Jan 31, 2023
Priority 1 Inclusive Development
Priority 2 Reaching the Last Mile
Priority 3 Infrastructure and Investment
Priority 4 Unleashing the Potential
Research and Development:
Priority 5 Green Growth
Priority 6 Youth Power
Priority 7 Financial Sector
New Tax Rates
Nominal GDP (or what will be the size of the economy next year?)
Fiscal Deficit (or how much money can the government borrow?)
Total Revenues (or how much money can the government raise on its own?)
Total Expenditure (or what is the maximum it can spend and where?)
The Union Budget for the financial year 2023-24 will be presented by the Finance Minister Nirmala Sitharaman on 1st February 2023.
How is a Union Budget prepared? What are the forces that shape it? (250 words, 15 marks)
Finance Minister Nirmala Sitharaman Listed seven priorities of the budget ‘Saptarishi’ are inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power, and financial sector.
Rs. 15,000 crores for implementation of Pradhan Mantri PVTG Development Mission over the next three years under the Development Action Plan for the Scheduled Tribes.
The program covers 500 blocks launched for the saturation of essential government services across multiple domains such as health, nutrition, education, agriculture, water resources, financial inclusion, skill development, and basic infrastructure.
Outlay for PM Awas Yojana is being enhanced by 66% to over Rs. 79,000 crores.
Investment of Rs. 75,000 crores, including Rs. 15,000 crores from private sources, for one hundred critical transport infrastructure projects, for last and first-mile connectivity for ports, coal, steel, fertilizer, and food grains sectors.
Capital investment increased by 33% to 10 lakh crore, 3.3% of GDP.
For this more than 39,000 compliances were reduced and more than 3,400 legal provisions were decriminalized.
The bill amends 42 Central Acts.
To facilitate the efficient flow of credit, promoting, and fostering financial stability. A new legislative framework is to be designed in consultation with RBI to govern this credit public infrastructure.
For faster handling of various forms filed with field offices under the Companies Act.
A one-time new small savings scheme for the tenure of 2 years (up to March 2025) at a fixed interest rate of 7.5% with a partial withdrawal option and a deposit facility up to Rs 2 lakh for women or girls.
To enhance business activities in GIFT IFSC, the following measures are to be taken:
Current Total Income (Rs) Rate 2023-24(percent) Previous Total Income(Rs) Rate 2022-2(percent) Up to 3,00,000 Nil Up to 2,50,000 Nil From 3,00,001 to 6,00,000 5% From 2,50,001 to 5,00,000 5% From 6,00,001 to 9,00,000 10% From 5,00,001 to 7,50,000 10% From 9,00,001 to 12,00,000 15% From 7,50,001 to 10,00,000 15% From 12,00,001 to 15,00,000 20% From 10,00,001 to 12,50,000 20% Above 15,00,000 30% From 12,50,000 to 15,00,000 25% Above 15,00,000 30%
They can claim payments made to sugarcane farmers prior to the assessment year 2016-17 as an expenditure. This is expected to provide them relief of almost Rs. 10,000 crores.
They will get a higher limit of Rs. 3 crores for TDS on cash withdrawal.
Deduction from capital gains on investment in residential houses under sections 54 and 54F is to be capped at Rs. 10 crores for better targeting of tax concessions and exemptions.
Income of authorities, boards, and commissions set up by the Union or State statutes for housing, development of cities, towns, and villages, and regulating, or regulating and developing an activity or matter.
Conversion of gold into the electronic gold receipt and vice versa is not to be treated as a capital gain.
Deployment of about 100 Joint Commissioners for disposal of small appeals in order to reduce the pendency of appeals at the Commissioner level.
Period of tax benefits to funds relocating to IFSC, GIFT City extended till 31.03.2025.
Certain acts of omission of liquidators under section 276A of the Income Tax Act are to be decriminalized with effect from 1st April 2023.
Also Read: What are Green Debt Swaps and How Do They Work?
Compounded Rubber: It is increased to 25% from 10% or 30 per kg whichever is lower.
Independent India presented its first budget in 1947.
In 1924, on the recommendations of the Acworth Committee Report (1921), Railway Budget was separated from the General Budget.
The Government of India had two budgets, namely, the Railway Budget and the General Budget, till 2017. Now the Government of India has only one budget i.e. Union Budget.
The Constitution of India lays out certain requirements related to the budget in India. These include
Important read: Economic Survey 2023 | Top 20 Key Highlights
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Other Types of Budget
Traditional or General Budget: The traditional budget is the initial structure of the general budget that aims for financial control over the Executive and Legislature.
General Budget contains the details of the expenditure done by the government in various sectors.
It is the result of the shortfalls of the Traditional budget as it doesn’t provide the outcome of the expenditure incurred.
