The global economy slowdown is evident and India too has experienced the heat of slowdown. The automobile industry was hit the worst. The Finance minister announced various measures to boost the economy and the stock market responded positively to that.
Now, The finance ministry will kick-start the exercise to prepare annual Budget for 2020-21 from October 14. It will be the second Budget of both the Modi 2.0 government and Finance Minister NirmalaSitharaman.
These exercises are taken up to assess the financial situation in the country, measures that are needed to be taken. This time pre budget exercises will address critical issues pertaining to slowdown in growth and subdued revenue collection.
According to a Budget Circular (2020-21) of the budget division of the finance ministry’s Department of Economic Affairs,
The pre-Budget/RE (Revised Estimate) meetings will begin on the October 14, 2019.
All financial advisers are instructed that the necessary details related to these meetings contained in the RE module of the UBIS (Union Budget Information System) to be mentioned and discussed in the exercise.
Why these exercises are undertaken? How this will help framing the union budget?
The Union Budget is the most comprehensive report of the government’s finances in which revenues from all sources and outlays for all activities are consolidated by the finance ministry.
The budget also contains estimates of the government’s accounts for the next fiscal year called Budgeted Estimates.
Made in close consultation with the Prime Minister’s Office, the budget is not just a statement of accounts but a charter of the government’s economic policies.
How is the Budget made?
The finance ministry collects information about receipts and expenditure from various departments to prepare the revised estimates for the budget.
The government also holds pre-budget consultations with stakeholders such as state representatives, bankers, agriculturists, economists and trade unions to understand their demands, which includes tax incentives and fiscal support.
This is what meant by the exercises. Where the expenses from various departments, it will assess the changes that need to be brought in.
From 2017-18, the Modi government has merged the Railway Budget with the Union Budget.
NirmalaSitharaman’s budget team comprises Minister of State for Finance Anurag Singh Thakur and Chief Economic Advisor Krishnamurthy Subramanian.
The General Budget has two major parts: Revenue and Expenditure.
Assessing the revenues from different central taxes is the primary function of the Department of Revenue and the expenditure estimates for the current and the next year for various expenditure heads are assessed by the Department of Expenditure.
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.
Finance Secretary coordinates 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.
The Budget Estimates for 2020-21 will be provisionally finalised after the expenditure secretary completes discussions with other secretaries and financial advisers. Pre-Budget meetings will begin from October 14 and continue till the first week of November, it said.
Prime Minister Narendra Modi-led government scrapped a colonial-era tradition of presenting the Budget at the end of February. Then Finance Minister ArunJaitley had for the first time presented the annual accounts on February 1, 2017.
With the preponement of the Budget, ministries are now allocated their budgeted funds from the start of the financial year beginning April.
This gives government departments much freedom to spend as well as allow companies time to adapt to business and taxation plans.
Previously, when the Budget was presented at the end of February, the three-stage Parliament approval process used to get completed some time in mid-May, weeks ahead of onset of monsoon rains.
This meant government departments would start spending on projects only from August-end or September, after the monsoon season ended.
Modi government is leaving no leaf unturned to bring the economy on track. The next budget will be crucial to bring the GDP which has fallen lowest in the last 6 years, but India is doing well in terms of maintain fiscal deficit.
The next budget will be a crucial step in fulfilling India’s dream of 5 trillion dollar economy.
Dr. Sindhu Prashanth