How India’s Budget is prepared..
February 23, 08 by FinanceTurfThe Budget process is a gigantic exercise. The exercise has different stages and each stage kicks off at a different stage of Budget making process.
The two sides of the Budget.
Like everyone’s family the nation’s budget too had two sides or we major parts : Revenue(incomes,profits,gains) n Expenditure(expenses)..
Assessing the incomes n profits from various department heads is primarily the function of The departments of revenues on the other hand The expenditure departments takes into accounts all expenses of the current as well as estimates of the next year.
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The Department of Expenditure also assesses the resources of the public sector undertakings (PSUs). The Budget division is a part of the Department of Economic Affairs.
The Finance Secretary coordinates the overall Budget-making process. All of them keep the finance minister informed and seek directions from time to time. The Chief Economic Advisor assists the concerned departmental officer in this process.
1. Let’s see the Revenue side
Leaving all the tax receipts, the other sources of revenue which goes into the budget are the dividends which are paid by PSUs on the government shareholding, , including the interim(short term) dividends and the capital receipts on account of the divestment(reduction of some kind of asset for either financial goals or ethical objectives) of the government share holdings.
• What else??
Besides the external receipts it also takes into account all the borrowings from international agencies like World Bank, ADB, etc. these all are included in the assessment gross budgetary resources of various programmes under various ministries.
Resources of the public sector undertakings, including their operating surplus (A component of value added and referred to as "mixed income") and the borrowings by them; also constitute an important component of the gross budgetary resources and goes to fund their plan.
The basic policy of PSU for getting funds for its plans is from its own resources but in some strategic and economically vital areas where the budgetary support is needede based on the recommendations of the Planning Commission.
This assessment of the Internal and External Budgetary Resources (IEBR) conducted by the Department of Expenditure forms part of the total plan resources and is also reflected in the budget documents.
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To estimate the earnings of PSUs, the government invites the finance directors of the PSUs . A joint secretary level officer of the ministry of finance holds one-on-one meeting with the PSU chairmen to estimate the revenues.
He passes on the information to Expenditure Secretary, who in turn, passes on the information to Finance Secretary. This exercise starts usually in the month of August/September. This revenue forms a part of plan expenditure.
Based on the inputs of different ministries Revised Estimate (RE) is prepared.RE means revising once again as to how much is actually required by the ministry.
• Last Step in Revenue Side
As a part of the expenditure management, the government issues instructions to various ministries to adhere to the quarterly expenditure schedule and to avoid the bunching of expenditures that may occur in last quarter.
Additional funds are also provided in the RE stage because it is important for the non-plan requirement for the next year..
Plan allocations are to be provided by the Planning Commission later based on the total gross budgetary support (GBS) indicated by the ministry of finance. This exercise starts in the month of October-December.
As is known, the Department of Revenue, the ministry of finance has two boards — Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC). By mid-January, these boards give the figure of tax collection up to December 31. For remaining three months, tax collection is assumed on the basis of previous trends.
The boards also estimate the tax revenue expected in next financial year. The honesty of the budget making depends on the realistic nature of these estimates particularly in the face of the economic discipline imposed by the FRBM Act.
It is a happy development in the past two or three years the estimates are generally not very wide off the mark.
To know more about the other side, i.e. Expenditure Side, Click Here.. Till then Do Post Your Comments..
Astitava Says: 24.02.08 at 5:24 pm
Thanks for the valuable thoughts, would like to know more about the dept of budget, and how this concept of budget is evolved, and also let us know about the other things that are been taken care while writing budget.
Thanks Always.