An Introduction to the Union Budget

In Article 112 of the Indian Constitution, the Union Budget is referred to as the Annual Financial Statement and is considered as the Annual Budget of the Republic of India. In simpler terms, a Budget is known as a statement holds estimated receipts and expenditures of the Government for a particular year. The first Union Budget of India was presented on February 18, 1860,  by Scotsman James Wilson. Every year, the Union Budget is prepared by the Department of Economic Affairs, which is further presented by the Finance Minister in the Parliament, on the first day of February. The undertones of the budgetary process can be found in Kautilya’s Arthashastra. It allowed the process to be segregated into different activities, the revenue was then collected and the summation was in order. Whereas, when we take a glimpse at the modern budgetary system, it initiated during the Norman Period. Here, dealing with Finances was bestowed upon two departments, the Treasury and the Exchequer. The Treasury dealt with the inflow and outflow of  money on behalf of the monarch. Whereas the Exchequer had a ‘lower office’ which received money, and an ‘upper office’, concerned with regulating the Kings’ accounts. In India, with the passage of time, the Finance Minister adopted the process of preparing the budget every year with their assistants and bureaucrats. The opinions of economists, industry titans, and other bodies concerned with the economy are also taken into consideration before the budget is prepared and presented. The financial year is divided into four quarters, generally the budget-making process starts in the third quarter. The budgetary process consists of four phases:  (1) estimates of revenues and expenditures, (2) first estimate of deficit, (3) narrowing of deficit and (4) presentation and approval of budget. 

This year’s budget was released encapsulating three themes: 1. Aspirational India: the budget pushes the standard of living to be better, whilst opening more opportunities to healthcare, education, and better jobs; 2. Economic Development for all: the budget focuses on the growth of the citizens too, whilst ensuring better productivity for the country as a whole. 3. Bringing everyone closer: the budget strives to make our society more passionate, caring, and appreciative. The theme of this year’s budget is set to immensely focus on Covid-19, economic recovery from it and growth. In light of that, the government shall create greater demand and job creation through targeted schemes and incentives. The allocation of funds also saw significant growth in sectors like real estate, healthcare, education, infrastructure and defence. The government also launched the Budget App for Android and IOS mobile phones which has all the information revolving around the Budget.

Budget Trends across the decade

Before we move further into the specifics of the Budget 2021, let us take a step back in the recent past and have a look on the budgets over the decade. Starting off with the Budget 2010, the situation was different back then. Presented in the shadow of the global financial crisis, the then Finance Minister had announced that India would be looking forward to reverting back to 9 percent growth. The Budget had various announcements such as the creation of the Financial Stability and Development Council and Financial Sectors Legislative Reforms Commission. New banking licenses were also proposed.

New ideas popped in the Budget 2011 which can be termed as modest. The biggest announcement in the budget was an attempt to increase the share of manufacturing in the GDP. Moving to 2012, the Budget introduced by Mukherjee introduced the General Anti Avoidance Rules. Various subsidies were announced while taxes on services were levied. Mukherjee became President and P Chidambaram presented the next budget. Inflation Indexed Bonds were announced and the Finance Minister addressed the major macroeconomic issues. 

The General Elections took place in 2014 and there was a change in the government. Arun Jaitley presented the budget focussing fiscal prudence. He relaxed the FDI limits and presented the idea of great public ownership in banks.  The next budget came after the move of demonetisation and Jaitley announced the National Investment and Infrastructure Fund. Jan Dhan Scheme had been launched and MUDRA came into being. Sovereign Gold Bonds were brought back. 

Budget 2016 aimed at formalisation of inflation targeting. An idea of a credit enhancement fund by LIC was floated. Budget 2017 had two major ideas, first being the unlocking of values from railway subsidies and the second being electoral bonds.

Budget 2018 launched the Aayushman Bharat scheme. A long term Capital Gains Tax was also introduced. Elections took place, Piyush Goyal presented the interim Budget owing to Jaitley’s health and Nirmala Sitharaman took over as Finance Minister after the elections. The Budget 2019 announced the PM KISAN scheme. The government also levied an enchanted surcharge on income above 2 crores. The Government also announced that they’ll borrow in foreign currency.

Budget 2020 introduced a new optional personal Income Tax system, thus providing the citizens with 2 alternatives. DDT was abolished and a new Taxpayers charter was introduced. The Vivaad se Vishwas scheme was introduced. An analysis over the years has shown the growth and decline of the Indian economy and how the budget every year, is tailored as per the changing situation of the economy.

Let’s analyze the Union Budget 2021: https://new.iimun.in/blog/national/union-budget-2021/