Budget:
"Budget is a document detailing the projected expenditure and the sources thereof. Either the expenditure is curtailed or new avenues of income are explored to meet the expenditure. Budgets are made at micro level as well as the macro level. "
Families make home budgets of the expenditure such as provisions, rent, EMI, education, health, milk, so on and adjust the expenditure to be within the sources of income be it salaries, rents, interest, pension whatever.
Business houses and industries make a budget for their commitments and revenues. Business houses have budgets for each aspect of business such as production, sales, salaries, etc. It is a complex activity.
The objective of budget varies from person to person.
At personal level, the objectives may be:
To determine the loan repayment capacity and to decide if to go in for a housing or a car loan etc
To determine how much he can spare to invest or to buy a long term insurance policy.
To budget the cost of an event such as construction or a marriage or a function and so on and to plan resources
The objective of any business is to maximise their profits taking in to consideration the existing circumstances, competition, level of activity, taxes, and the like. Budgets are made to control the expenditure and to examine the causes for variations.
Budgets are made for different periods. It could be quarterly half yearly or annual. There could be long term budgets also spreading over some years.
Like any other, the state Governments and the Government of India also make a budget every year. It is a Himalayan task to prepare the budget and the ministry of finance does a marvellous job of it.
There would be requirements of various industries, essential services such as health, defence, salaried class so on. The imports and exports, economic conditions, political equations, etc are to be considered by the ministry while formulating the budgets.
The objective of government is not profit. The objective of Government is welfare of the citizens, good governance and protecting the sovereignty of the republic. The government allocates funds for various activities such as agriculture, health, defence, education, infrastructure, so on. Sources for the government are by way of taxes and duties, borrowing from the public, profits from the public sector units, etc. The government operates certain services such as postal department, railways, etc, which not only provide service to the public but also generate revenues to the Government.
The finance ministry has to balance between the resources and the allocations. Raising the taxes does not go well with the Government since the citizens will be burdened and there will be a dissent among the public. The ministry also has to consider the trends internationally. International lending institutions such as IMF will be watching the budget since they finance the Government. They would be interested to see how the rupee is spent and from where does the Government get the resources.
Huge infrastructure projects cannot be completed within one year and there are several dams constructed across rivers. There would be demands from various states for their development. There would be political compulsions such as elections in some states, backward states, which have to be addressed.
For example, the allocations to the states where elections will be held this year have been much more than the other states.
The gap between the allocations and sources is the deficit which is expressed as a percentage relation with GDP. It is a tough balancing act between the expenditure and the resources. The Government explores resources to mop up the deficit.
Finance bill is tabled in the Lok Sabha by the honourable finance minister to be approved by the house and sent to Rajya Sabha for ratification and then to the President of India to become a legally enforceable Finance Act. Budget is presented on the first day of February and takes effect from first day of April the same year. This time gap is provided for the finance bill to go through the procedures and to receive the assent of the President of India.
Generally the consumer goods are impacted by the budget provisions. Prices of some products go up while some might come down by the alteration in the rates of central excise, customs duty, etc.
Luxury items and consumer durables such as air conditioners, cars, etc are targeted by the finance minister
In the current year, the honourable finance minister was planning her budget around the five pillars of aatmanirbhar India enunciated by the honourable prime minister.
The five pillars being:
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