What is Union Budget? Understanding the Union Budget

As the media buzzes with talk of the Indian Union Budget 2023, it's clear that this financial event is one of the most highly anticipated and closely watched by the general public.

But how many of us truly understand the basics of the budget and how it affects our everyday lives?

In this blog post, we'll take a closer look at the Indian Union Budget and explain the key concepts and considerations that are relevant to both the common man and the economy as a whole.

Let’s start with the basics: Why a Budget?

Let’s consider the Khanna family, who earns Rs. 5,00,000 a year.

Last year, the Khanna's spent Rs. 5,35,000, which means they borrowed the additional Rs. 35,000.

Clearly, the Khanna's spent more than they earned which resulted in a shortfall of Rs. 35,000.

To be more mindful about their finances in the coming year, they decided to adopted some cost-cutting measures and also increase their income.

They mapped out an estimate of the various expenses and incomes as well as the savings and spending they will be undertaking in the coming year. And this was their Budget for the coming year.

Similarly, the government also prepares an estimate of the nation’s budget which is called the Union Budget. It is a financial plan presented by the government of India every year, outlining its revenues and expenditures for the upcoming fiscal year.

This budget covers the government's an estimate of the nation’s budget estimated revenues from taxes and non-tax sources, as well as its planned expenditures on various programs and schemes. It also includes a statement of the government's overall financial position, including the level of public debt.

So, the Union Budget is important as it lays out the government's plans for the economy and its priorities for the coming year.

Union Budget of India

According to Article 112 of the Indian Constitution, the Union Budget of India is the comprehensive annual financial statement on the government's capital, revenue, and expenditures.

The term "budget" is taken from the old French word "Bougette" which means bag or wallet. It is a detailed financial plan for the present and future based on revenue and expenditure estimates for the Central Government.

The Blueprint Of The Union Budget

The Union Budget of India is the government's blueprint for revenue and expenditure for the fiscal year, which runs from April 1st to March 31st.

The budget is presented by the Finance Minister of India in the Parliament, usually on the first working day of February so that it can be implemented before the start of the new financial year.

The budget is divided into two parts: The Revenue Budget and the Capital Budget.

The revenue budget includes government revenue and expenses, while the capital budget covers capital receipts and payments.

Here are a few key terms and concepts used in the Budget.

Key Budget Terms & Concepts

• Fiscal Deficit: This is the shortfall between the government's income and expenditure.

• Direct Taxes: These are the taxes imposed directly on citizens, such as income tax and corporate tax.

• Indirect Taxes: These are the taxes imposed on suppliers or manufacturers that are passed on to consumers, such as the Goods and Services Tax (GST).

• Non-Plan Expenditure: Includes expenditure on interest payments, defense, subsidies, police, pensions, and other services.

• Plan Expenditure: These are the expenditures on the Central Plan and Central Assistance to states and union territories.

Budget’s Objective: Balanced Growth

The primary objective of the Union Budget is to promote rapid and balanced economic growth, social justice, and equality.

The budget aims to efficiently allocate resources, reduce unemployment, and address income disparities.

By understanding the Union Budget and how it is balanced, we as citizens can better grasp how the government is planning to improve the economic growth.

An important aspect of the Union Budget is the concept of fiscal deficit. Fiscal deficit is the amount by which the government's expenditure exceeds its revenue.

In other words, it represents the extent to which the government has to borrow in order to finance its operations. The government aims to maintain a balance between its expenditure and revenue, in order to avoid a fiscal deficit. This is why the government may choose to promote economic growth, increase taxes or reduce spending in order to balance its budget.

Another important aspect of the Budget is the concept of direct and indirect taxes. Direct taxes are taxes that are imposed directly on citizens, such as income tax and corporate tax. Indirect taxes, on the other hand, are taxes that are imposed on suppliers or manufacturers and are passed on to consumers. The Goods and Services Tax (GST) is an example of an indirect tax. Understanding the difference between these two types of taxes is important for understanding how the government raises revenue and how it impacts citizens.

Conclusion:

In conclusion, the Union Budget is a crucial financial event that impacts the lives of every citizen. It is the blueprint of the government's revenue and expenditure for a fiscal year and is presented every year in the month of February.

By understanding the basics of the budget, such as the fiscal deficit, direct and indirect taxes, and plan and non-plan expenditure, we can better grasp how the government manages its finances and how it plans to drive economic growth and social justice for a particular year.

Read More : Union budget 2024

Sources: Indiabudget.gov.in