2. Introduction
◦ The Union Budget of India, also referred to as the Annual Financial Statement in
Article 112 of the Constitution of India, is the annual budget of the Republic of India
◦ The Government presents it on the first day of February
◦ The budget, which is presented by means of 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
◦ Budget Division of the Department of Economic Affairs in the Finance
Ministry is the nodal body responsible for preparing the Budget
3. Stages-
◦ In Parliament, the Budget goes through six stages:
◦ Presentation of Budget.
◦ General discussion
◦ Scrutiny by Departmental Committees.
◦ Voting on Demands for Grants.
◦ Passing of Appropriation Bill.
◦ Passing of Finance Bill.
4. Objectives
◦ Reallocation of Resources
◦ Reducing Inequalities in Income and Wealth
◦ Contributing to Economic Growth
◦ Bringing Economic Stability
◦ Managing Public Enterprises
◦ Reducing Regional Differences
6. Components of Union Budget
◦ The Union Budget consists of a detailed account of the government’s
finances, its revenues from various sources and expenditures to be
incurred on different activities
◦ Divided into two parts:
(i) Revenue Budget
(ii) Capital Budget
7. Revenue budget
◦ revenue receipts and revenue expenditure
◦ expenditure which does not result in the creation of assets is treated as revenue
expenditure
◦ The revenue receipts include both tax revenue (like income tax, excise duty) and non-
tax revenue (like interest receipts, profits)
◦ Other revenues are receipts of the government mainly consisting of interest and
dividend on investments made by the government, and fees and receipts for other
services rendered by the government
8. ◦ Revenue expenditure is expenditure for the normal running of government
departments and various services, interest charges on debt incurred by government,
subsidies etc.
◦ All grants given to state governments and other parties are also treated as revenue
expenditure even though some of the grants may be for creation of assets
◦ If revenue expenditure exceeds revenue receipts, the government incurs a revenue
deficit.
9. Capital budget
◦ Capital receipts are receipts of the government which create liabilities or reduce
financial assets, e.g., market borrowing, recovery of loan, etc.
◦ capital receipts and payments
◦ Capital receipts are loans raised by the government from the public which are called
- market loans
- borrowings by the government from the Reserve Bank and other parties through sale
of treasury bills
- loans received from foreign bodies and governments
- recoveries of loans granted by the central government to state and union territory
governments and other parties.
10. ◦ Capital payments consist of capital expenditure on –
- acquisition of assets like land, buildings, machinery, and equipment
- investments in shares
- loans and advances granted by the central government to state and union territory
governments, government companies, corporations and other parties
