The Union Budget for the Financial Year 2023-24 is just around the corner. It is a widely anticipated event, and all eyes are on the budget. If you are new to the world of finances and want to understand the basics of the Union Budget, we are here to help you.
The Union Budget, commonly known as the annual financial statement, is a statement of the expected income and expenditures of the government for that specific year, as per Article 112 of the Indian Constitution.
The Union Budget takes into account the finances, which run from 1 April to 31 March. The budget can be further classified into two categories: The Revenue Budget and Capital Budget.
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Let us see the meaning of these two categories and their significance.
The Revenue Budget
The revenue budget is made up of revenue receipts and revenue expenditures. A revenue deficit exists when the revenue costs exceed the revenue receipts.
Revenue receipts, estimated in the yearly financial accounts after accounting for the effects of the taxation plans included in the finance bill, represent the amount of taxes and other levies the union government expects to collect. Additionally, it contains earnings from other sources such as interest, dividends from investments, and fees from using government services.
Revenue expenditure are the regular expenses associated with the government's regular operations and the variety of services provided to the general population. It consists of expenditures for paying interest on the debt, running government entities, giving out subsidies, etc. The treatment of grants (revenue or capital) granted to state governments, union territories, and other parties is also considered to be a revenue expense.
The revenue budget is an important component of the Union Budget of India as it outlines the government's estimated revenue from various sources, such as taxes and non-tax revenues, and the proposed allocation of funds for various government schemes and programs.
It is important because it is the revenue that the government has available to fund its various activities and services, including healthcare, education, infrastructure development, and defence.
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Additionally, the revenue budget provides essential information on the government's tax policies, which can have a significant impact on the economy and businesses. It also provides information on the government's efforts to increase revenue, such as through tax reforms or efforts to increase non-tax revenues.
Overall, the revenue budget is an important tool for the government to plan and manage its finances and ensure that it has the resources to meet the needs of its citizens.
Capital expenditures and capital receipts make up the capital budget, which has long-term components. Loans from taxpayers, the Reserve Bank of India (RBI), and foreign governments are some of the main sources of government revenue.
On the other side, capital expenditures include expenses for the creation and upkeep of tools, machinery, buildings, schools, and other infrastructure. A fiscal deficit happens when the amount of money the government spends exceeds the amount it brings in.
The capital budget is significant because it offers a thorough overview of the government's objectives and investment plans for the nation's economic growth.
The capital budget, which allocates funds for the building of new infrastructure and the upkeep of current infrastructure, including roads, railroads, airports, and ports, is crucial in fostering economic growth and development. This enhances connectedness, lowers travelling expenses, and boosts productivity.
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Additionally, it is essential for fostering the expansion of critical economic sectors, including agriculture, manufacturing, and services. For instance, allocating cash for irrigation, electricity, and communication infrastructure may aid in boosting agricultural production, while expenditures in R&D can support technical advancement and innovation in the industrial sector.
Additionally, the capital budget contributes to the improvement of citizens' quality of life and the creation of jobs. Investments made by the government in infrastructure and other long-term projects have the potential to generate jobs in manufacturing, construction, and other industries, as well as open up access to necessities like water, power, and transportation.
In summary, the capital budget is an important tool for the government to plan and manage its long-term investments and infrastructure development, which in turn is important for the sustainable economic growth and development of the country.
The Union Budget summarises the government's expected revenue and expenditure for the following fiscal year. It is a crucial document that establishes the course for the growth and development of the nation's economy. It is crucial to comprehend these elements to evaluate the budget and determine how it affects the economy and society.
Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.