What is Budget and how is it Prepared in India? What are signs of a Good Budget?

02 Feb 2017

Categories: Did you know

February,2,2017:

It is a detailed analysis of cost and revenues of a Nation.

Budget

By definition Budget is an Annual financial statement of the estimated receipts and expenditure of the Government for the financial year. (1st April –31st March).

A Nations Budget in a Democracy is presented by the Union Finance Minister in the parliament. Once a Budget is passed by both the houses of parliament and also approved by the President, the Budget comes into effect from 1st April.

Why do we need Budget?

The Budget is needed to chart a course to optimally allocate the Government’s financial resources to different sectors and schemes, so that the objectives of the government could be broadly achieved. Budget reflects Government’s proposal for revenues and expenditure for the coming financial year.

Budget also determines how efficiently the Govt. discharged the financial and resource management duties in the previous financial year.

Budget reflects financial accountability of the Government to the both houses of Parliament. This ensures legislative supermacy over taxation and expenditure.

How is the Budget Prepared in India?

In our Country the Budget is prepared by the Budget Division, Department of Economic Affairs, Ministry of Finance, Government of India.

a) To begin the process the budget division of Finance Ministry issues an annual budget circular to all the Union Government ministries/ departments with guidelines on how to prepare budget estimates.

b) Thereupon the Ministries/departments prepare and present their estimates for budget allocation.

c) All the ministries provide the estimated revenue receipts of the current financial year and subsequent financial year to the finance ministry.

d) The Fin. minister examines these proposals and makes necessary changes, if needed in consultation with Prime Minister. Union Cabinet is also briefed about the budget.

e) All the inputs are then consolidated and used to prepare the budget documents.

The Government receipts are categorised in the budget as

a) Revenue receipts and b) Capital Receipts

Government expenditure is categorised into a) Revenue Expenditure and b) Capital Expenditure.

The characteristics of a good budget are:

- It should be expressed in quantitative or monetary terms.

- The period for which it is prepared should be fixed and it must be prepared before the period in which it commences.

- All suggestions and proposals should be practical to implement.

- Budget should spell out the objects and the policies for the organisation.

- It should be Flexible enough to allow changes in the changing environment or conditions.

Tags : Budget

Download the LatestLaws.com Mobile App