Union Budget of India (Important Provisions & Facts) – Economics Notes for APSC, UPSC and other competitive Exams
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The Union Budget of India also referred to as the Annual Financial Statement in the Article 112 of the Constitution of India, is the annual budget of the Republic of India.
Since 2017, the Government of India presents it on the first day of February so that it could be materialised before the beginning of new financial year in April. Before 2017, it was presented on the last working day of February by the Finance Minister in Parliament.
The budget, presented as the Finance bill and the Appropriation bill has to be passed by Lok Sabha before it can come into effect on 1 April, the start of India’s financial year.
On election years, an interim budget is presented in February month. An interim budget is not the same as a ‘Vote on Account’. While a ‘Vote on Account’ deals only with the expenditure side of the government’s budget. An interim budget is a complete set of accounts, including both expenditure and receipts. An interim budget gives the complete financial statement, very similar to a full budget.
Important Facts about Union Budget of India
The first Indian budget was presented by James Wilson, a Scottish economist and politician, in 1860. He did so as a ‘Finance Member of the India Council’. He is regarded as the founder of Standard Chartered Bank and ‘The Economist’ magazine.
As of now,Morarji Desai has presented 10 budgets which is the highest count followed by P Chidambaram’s 9 and Pranab Mukherjee’s 8. Yashwant Sinha, Yashwantrao Chavan and C.D. Deshmukh have presented 7 budgets each while Manmohan Singh and T.T. Krishnamachari have presented 6 budgets.
The first Union budget of independent India was presented by R. K. Shanmukham Chetty on 26 November 1947.
The Union budgets for the fiscal years 1959-61 to 1963-64, inclusive of the interim budget for 1962-63, were presented by Morarji Desai. On 29 February in 1964 and 1968, he became the only finance minister to present the Union budget on his birthday. The last four budgets he presented when he was both the Finance Minister and the Deputy Prime Minister of India.
Morarji Desai is the only Finance Minister to present two Budgets on his Birhtday i.e. February 29, 1964 and 1968.
After Desai, Indira Gandhi, the then Prime Minister of India, took over the Ministry of Finance to become the first woman to hold the post of the Finance Minister.
Pranab Mukherjee, the first Rajya Sabha member to hold the Finance portfolio, presented the annual budgets for the financial years 1982-83, 1983–84 and 1984-85.
Manmohan Singh under P. V. Narasimha Rao, in his next annual budgets from 1992–93, opened the economy, encouraged foreign investments and reduced peak import duty from 300 plus percent to 50 percent. This budget is crucial for the onset of Indian economy’s liberalization.
The Union Budget for 2019–2020 was presented by Nirmala Sitharaman on 5 July 2019. Sitharaman becoming India’s second female defence minister and also the second female finance minister after Indira Gandhi and first full-time female Finance Minister. She has also presented the Union Budget for 2019–2020.
Budget Presentation Date & Time
Until the year 1999, the Union Budget was announced at 5:00 pm on the last working day of the month of February. This practice was inherited from the Colonial Era and another reason was that until the 1990s, all that budgets seem to do was to raise taxes, budget presentation in the evening gave producers and the tax collecting agencies the night to work out the change in prices.
In 1999, Yashwant Sinha, the then Finance Minister of India in the NDA government, changed the ritual by announcing the 1999 Union Budget at 11 am.
In 2016, departing from the colonial-era tradition of presenting the Union Budget on the last working day of February, Minister of Finance Arun Jaitley, in the NDA government of Narendra Modi announced that it will now be presented on 1 February.
Rail Budget
Railway budget of India was the Annual Financial Statement of the state-owned Indian Railways, which handles rail transport in India. It was presented every year by the Minister of Railways, representing the Ministry of Railways, in the Parliament.
The Railway Budget was presented every year, a few days before the Union budget, till 2016. From 2017, the Rail Budget is merged with the General budgets, ending a 92-year-old practice of a separate budget for the nation’s largest transporter.
The last standalone Railway Budget was presented on 25 February 2016 by Mr. Suresh Prabhu.
Halwa Ceremony and Budget briefcase
The printing of budget documents starts roughly a week ahead of presenting in the Parliament with a customary ‘Halwa ceremony’ in which halwa is prepared and served to the officers and support staff involved. They remain isolated and stay in the North Block office until the Budget is presented. The Halwa is served by the Finance Minister. This ceremony is performed as a part of the Indian tradition of having something sweet before starting an important work.
Until 2018, as a part of tradition, Finance ministers carried the budget in a leather briefcase. The tradition was established by the first Finance minister of India, Mr. RK Shanmukham Chetty. On 5 July 2019, Nirmala Sitharaman, broke this tradition by carrying the budget in a Bahi-Khata, which she continued in 2020 also.
