Explained: Important steps in preparation Union Budget
4 min read • Updated: January 19, 2024, 4:49 PM
The budget-making exercise usually starts in August and September, around six months before the presentation in the Lok Sabha by the Finance Minister.
The Union Budget is presented on the first working day of February every year. Investors, taxpayers, corporates, business owners and the general public keenly watch the one-day affair to find out what’s in store for them in the Budget.
For many it may be just watching the speech of the Finance Minister or scanning the newspaper headlines the next day to take a quick grasp of new proposals. But, for those who prepare and finalise the budget proposals, it is a lengthy process which starts well in advance by the middle of a financial year.
The budget-making exercise usually starts in August and September, around six months before the presentation in the Lok Sabha by the Finance Minister. It's a meticulous exercise carried by a team headed top bureaucrats and experts.
This year, Finance Minister Nirmala Sitharaman will present the Interim Budget on February 1 ahead of the Lok Sabha elections. The full Budget is expected to be presented by the new government in July after the Lok Sabha elections.
Important steps in preparation of Union Budget
There are five major steps in the Budget preparation which start with initial notification by the Expenditure Department of Finance Ministry inviting proposals from the various ministries for the next year’s budget.
Let’s take a look at the key stages of the budgeting exercise.
1. Issue of Circular by Economic Affairs Department
Kicking off the budget-making process, the Budget Division under the Economic Affairs Department of the Finance Ministry issues a circular to all ministries and departments, Union Territories, state governments and autonomous bodies.
The circular contains necessary guidelines for submitting various details of receipts and expenditures in the fiscal by the departments concerned as well as demands for the next fiscal. A tentative schedule of various events such as the timeline for submitting the initial details and demands and schedule of pre-budget meetings is explained in the circular.
All departments and ministries are also directed to submit details of implementing agencies or autonomous bodies for which dedicated funds have been created. The departments are asked to explain the reasons for the continuance and requirement of grant-in-aid support. Such details are submitted by the departments by the first week of October.
2. Pre-budget meetings
After the receipt of details from financial advisors of various departments, the Economic Affairs Department validates the details and demands, and allocates revenue to various departments and divisions.
Pre-budget meetings are organised with various departments for better understanding of their demands and programmes as well as negotiations over the funds allocated for the departments.
These meetings usually take place from the second week of October till November. The requirement of funds for various expenditures as well as receipts of ministries or departments is discussed in the pre-budget meetings. Non-tax revenues, including arrears of non-tax revenue and indicative budget figures, are discussed on a net basis.
The Finance Ministry officials also hold meetings with other stakeholders such as farmer bodies, trade unions, economists, bankers, industry associations and small businesses to take their views and demands for the next budget.
3. Formulation of Budget
Following the pre-budget meetings, budget estimates are prepared by the Finance Ministry officials. The budget proposals are also discussed with the Prime Minister of India or Union Cabinet if there are some disagreements over the fund allocation or new schemes are proposed. Public comments are also invited for the formulation of new welfare schemes. The ministry in consultation with the Central Board of Excise and Customs and the Central Board of Direct Taxes also finalises a report on expected revenue in the upcoming financial year.
**4. Printing the Budget **
The Finance Ministry every year holds a traditional event, Halwa Ceremony, to mark the start of the printing of the Union Budget Document. During the ceremony, finance ministry officials involved in the budget-making exercise prepare and consume Indian dessert halwa. After the start of the printing, these officials do not leave the premises of the finance ministry until the presentation of the Budget to maintain secrecy.
5. Presentation of the Budget
The Finance Minister tables the Budget Documents in the Lok Sabha. The Budget is presented on February 1. As India is going for general elections in April-May this year, the government will present an Interim Budget next month.