be traced?

The reference of the budget can be traced from various literary sources. The main reference can be found from the Kautilya’s Arthashastra in which he mentioned that the Chancellor should first estimate revenue from each place and sphere of activity under different heads of accounts and then arrive at a total. The actual revenue is to be estimated by adding receipts into the treasury for the current year and delayed payments received which were due in earlier year/s. From this deduct the expenditure on the king, standard rations, other exemptions granted by King and authorised postponement of payments into the treasury. The outstanding revenues were estimated from work under construction for which revenue will accrue on completion, unpaid fines, unrecoverable dues, uncollectible sums, advances to be repaid by officers etc.

The origins of the modern Budget can be traced to the Norman period, where two departments dealt with finance—the Treasury and the Exchequer. The Treasury received and paid out money on behalf of the monarch. The Exchequer had a 'lower office' which received money, and an 'upper office', concerned with regulating the Kings’ accounts.

The term ‘budget’ has been derived from the old French word ‘brunette’, which means a leather bag or wallet. The first use of the term 'budget' may date back to 1733 financial statement by Walpole as Prime Minister and Chancellor of the Exchequer.

Who prepared the Union Budget?

The budget is prepared by the Finance Minister with the assistance of several advisors and bureaucrats. The Finance Minister seeks the view of the industry captains and economists before preparation. Various accounting and finance-related organisations send in their opinions and suggestions. The budgeting exercise in India remains mainly the domain of bureaucrats to participate and influence the outcomes.

Normally, the budget-making process starts in the third quarter of the financial year. The budget has four stages viz., (1) estimates of expenditures and revenues, (2) first estimate of deficit, (3) narrowing of deficit and (4) presentation and approval of the budget.

Estimates of expenditures and revenues

In this step, various ministries providing initial estimates of plan and non-plan expenditures and discuss the plan with Planning Commission which plans and decide new programs under given resources that are provided to it by the finance ministry. The financial advisors of the ministries prepare the non-plan expenditures.

Apart from estimating the expenditure, an assessment of expected revenues likely to flow into the government treasury has to do as a concurrent exercise.

First estimates of the deficit

After the estimates of revenue and expenditure are made, they are matched together. This provides the first estimate of the expected shortfall in revenue to meet projected expenditure. The government then, in consultation with the chief economic advisor, decides on the optimum level of borrowings to meet this deficit.

Narrowing of the deficit

After the targets for the fiscal deficits and the overall budget deficit is decided, any remaining shortfall is filled through a revision in tax rates if feasible, keeping in mind the fiscal incentive structure the government wishes to put in place to stimulate the growth in different sectors. Following the initial plans, if any changes need to be made adjustments are made to the expenditure; usually the plan expenditure has to be modified.

The Budget

The presentation of the Budget for the ensuing fiscal year (beginning April 1) is usually done on the last working day of February. The Indian constitution has made the Parliament supreme in financial matters.

How this year budget different from other previous budgets?

• This time Budget was represented digitally.
• Budget 2021 depends on six pillars of health & well-being, physical & financial capital & infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation & R&D, minimum government and maximum governance.

Health and Sanitation

• Along with that, the Finance Minister proposed a Rs 64,180-crore Aatmanirbhar Swastha Bharat scheme given the pandemic.
• A new scheme, titled PM Atma Nirbhar Swasthya Bharat Yojana, to be launched to develop primary, secondary and tertiary healthcare.
• Mission POSHAN 2.0 to improve nutritional outcomes across 112 aspirational districts
• Operationalisation of 17 new public health units at points of entry.
• Jal Jeevan Mission Urban aimed at better water supply nationwide
• Strengthening of Urban Swachh Bharat Mission

Education

• 100 new Sainik Schools to be set up
• 750 Eklavya schools to be set up in tribal areas
• A Central University to come up in Ladakh

Infrastructure

• Vehicle scrapping policy to phase out old and unfit vehicles –  all vehicles to undergo a  fitness test in automated fitness centres every 20 years (personal vehicles), every 15 years (commercial vehicles)
• Highway and road works announced in Kerala, Tamil Nadu, West Bengal and Assam
• National Asset Monetising Pipeline launched to monitor asset monetisation process
• National Rail Plan created to bring a future-ready Railway system by 2030
• 100% electrification of Railways to be completed by 2023
• Metro services announced in 27 cities, plus additional allocations for Kochi Metro, Chennai Metro Phase 2, Bengaluru Metro Phase 2A and B, Nashik and Nagpur Metros
• National Hydrogen Mission to be launched to generate hydrogen from green power sources
• Recycling capacity of ports to be doubled by 2024
• Gas pipeline project to be set up in Jammu and Kashmir
• Pradhan Mantri Ujjwala Yojana (LPG scheme) to be extended to cover 1 crore more beneficiaries.

Tax

• No IT filing for people above 75 years who get pension and earn interest from deposit reopeningening window for IT assessment cases reduced from 6 to 3 years. However, in case of serious tax evasion cases (Rs. 50 lakh or more), it can go up to 10 years
• Affordable housing projects to get a tax holiday for one year
• Compliance burden of small trusts whose annual recede does not exceed crores crore to be eased
• Duty of copper scrap reduced to 2.5%
• Custom duty on gold and silver to be rationalised
• Duty on naphtha reduced to 2.5%.
• Duty on solar inverters raised from 5% to 20%, and on solar lanterns from 5% to 15%
• All nylon products charged with 5% customs duty
• Tunnel boring machines to attract customs duty of 7%
• Customs duty on cotton raised from 0 to 10%
• Agriculture infrastructure and development cess proposed on certain items including urea, apples, crude soybean and sunflower oil, crude palm oilKabulili chana and peas

Economy and Finance

• Fiscal deficit stands at 9.5% of the GDP; estimated to be 6.8% in 2021-22
• Proposal to allow States to raise borrowings to 4% of GSDP this year
• A Unified Securities Market Code to be created, consolidating provisions of the Sebi Act, Depositories Act, and two other laws
• Proposal to increase the FDI limit from 49% to 74%
• An asset reconstruction company will be set up to take over stressed loans
• Deposit insurance increased from Rs 1 lakh to Rs 5 lakh for bank depositors
• Proposal to decriminalise Limited Liability Partnership Act of 2008
• Two PSU bank and one general insurance firm to be disinvested this year
• An IPO of LIC to debut this fiscal

Agriculture

• Agriculture infrastructure fund  to be made available for APMCs for augmenting their infrastructure
• 1,000 more Mandis to be integrated into the E-NAM market place
• Five major fishing hubs, including Chennai, Kochi and Paradip, to be developed
• A multipurpose seaweed park to be established in Tamil Nadu

Employment

• A portal to be launched to maintain information on gig workers and construction workers
• Social security to be extended to gig and platform workers
• Margin capital required for loans via Stand-up India scheme reduced from 25% to 15% for SCs, STs and women.