Article 112 of the Indian Constitution fixes the responsibility on the government of the day for laying down the annual financial statement (also called budget) before the parliament.
Let us look at this entire process from the preparation to the passing of this important document.
The management of the entire budget process is handled by the Department of Economic Affairs, Ministry of Finance.
The budget presents an opportunity to the Legislature to hold the Executive responsible for its actions. It raises the bar of accountability.
This entire process can be divided into the following three stages.
1. Pre Budget process-
The preparations process begins well in advance in a year. Normally this process commences sometime around July-August.
Proposals are invited by a formal note that is sent to all Ministries.
The Ministries in turn, send it to their departments and affiliated agencies. These departments and affiliated agencies will have to send documents to the Secretary of the Ministry.
These Documents are related to budget proposals for the upcoming financial year, Budget Estimates (the allocated funds under the previous budget), Revised Estimates of the current financial year, and expenditure statements.
The departments will also have to explain their current activities and upcoming new activities for which funds are being sought.
Once sent to the Secretary of the Ministry, the officer then forwards it to the Ministry of Finance.
The Finance Ministry then scrutinizes these documents carefully and raises questions and clarifications from the concerned Ministry.
Any dispute between the Ministry of Finance and other Ministries is settled by the Cabinet, whose decision is final in this regard.
The Departments of Revenue and Expenditure are consulted before the budget is prepared.
Once the budget has been prepared, the Cabinet holds a discussion and approves it.
The contents of the Budget are a secret document and cannot be revealed until it is presented on the floor of the house.
Around two weeks before the budget is presented, there is a halwa ceremony that is held in the North Block.
The Economic Survey is presented, a day before the budget.
2. Budget Presentation-
The Finance Minister presents the budget on February 1st normally. This usually contains about 10 documents that have to be laid before both the houses of the parliament.
These documents are related to statements on expenditure, tax proposals, capital account and current account statements, previous year’s Revised Estimates and Actual Estimates of the preceding year.
For example, if the budget is presented in the year 2020, the Minister will present the proposed expenditure for 2020-21, Revised Estimates of 2019-2020 and the Actual Estimates of 2018-19.
After the budget presentation, there is a general discussion on the matter.
The proposals are then sent to the 24 Departmental Standing Committees of the Indian Parliament.
They are then given almost a month to study the proposals.
3. Post Budget presentation
Once the parliament reconvenes, all items under the Money bill are voted item by item and cleared. Once the Money bill has been cleared, the executive is authorized to withdraw money from the Consolidated Fund of India.
The Parliament has to clear the Money Bill which contains proposals on expenditure and other policy statements and the Finance Bill, which contains a list of taxation proposals.
The budget can be discussed in the Rajya Sabha but cannot be voted upon there.
The Lok Sabha has to clear the Money bill, otherwise, it will be deemed that the government has lost the confidence of the house and will have to resign.
The budget proposals then comes into effect.
This year the Finance Minister Nirmala Sitharaman will present the budget on February 1st. The Economic Survey will be presented a day before that on January 31st.