What is Union Budget, Interim Budget and Vote on Account?
Union Budget means
The Union Budget is the yearly financial report that predicts revenue and expenditure of the government for a particular year. The plan on how and where and what amount of finance to use according to income and spending. Union Budget keeps the report of the government’s finances for the year that runs from April 1 – March 31.
Interim Budget means
An Interim Budget is a whole set of accounts, including both expenditure and receipts. An Interim Budget gives the entire financial statement, very similar to a full Budget. An interim budget is valid for 12 months (a financial year).
Vote on account means
A vote on account means that the government seeks the approval of Parliament for meeting expenditure. It is paying salaries, ongoing programs in various sectors — with no changes in the taxation structure until a new government takes over and presents a full Budget that is revised for the entire fiscal. The vote on account usually is valid for two months only.
Classification: Union Budget classified into Revenue Budget and Capital Budget.
The government’s revenue receipts and expenditure. (Day to day functioning of the government and on different services offered to citizens.)
Capital receipts and payments of the government. (Loans from the public, foreign governments, and RBI form a significant part of the government’s capital receipts.)
What is the need for Union Budget?
The purpose of the Union Budget is to bring an accelerated and stable economic growth of our country, coupled with social justice and equality.
Following are the key objectives that highlight the importance of Union Budget in India.
- Ensure a suitable allocation of resources: It is necessary to employ the available resources in the best interest of the country. Allocating resources helps to achieve profit maximization for the government.
- Reduce unemployment and poverty levels: This will ensure that every citizen of the country can get the primary needs of food, shelter, and clothing, along with facilities for health care and education.
- Reduce wealth and income disparities: The budget aids in regulating the distribution of income through subsidies and taxes. It helps to ensure that a high rate of tax is levied on the wealthy class, thereby reducing their disposable income. On the other hand, a lower rate of tax is charged on the lower-income group to ensure they have sufficient income in hand.
- Keep a check on prices: The Union Budget aids in controlling the economic fluctuations as well. It ensures proper handling of inflation and deflation, thus bringing about financial stability. This aids in keeping price stability in the economy.
- Change tax structure: The Union Budget also talks about the possible changes in the direct and indirect taxes of the country. It brings about changes to income tax rates and tax brackets.
TIME and DATE of Budget Announcement
- In the British Era, the budget used to be performed at 5 PM. In1990s, all that budgets seem to do was to raise taxes.
- This practice was discontinued in the year 2001 by presenting the budget at 11 AM by Mr.Yashwant Sinha, the then Finance Minister of India in the NDA government who broke the ritual.
- Until 2016, the ritual was to present the budget on the last working day of February.
- Arun Jaitley changed it to February 1 in 2017.
- From the last two years, the budget is now presented on the first working day of February.
- The president of India fixes the date of the presentation of the budget.
Budget Briefcase and Halwa Ceremony:
- The printing of budget documents starts approximately ten days before it’s presentation in the Parliament with a customary ‘Halwa ceremony.
- During which the sweet dish is prepared and served to the finance ministry officers and support staff included.
- The ceremony marks the origin of the lock-in period to maintain budget confidence, which means the staff remains isolated and stay in the North Block office until the budget presents in Parliament.
Types of Union Budget
Depending on the utility of expenditure and revenue estimates, budgets are of three kinds – Balanced budget, Surplus budget, and Deficit budget.
If the estimated government expenditure is similar to expected government receipts in a financial year is called a balanced budget. They believed the government’s expense should not exceed their resources.
Merits: Ensures economic stability, if implemented successfully. Ensures that the government refrains from imprudent expenditures.
Demerits: Unviable at times of recession and does not offer any solution to problems such as unemployment.
A surplus budget is when the expected government revenues exceed the estimated government expenditure in a particular financial year. Which means that the government’s earnings from taxes levied are greater than the amount the government spends on public welfare. Such a budget can be implemented at times of inflation to reduce aggregate demand.
A deficit budget is where the estimated government expenditure exceeds the expected government revenue in a particular financial year. This type of budget is best suited for developing economies, such as India. Especially helpful at times of recession, a deficit budget helps generate additional demand and boost the rate of economic growth.
Merits: Helps in addressing public concerns such as unemployment at times of economic recession.
Demerits: Can encourage incautious expenditures by the government. Increases burden on the government by collecting debts.
Interesting and unknown facts about Union Budget
- The first Indian budget was presented by Mr. James Wilson on February 18, 1869, after the Indian budget was introduced on April 7, 1860, by the East India Company.
- The first Budget of Independent India was presented by the then Finance Minister, Mr. RK Shanmukham Chetty on November 26, 1947.
- Jawaharlal Nehru, Indira Gandhi, and Rajiv Gandhi are the only Prime Ministers to have presented a budget.
- Shri Morarji Desai holds the record of presenting the maximum number of Budgets for presenting 10 Budgets.
- Mr. KC Neogy and Mr. HN Bahuguna were the only two Finance Ministers who did not present any Indian Budget.
- For the first time in 92 years, the Union Budget of 2017 merged the Union Budget with the Rail Budget, which was usually presented separately.
- Nirmala Sitharaman will be the first full-time woman Finance Minister to present the Union Budget.