How the Union Budget works

The Constitution never uses the word “budget”. Article 112 requires the government to lay before Parliament an annual financial statement: its estimated receipts and spending for the coming financial year, which runs from 1 April to 31 March.

Budget day

The Finance Minister presents the budget in the Lok Sabha. Since 2017 it has usually been presented on 1 February, so that it can be approved before the year begins; in a general-election year, an interim budget comes first and the new government presents the full budget later. Also since 2017, the separate railway budget has been part of the Union Budget. The day before, the government normally tables the Economic Survey, prepared by the Chief Economic Adviser, which reviews the state of the economy.

What is in it

• The annual financial statement — receipts and spending, divided into revenue and capital accounts.
• Demands for grants — the spending each ministry asks Parliament to approve.
• The Finance Bill — the changes to taxes.
• Explanatory documents such as “Budget at a Glance”, which shows the headline numbers, including the fiscal deficit: how much the government expects to borrow.

How Parliament approves it

1. General discussion in both houses on the budget as a whole.
2. Demands for grants. Department-related standing committees examine the ministries’ demands, and the Lok Sabha debates and votes on them. Only the Lok Sabha votes on demands; the Rajya Sabha can discuss them. Members can move “cut motions” to reduce a demand.
3. The guillotine. Time always runs short, so on the last allotted day the Speaker puts all the remaining demands to the vote together, without discussion.
4. The Appropriation Bill authorises the government to withdraw the approved money from the Consolidated Fund of India — no money can be spent without it (Article 114).
5. The Finance Bill makes the tax changes law. Both bills are money bills, so the Rajya Sabha can only recommend changes.

Vote on account

If the budget cannot be passed before 1 April — for example in an election year — the Lok Sabha can grant a vote on account (Article 116): an advance to keep the government running for a few months until the full budget is approved.

Revenue and capital

Revenue spending covers salaries, pensions, interest and subsidies; capital expenditure builds assets such as roads and railways. Economists watch the balance between the two, and the fiscal deficit, as signs of how sustainable the government’s finances are.

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