What is a Union Budget?

[This article explains the meaning of Receipt budget, Non-debt receipt, capital budget, capital expenditure, department of expenditure, etc.]

A Union budget is the annual spending plan of the Government based on the estimated income and expense of a nation for the next financial year. The objective of the Government Budget is a blueprint for stimulating rapid and balanced economic growth, social justice, and equality. The budget aims to efficiently allocate resources, reduce unemployment, and address income disparities.

In India, the fiscal year starts on 1st April and concludes on the 31st of March of the next year. The Finance Minister of the Country presents the budget in the Lok Sabha every year normally in February.

The government makes an expenditure statement according to its objectives and then starts gathering the resources and funds to fulfill the proposed investment. Along with the Expenditure Budget, the Government presents budget receipts.

Government budget receipts refer to the funds that a government expects to receive during the next financial year. These receipts can come from various sources, including taxes, grants, loans, and other forms of revenue. The sum of all receipts from the taxes and all other duties under the government are referred to as tax revenue. They are either direct taxes or indirect taxes. It is the main source of regular receipts of the government and is categorized into Direct Taxes and Indirect Taxes.

Budget receipts are comprised under the Annual Financial Statement. It gives a rundown of non-tax revenue, capital receipts, and a summary of tax revenue. It additionally gives a point-by-point examination of the assessment of tax and non-tax receipts along with trends.

Capital budget – The capital budget includes capital receipts (such as disinvestment, and borrowing) and lengthy capital expenditure (for instance, long-term investments, and creation of assets).

Capital Expenditure: Capital expenditure is the money spent by the government on the development of machinery, equipment, buildings, health facilities, education, etc.

Capital receipts: Capital receipts are those receipts that either create liabilities or reduce the asset value of the government. They are the recovery of loans, market borrowing, etc. from various sources to fund the long-term developmental needs of the Government. Capital receipts can be both non-debt and debt receipts. Loans from the general public, foreign governments, and the Reserve Bank of India (RBI) form a crucial part of capital receipts. Recovery of loans given by the Centre to states and others is also included in capital receipts. In the balance sheet, capital receipts are mentioned in the liabilities section. The capital receipt has a nature of non-recurrence. Capital receipts can be both non-debt and debt receipts.

Debt Receipt: Debt Receipt is money borrowed by the Government which has to be repaid by the government. Around 25 per cent of government expenditure is financed through borrowing. Market loans, issuance of special securities to public-sector banks, issue of securities, short-term borrowings, treasury bills, securities against small savings, state provident funds, relief bonds, saving bonds, gold bonds, external debt, etc., are all examples of debt capital receipts. The lesser the debt receipt, the better the economy’s financial health.

Non-debt receipts:

Non-debt receipts are those the government receives through the sale of assets that do not incur any future repayment burden for the government. For example, disinvestment of public sector units is a non-debt capital receipt. Almost 75 per cent of the total budget receipts

Receipt Budget:

There are two parts to the Receipt Budget: Part A and Part B. Part A carries information about all types of receipts with their break-up. Receipt Budget provides a breakdown of tax and non-tax revenue items and capital receipts regarding the nature of debt and non-debt. The annexures to the receipt budget show the amount of revenue devolved to the states by the Centre as their share in the Union taxes. The data shown are actual, revised, and budgeted so that the states can better plan their finances.

Part B has the detailed Asset and Liability statements. This part contains statements on the various government assets and liabilities. The Asset and Liability statements are prepared based on the inputs received from multiple ministries and departments. The country’s total quantum of debt and structure can be gauged from this part of the Receipt Budget. This part captures the debt position of the Government of India and the Statement of Assets and shows the statement of liabilities and guarantees given by the Central government.

Department of Expenditure:

The Department of Expenditure is the nodal Department for overseeing the public financial management system in the Central Government and matters connected with state finances. The department is responsible for the implementation of the recommendations of the Finance Commission and Central Pay Commission, monitoring of audit comments/ observations, and preparation of Central Government Accounts. The expenditure department also assists central Ministries/ Departments in controlling the costs and prices of public services, reviewing systems and procedures to optimize outputs and outcomes of public expenditure. The National Institute of Financial Management (NIFM), Faridabad, which is an autonomous body is under administrative control of the department of the department of expenditure.

Related post: