From ideating all the changes required in components and subcomponents of the budget to finalising the allocations & sources of funds, everything is done with the collaboration of different ministries, states, and UTs. Before jumping off the steps, let’s understand which department is involved with the union budget significantly:
Since the union budget is a financial statement of the government that lays out a fiscal roadmap of the country for the next financial year, the union budget is prepared by the ministry of finance with the consultation of Niti Ayog. Niti Ayog is an apex body assigned with the task of economic development with the involvement of state governments and the governments of union territories in India.
Let’s understand each step required to create the union budget.
Step 1 - Issuing circulars for all expenses and revenues
In the very first step, the ministry of finance issued a circular to all the ministries, UTs, states, and autonomous bodies to prepare a budget for the incoming years along with explanations. In the same budget, everyone’s demand for money is taken into consideration.
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Step 2 - Scrutinising
Once proposals are received, the top government official will scrutinise the genuineness of the proposal made by all the stakeholders while aligning it with the long-term objectives of the government.
Step 3 - Consultations with the expenditure department
Extensive consultation will be made with the department of expenditure before making any financial decision by the government. Once scrutinised, the data will be made available to the ministry of finance for making the final allocation of funds.
Step 4 - Allocation of funds
After all the consultations and recommendations, the funds will be allocated to the respective departments, ministries, state governments, and UTs according to the estimates provided. In the case of any disputes regarding the allocation of funds, the finance ministry will consult with the union cabinet or the Prime Minister of the country to make rational decisions.
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Step 5 - Pre-union budget meetings
The finance minister will sit in on meetings with various stakeholders to whom funds are allocated to have an in-depth understanding of the estimated budget proposed by them to the ministry. After a deep analysis of the proposal and consultations, the finance ministry will take a final decision on the fund demand made by the departments, UTs, and states.
The stakeholders include banks, agriculturists, economists, and trade unions.
Step 6 - Final documentation of budget
Final documents take place after making final decisions on the expenditure with deep discussions and consultations, and documentation of the budget starts. Before Feb 2021, the union budget used to be presented in a physical form traditionally known as “bahi khata”, but on the said date, the finance minister Nirmala Sitharaman presented the first paperless budget. It was presented on the tablet. Now, the documentation of the budget will be done in electronic format by serving “halwa” to the finance ministry staff as a part of the ritual.
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Step 7 - Presentation
The preparation of the union budget ends with the ritual of “halwa” distribution, and the finance minister of the country will present the union budget on the 1st Feb every year in digital format. Currently, the finance minister Nirmala Sitharaman will be presenting the budget on 1st Feb 2023 and the speech will start at 11 A.M.
It is necessary to have a detailed understanding of the budget, especially when you are professionally engaged with the activities that directly affect your business with the actions taken by the government in the budget.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com