Interim Budget 2024: Here's how the Budget document is compiled and presented in Lok Sabha
Compilation of the budget document is a lengthy process and starts almost six months before the Budget is presented by the finance minister in the Lok Sabha. The main Budget file consists of 14 documents, including the Annual Finance Statement (AFS), Demand for Grants (DG), and Finance Bill.
- Jan 11, 2024,
- Updated Jan 11, 2024 11:10 AM IST
Union Finance Minister Nirmala Sitharaman will be presenting her sixth Budget this year next month. But this year it won't be a full budget like last year. The Interim Budget is presented by the ruling government in Parliament in a year when there is insufficient time to present a complete budget or when elections are due in the same year. It is the incoming government that is responsible for formulating the full budget.
Compilation of the budget document is a lengthy process and starts almost six months before the Budget is presented by the finance minister in the Lok Sabha. The main Budget file consists of 14 documents, including the Annual Finance Statement (AFS), Demand for Grants (DG), Finance Bill.
Besides, explanatory statements are attached to the main document. These are Expenditure Budget, Receipt Budget, Expenditure Profile, Budget at a Glance, Memorandum Explaining the provisions in the Finance Bill, and Output Outcome Monitoring Framework. Earlier, the documents were printed in the North Block, but now the Finance Minister presents a Green Budget, which is in a paperless format.
How the Budget is compiled
Budget Circular: According to the Finance Ministry, the process of creating the budget begins with the issuance of a Budget Circular. Typically, this occurs in August or September, when the circular, signed by the Joint Secretary (Budget division) in the Finance Ministry, is distributed to various ministries.
Occasionally, pre-budget circulars are distributed to officials and financial advisors of other ministries earlier than usual. Last year it was done to gather data for revised estimates of the current year (FY23) and budget estimates for FY24.
Expenditures and ministries: After the issuance of the budget circular, ministries compile reports on their expenditure for the current fiscal year and outline their plans for the upcoming financial year, including schemes, programs, capital expenditure, and administrative costs.
Following the distribution of the circulars, officials from the Expenditure and Economic Affairs departments convene meetings with representatives from central governments, ministries, agencies, and union territories. The process commences with ministries presenting initial estimates for both plan and non-plan expenditures. These meetings aim to establish Revised Estimates for FY24 and allocate Budget Estimates for FY25.
Planning stage: Before presenting their expectations and estimates, the ministries have discussions with the Niti Ayog regarding their planned expenditures. These expenditures encompass areas such as electricity generation, infrastructure, education, and other relevant sectors.
Subsequently, the financial advisors of the ministries outline the non-plan expenditures, which specifically focus on the budgeted expenses for a specific fiscal period. The expenditure secretary then consolidates these figures and, after thorough deliberation with the financial advisors, establishes the budget estimates for the upcoming fiscal year.
Budget estimates: Finance ministry officials evaluate the projected revenues expected to flow in the next fiscal year. This assessment includes income tax, corporate tax, Goods and Service Tax (GST), customs duties, and various cesses.
Additionally, the Finance ministry takes into consideration the estimated amounts to be generated through the divestment of public sector equity and loan repayments. Dividends from the Reserve Bank of India (RBI), state-owned financial institutions, and state-owned companies in different sectors are also factored in. A comprehensive estimation of all these aspects is presented to the revenue secretary.
Reassessing data: After the ministries submit their requests and estimates, top Finance Ministry officials reevaluate the requirements. The Finance Ministry compiles the final data and sends it to the Finance Ministry after extensive consultations between the ministries.
The Finance Ministry then compares the current revenue and expenditure estimates to the previous year's, analyzes the data with the Chief Economic Advisor, and decides the ideal borrowing amount to meet the deficit. At the same time, the Economic Survey is also compiled, which is tabled in Parliament a day before the budget.
Deficit targets: The Finance Ministry sets fiscal deficit targets and determines the overall budget deficit. Any resulting gap is filled by revising tax rates, if there is any room to do so. The Centre designs this entire process around its fiscal incentives, which aim to promote sound growth across sectors. Following the initial plans, if any changes are needed, they are made to the expenditure plan.
Next steps: The Finance Ministry allocates revenues to various departments for future expenditures after reviewing all recommendations.
The Finance Minister then begins discussions in mid-November with stakeholders, industry representatives, labor groups, economists, and representatives from sectors like agriculture and social welfare. During these talks, the Finance Minister reviews compiled data on revenues and budget estimates.
Final leg: In January, the National Statistical Office releases advance estimates for GDP for the current fiscal year. These estimates are then incorporated into the Budget document.
It is notable that the Finance Minister's budget speech presented in Parliament is written by multiple people, though the Minister provides her own inputs.
The speech has two parts. Part A, focusing on the economy, new schemes, and initiatives, is written primarily by the Economic Affairs Secretary.
Part B, containing finance and tax announcements, is written by the Revenue Secretary. Sometimes the Chief Economic Advisor also contributes inputs.
After final revisions, printing or final documentation the budget starts in mid-January with a traditional halwa ceremony attended by the Finance Minister and top officials.
A copy of the final Budget document is sent to the Union Cabinet for approval. Once done, the Finance Minister presents it to the President on the day of the Budget (February 1). Following which, the FM proceeds to Lok Sabha to finally read out the contents of the Budget in the Lok Sabha.