Thus, the Performance Budget was drafted as a complimentary budget to the earlier Traditional Budget.
The budget is based on the outcome which is the base of any budget, such a budget is known as a ‘Performance Budget’.
In short, in Performance Budget the government has to tell ‘what’ and ‘how’ it is done for the nation and citizens.
Zero-Based Budget: This was introduced due to continuous revenue deficit in the budget and due to poor implementation of the Performance Budget.
In this nothing from the previous financial years is considered and instead every activity is decided based on a Zero basis thus this budget is also known as the ‘Sun Set Budget’.
Peter Pyre is known as the father of ‘Zero-Based Budgeting’ who presented this sort of budget in 1970. The budget was adopted in India in 1987-88 after it was introduced by the mainstream Research organization, the Council of Scientific and Industrial Research.
In 2005, due to the burden of the schemes on the government and the lack of any parameters to measure the outcome of the schemes the government introduced the Outcome Budget.
Outcome budget is aimed to reduce the cost burden of various schemes from the government.
The Union Budget is the compromise solution between the pulls and pressures of these three demands:
‘Rule of Lapse’ and ‘March Rush’:
The Union Budget is based on the principle of the annuity.
As per the principle of annuity, the money to the government is granted by the Parliament for the financial year. In case the granted amount is not spent by the end of the financial year then the balance expires and returns to the Consolidated Fund of India.
This is known as the ‘rule of lapse”.
Rule of lapse facilitates effective financial control by the Parliament as no reserve funds can be built without its authorization.
The term ‘March Rush’ is the heavy rush of expenditure towards the close of the financial year, due to the ‘rule of lapse’.
To limit the ‘March Rush’ the government usually sets a limit on the total expenditure the government can use from the allocated budget in March.
The Union Budget for the upcoming fiscal year is based on how the overall economy would do in the coming year, the size of the overall economy, and its growth rate. Thus to prepare a Union Budget following are ascertained:
Fiscal Responsibility and Budget Management (FRBM) Act, 2003
The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was enacted by the Parliament in August 2003.
Objective of introducing the FRBM Act, 2003: To institutionalize fiscal discipline, reduce the fiscal deficit, and improve macro-economic management and the overall management of the public funds by moving towards a balanced budget.
Amendment: Section 7A of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, as amended in May 2012, provides that the Central Government may entrust the Comptroller and Auditor General (CAG) of India to review periodically as required, the compliance of the provisions of this Act and such reviews shall be laid before both Houses of Parliament.
Major Provisions of the FRBM Act 2003
The FRBM framework mandated the Central Government to limit the fiscal deficit to up to 3% of the gross domestic product by the 31st of March, 2021.
It further provides that, the Central Government shall endeavor to limit the General Government Debt to 60% of GDP and the Central Government Debt to 40% of GDP, by 31st March 2025.
It is the document presented to the Parliament. The budget document comprises the following:
Annual Financial Statement
Demands for Grants
Outcome Budget, among others
The budget goes through the following six stages in the Parliament:
Presentation of budget.
Scrutiny by departmental committees.
Voting on demands for grants.
Passing of appropriation bill.
Passing of finance bill.
News Source: The Indian Express, hindustantimes
Which of the statements given above is/ are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 2 only
(d) 1, 2 and 3
The Union Budget is the government’s economic and fiscal policies for the next fiscal year. It is also the government’s proposed expenditures and revenues for the upcoming fiscal year.
This process begins in August-September and involves a number of steps, including pre-budget meetings and a halwa ceremony. It culminates with the presentation of the Budget in the Parliament and its approval by the President. The Government of India presents the Union Budget every year on 1st February.
The government calculates the total amount of money it can raise from borrowings after ascertaining the nominal GDP. Now the government ascertains revenue they earned through three main ways namely tax revenues (by levying taxes), non-tax revenues (such as the dividends earned by government-owned enterprises, etc.), and money raised through disinvestment of public sector undertakings. The ascertained sum from borrowing and earning is now clubbed together to know the total money the government can spend on different schemes (old or new).
The budget goes through the following six stages in the Parliament:
Liaquat Ali Khan, a Member of the Interim Government presented the Budget for 1947-48. After Independence, India's first Finance Minister, Shri Shanmukham Chetty, presented the first budget of independent India on 26th November 1947.
Article 112 of the Constitution requires the President of India to cause the annual financial statement (i.e. the budget) to be laid before the Parliament.
After Independence, India's first Finance Minister, Shri Shanmukham Chetty, presented the first budget of independent India on 26th November 1947.
The procedure of budgeting culminates with the presentation of the Budget in the Parliament and its approval by the President.
The Government of India presents the Union Budget every year on February 1. The budget is presented by the Finance Minister of India in Parliament.
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