Union Budget 2023: The Four Primary Stages Of Budget Simplified

Finance Minister Nirmala Sitharaman is set to present the Union Budget 2023-2024 on February 1, 2023. The preparation of the Union Budget every year involves months of planning and execution. The process of making the Union Budget starts as early as August-September, which is about six months prior to the date of the presentation of the Budget in the Parliament. Once the Union Budget is presented, it has to be passed by both houses of Parliament before April 1, i.e., the beginning of the financial year.

The Budget division of the Department of Economic Affairs (DEA) in the Ministry of Finance prepares the Union Budget every year in consultation with Niti Aayog and other concerned ministries. Primarily, there are four stages involved in the budget-making process. 

Let’s take a look at the four stages of preparing the Union Budget:

Part A: Estimates of Expenditure

This process begins with the concerned ministries providing their initial estimates of planned and non-planned expenditures. They discuss the planned expenditures with the Planning Commission. The financial advisors of the ministries prepare the non-planned expenditures. The expenditure secretary then consolidates these expenditures and after intensive discussion with the financial advisors, budget estimates are set for the following fiscal year.

Part B: Estimates of revenue

As a concurrent exercise, an assessment of expected revenues that are likely to flow into the government treasury is done. These include receipts from the repayment of loans given by the government, receipts from the divestment of public-sector equity, tax revenues, receipts from the dividends from public-sector units, interest payments on loans given out by the government, etc.

All these estimates are provided to the revenue secretary.

After getting the estimates of revenue and expenditure, the Finance Ministry compares them to get the first estimate of the shortfall of revenue to meet projected expenditure. The government then decides on the optimum level of borrowing to meet this deficit, in consultation with the Chief Economic Advisor.

Any remaining shortfall after the targets for the fiscal deficits and the overall budget deficit is decided is filled by a revision in tax rates if feasible. This is done keeping in mind the fiscal incentive structure the government wants to put in place for stimulating growth in different sectors. If any changes need to be made following the initial plans, adjustments are made to the expenditures.

The Finance Minister then holds pre-Budget meetings with the concerned stakeholders to know their proposals and demands. Once these consultations are done, the Finance Minister takes the final call on their demands and discusses it with the Prime Minister before finalisation.

Finally, the Finance Minister presents the Union Budget in the Lok Sabha. The proposals of the Union Budget come into force on April 1. Between the presentation of the Budget and the effective date, there is a gap of 1 month. During this period, the Lok Sabha can review and modify the Budget proposals.

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