How did the term budget originate and what does it mean?
The term ‘budget’ has been derived from the French word ‘bougette’, which means a leather bag or wallet. The term was used in its present sense for the first time in 1873, in a satire directed against Walpole’s financial plan for that year. Since then, the term has been used for an annual financial statement of income and expenditure of a government.

What are the Constitutional provisions?
The Union government, under Article 112, is required to lay an annual financial statement of estimated receipts and expenditure before both Houses of Parliament. Under Article 114, the government is required to get the Appropriation Bills approved by Parliament. This is necessary because the government cannot withdraw any money from the Consolidated Fund of India without the approval of Parliament.

Article 265 prohibits the government from collecting any taxes without the authority of law. Therefore, the government comes up with the Finance Bill. The Bill may levy new taxes, modify the existing tax structure or continue the existing tax structure beyond the period approved by Parliament earlier.

What are Budget documents?
The Union Budget comprises various documents. The first one is the speech of the finance ministry, which he reads in the Lok Sabha. Earlier, the speech used to be split into Part A and Part B. Part A used to contain the main features of the Budget, including policy initiatives, while Part B dealt with tax proposals. Former finance minister Jaswant Singh discontinued the practice of presenting the speech in two parts. Now there is one integrated Budget speech. The other important documents are: key to Budget documents; Budget at a glance; Annual financial statement; Demands for grants of central government; Expenditure Budget Volume I and II; Receipts Budget; Finance Bill; and Memorandum explaining the provisions in the Finance Bill. Later, ‘Implementation of Budget announcements’ and ‘Key features of the Budget’ was added to the set of Budget documents.

What do these documents indicate?
The Budget speech provides the direction in which the government wishes to move in the coming financial year. The speech also lists the problems being faced by the country on the economic front and indicates the government’s response to them. It also summaries various expenditure and tax proposals.

Demands for grants indicates the money which will be granted to various ministries and departments, the office of the President, Vice-President and other organs of the government. Expenditure Budget Volume I and II explains these provisions. While Volume I explains the provisions ministry-wise, Volume II analyses expenditure trend over the years with regard to Plan and non-Plan expenditure.

Receipts Budget gives details of revenue receipts and capital receipts and explains the estimates so as to make them intelligible to an ordinary citizen. It also include trend of receipts over the years and details of external assistance.

The Finance Bill includes the tax proposals and the tax rates while the Explanatory Memorandum explains tax provisions contained in the Finance Bill.

Budget At A Glance provides an overview of government finances. It’s more like a balance-sheet of the Union. Progress towards implementation of Budget proposals announced in previous years are listed in the Implementation Budget. And Key to the Budget indicates what is contained where.

Who formulates the Budget?
The Union ministry of finance formulates the Budget in consultation with other administrative ministries and also the Planning Commission. Tax proposals are primarily formulated by the finance ministry though inputs are taken from ministries, chambers of commerce and industry, economists, agriculturists, trade union leaders and consumer activists concerned. The Railway Budget, however, is presented separately. It was separated from the General Budget in 1921.

What is a vote on account?
Whenever detailed discussion on all demands for grants are not completed on or before March 31, by the legislature, the appropriation on account bill is sought for one or two months commencing from April 1. This is to allow the government to function, pending passage of the Budget by Parliament.

What is deficit?
There are three categories of deficits — fiscal, revenue and primary. Fiscal deficit is the difference between revenue receipts plus certain capital receipts and total expenditure. Since ideally the capital expenditure of the government should be financed from revenue surplus, fiscal deficit provides a measure of macro-economic imbalance. It is also a measure of public borrowing.

Revenue deficit is the excess of revenue expenditure over revenue receipts. It indicates government’s dependence on borrowed funds for meeting current expenses. Primary deficit is measured by subtracting the interest payments from fiscal deficit. It is a measure of the current year’s fiscal operations after excluding the liability of interest payment created due to borrowings undertaken in the past.