Important Budgets
First Union Budget – Independent India’s first Union Budget was presented on 26th November, 1947 by the first Finance Minister of India R K Shanmukham Chetty.
People’s Budget – Union Budget for 1968-69 presented on 29th Februray, 1968 by Sri. Morarji Desai, then Finance Minster was termed as ‘People’s Budget’ due to its ground breaking proposals such as simplified assessment for manufacturers under erstwhile Excise Law regime, abolition of spouse allowance, discontinuance of separate surcharges on earned and unearned incomes, reducing the tax assessment time to two years from 4 years, heavy penalty for tax evaders and among others.
Carrot & Stick Budget – Union Budget for 1986-87 presented on 28th Februry, 1986 by Sri. V.P. Singh, got this nick name due to its serious attempts to removal of license raj from the administration, long-term fiscal policy in-line with five year plans, a beginning of major indirect tax reforms including Excise laws related proposals, introduction of modified Value Added Tax etc.
New India’s foundation stone laying Budget – Union Budget for 1991 – 92 presented on 24th July, 1991 by Sri. Manmohan Singh, then Finance Minister could be termed as ‘New India’s foundation stone laying ceremony’ due to its path breaking proposals such attempts to overhaul India’s Export & Import policy, trade policy, slashing of import license, promotion of export sector to enable the Indian industry to compete with its global players, increase in foreign investment limits among others have shown a totally new path for the Indian economy.
Dream Budget – Union Budget for 1997 – 98 presented on 28th February, 1997 by Sri. P. Chidambaram, then Finance Minister was called the Dream Budget due to its significant proposals on Personal Income Tax and Corporate Tax regime. FM has brought down the highest Personal Income Tax rate from 40 percent to 30 percent, done away with number of surcharges, reduced royalty rates which were welcomed by larger section of the society. Another unconventional but path breaking proposal was ‘The Voluntary Disclosure of Income Scheme (VDIS) – 1997’ to allow people to come forward to disclose their undeclared wealth either in the form of cash or shares or gold or real estate assets, held in India or abroad without disclosing its source of funds. Since Scheme allowed to pay barely 30 and 35 percent of tax on such declared income, waiver hefty interest, penalty and immunity under various laws say, the Income tax law, wealth tax law and the foreign exchange law fetched very good response where more than 3,50,000 Indian citizens came forward to declare their undisclosed income or assets and committed to pay tax about Rs. 7,800 crore.
Millennium Budget – Union Budget for 2000-01 presented on 29th February, 2000 by Sri. Yashwant Sinha, then Finance Minister was a first Budget of the millennium. Finance Minister through this budget laid out a path to make India as a software hub. Introduction of Transfer Pricing Regulation under Income Tax Law to curb erosion of tax base India, phasing out of exemptions / subsidies granted for export regime, reduction in customs duty on computers from 20 per cent to 15 percent, mother boards from 20 per cent to 15 per cent, on specified capital goods for manufacture of semiconductors from 15 per cent to 5 per cent were truly shot in the arm for India’s growing software industry.
Ordinary Indians Budget – Union Budget for 2005 – 06 was presented 28th February, 2005 by Sri P. Chidambaram, then Finance Minister due to its pro poor and people oriented proposals known as Ordinary Indians or Aam Aadmi Budget. Hon’ble Finance Minister has presented one of the best union budgets in recent times. Tax proposals including upward changes in tax slabs, lowered corporate tax rates, reduction in customs duty on crude petroleum, collective Fringe Benefit Tax for employees, allowing Minimum Alternate Tax (MAT) Credit, introduction of National Rural Employment Guarantee Act (NREGA) and Right To Information Act (RTI) were truly common man’s needs.
Budget Documents & Its list
Besides the Finance Minister’s Budget Speech, there will be a set of Documents which also presented in the Parliament.
- Annual Financial Statement (AFS)
- Demands for Grants (DGs)
- Finance Bill of the coming Financial year
- Statements mandated under FRBM Act-
♦ Macro-Economic Framework Statement
♦ Fiscal Policy Strategy Statement
♦Medium Term Fiscal Policy Statement
- Expenditure Budget
- Receipts Budget
- Memorandum Explaining the Provisions in the Finance Bill
- Budget at a Glance
- Outcome Budget
- Economic Survey
Economic Survey
Economic Survey – The Central Government is bringing an ‘Economic Survey’ indicating survey on economic trends of the country. The Survey throw lights on agricultural, industrial production, infrastructure, employment, money supply, prices, imports, exports, foreign exchange reserves and other relevant macro and micro economic factors which have a direct impact on the Union Budget.
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