Also read: Budget 2024-25: Meet the Finance Ministry architects working on the Interim Budget this year
Also read: Interim Budget 2024: Volatile geopolitics could impact Indian subsidy math in 2024; here's how
Union Finance Minister Nirmala Sitharaman will be presenting her sixth Budget this year next month. But this year it won't be a full budget like last year. The Interim Budget is presented by the ruling government in Parliament in a year when there is insufficient time to present a complete budget or when elections are due in the same year. It is the incoming government that is responsible for formulating the full budget.
Compilation of the budget document is a lengthy process and starts almost six months before the Budget is presented by the finance minister in the Lok Sabha. The main Budget file consists of 14 documents, including the Annual Finance Statement (AFS), Demand for Grants (DG), Finance Bill.
Besides, explanatory statements are attached to the main document. These are Expenditure Budget, Receipt Budget, Expenditure Profile, Budget at a Glance, Memorandum Explaining the provisions in the Finance Bill, and Output Outcome Monitoring Framework. Earlier, the documents were printed in the North Block, but now the Finance Minister presents a Green Budget, which is in a paperless format.
How the Budget is compiled
Budget Circular: According to the Finance Ministry, the process of creating the budget begins with the issuance of a Budget Circular. Typically, this occurs in August or September, when the circular, signed by the Joint Secretary (Budget division) in the Finance Ministry, is distributed to various ministries.
Occasionally, pre-budget circulars are distributed to officials and financial advisors of other ministries earlier than usual. Last year it was done to gather data for revised estimates of the current year (FY23) and budget estimates for FY24.
Expenditures and ministries: After the issuance of the budget circular, ministries compile reports on their expenditure for the current fiscal year and outline their plans for the upcoming financial year, including schemes, programs, capital expenditure, and administrative costs.
Following the distribution of the circulars, officials from the Expenditure and Economic Affairs departments convene meetings with representatives from central governments, ministries, agencies, and union territories. The process commences with ministries presenting initial estimates for both plan and non-plan expenditures. These meetings aim to establish Revised Estimates for FY24 and allocate Budget Estimates for FY25.
Planning stage: Before presenting their expectations and estimates, the ministries have discussions with the Niti Ayog regarding their planned expenditures. These expenditures encompass areas such as electricity generation, infrastructure, education, and other relevant sectors.
Subsequently, the financial advisors of the ministries outline the non-plan expenditures, which specifically focus on the budgeted expenses for a specific fiscal period. The expenditure secretary then consolidates these figures and, after thorough deliberation with the financial advisors, establishes the budget estimates for the upcoming fiscal year.
Budget estimates: Finance ministry officials evaluate the projected revenues expected to flow in the next fiscal year. This assessment includes income tax, corporate tax, Goods and Service Tax (GST), customs duties, and various cesses.
Additionally, the Finance ministry takes into consideration the estimated amounts to be generated through the divestment of public sector equity and loan repayments. Dividends from the Reserve Bank of India (RBI), state-owned financial institutions, and state-owned companies in different sectors are also factored in. A comprehensive estimation of all these aspects is presented to the revenue secretary.
Reassessing data: After the ministries submit their requests and estimates, top Finance Ministry officials reevaluate the requirements. The Finance Ministry compiles the final data and sends it to the Finance Ministry after extensive consultations between the ministries.
The Finance Ministry then compares the current revenue and expenditure estimates to the previous year's, analyzes the data with the Chief Economic Advisor, and decides the ideal borrowing amount to meet the deficit. At the same time, the Economic Survey is also compiled, which is tabled in Parliament a day before the budget.
Deficit targets: The Finance Ministry sets fiscal deficit targets and determines the overall budget deficit. Any resulting gap is filled by revising tax rates, if there is any room to do so. The Centre designs this entire process around its fiscal incentives, which aim to promote sound growth across sectors. Following the initial plans, if any changes are needed, they are made to the expenditure plan.
Next steps: The Finance Ministry allocates revenues to various departments for future expenditures after reviewing all recommendations.
The Finance Minister then begins discussions in mid-November with stakeholders, industry representatives, labor groups, economists, and representatives from sectors like agriculture and social welfare. During these talks, the Finance Minister reviews compiled data on revenues and budget estimates.
Final leg: In January, the National Statistical Office releases advance estimates for GDP for the current fiscal year. These estimates are then incorporated into the Budget document.
It is notable that the Finance Minister's budget speech presented in Parliament is written by multiple people, though the Minister provides her own inputs.
The speech has two parts. Part A, focusing on the economy, new schemes, and initiatives, is written primarily by the Economic Affairs Secretary.
Part B, containing finance and tax announcements, is written by the Revenue Secretary. Sometimes the Chief Economic Advisor also contributes inputs.
After final revisions, printing or final documentation the budget starts in mid-January with a traditional halwa ceremony attended by the Finance Minister and top officials.
A copy of the final Budget document is sent to the Union Cabinet for approval. Once done, the Finance Minister presents it to the President on the day of the Budget (February 1). Following which, the FM proceeds to Lok Sabha to finally read out the contents of the Budget in the Lok Sabha.
Also read: Budget 2024-25: Meet the Finance Ministry architects working on the Interim Budget this year
Also read: Interim Budget 2024: Volatile geopolitics could impact Indian subsidy math in 2024; here's how