When Finance Minister Arun Jaitley rises in Parliament to present the Budget for FY 2017-18 on February 1, he will address the House four weeks earlier than his predecessors. The annual financial statement of the estimated receipts and expenditure of the Government of India, as the Constitution’s Article 112 describes it, has, except in election years and under specific circumstances, always been presented on the last day of February.
Bringing the Budget forward is aimed at completing the process of obtaining mandatory legislative approval for annual spending plans and tax proposals before the beginning of the new financial year on April 1. Prime Minister Narendra Modi has shown an unambiguous preference for changing the date, and the union Cabinet in September 2016 gave the proposal in-principle approval.
The process of Budgetmaking has begun every year in September. This year, as a result of the advancement of the date of presentation, the entire process has had to be speeded up.
The first circular
Five months ahead of the presentation of the Budget, by September of the previous year, the Budget division of the Finance Ministry sends a note to central government ministries and departments, seeking details of expenditure incurred by them in the fiscal year until then, the projected expenditure for the next fiscal, estimates of non-tax receipts including fees earned for services, other earnings, and dividends of public sector firms controlled by them.
During October and November, the Expenditure Secretary holds meetings with senior officials of the ministries, including financial advisers of some departments, to review their spending and discuss the rationale for proposals for the next year. Meanwhile, senior officials of other departments in the Finance Ministry — Economic Affairs and Revenue — too discuss proposals relating to revenue, including fresh proposals for taxation and new projects and policies. Discussions with economists and experts from various sectors follow, with the Finance Minister himself sitting in on the meetings.
Core takes over
Once the expenditure numbers are in, the Core Budget team discusses broad overall revenues, new proposals to raise revenue, ways to raise more funds, the levels of deficits, and related numbers. The Core team is headed by the Finance Minister, and consists of the Finance Secretary who may be in charge of the Department of Economic Affairs or Expenditure, the Revenue Secretary, the Expenditure Secretary or the Chief Economic Advisor, and the Additional Secretary in charge of the Budget division. The chiefs of policymaking bodies — Central Board of Direct Taxes and Central Board of Excise and Customs — are called in for meetings on a need-to-know basis.
The blue sheets
Budget proposals are outlined on a blue sheet of paper and discussed by the Core team. Some of these papers are subsequently destroyed by the senior official in charge of the Budget division to ensure secrecy.
By late November, the Ministry is declared out of bounds for visitors, and intelligence agencies begin surveillance. Meanwhile, under the supervision of the Chief Economic Advisor, work on the Economic Survey, which precedes the Budget, gets under way.
PM enters picture
In the first meeting between the Finance Minister and Prime Minister, the overall fiscal scenario, scope for fresh spending, new schemes or additional revenue measures, and the general direction of the Budget is discussed. The Prime Minister puts forward any suggestions that he might have. The Finance Minister may be accompanied by the Finance Secretary or other senior officials. The Principal Secretary to the Prime Minister is also present.
Firming up plans
Subsequent meetings between the Prime Minister and Finance Minister have traditionally focused on the size of the Gross Budgetary Support or GBS for the Plan. In the days of the Planning Commission, the PM usually intervened to sort out differences between the Ministry and the Plan panel; these days, the Ministry takes the decisions. In one of the meetings, the revenue proposals are vetted, and the PM’s approval sought. The last of the pre-Budget meetings — where the draft of the Budget speech (which the PM reads and approves) is discussed — focus on the overall thrust of the Budget, and any final proposals.
In early February — a couple of weeks ahead of what has so far been Budget day — the expenditure budget, which outlines spending by various ministries, is sent for printing to the press in the Finance Ministry basement. Those working there, and some officers from the Finance Ministry and the legislative branch of the Law Ministry who vet draft laws such as the Finance Bill and the Appropriation Bill, are quarantined there — and released only on Budget day. Other documents — such as the implementation of the Budget proposals and the revenue budget with the Finance Bill — are prepared as the Budget nears. The Finance Minister’s speech is the last, and is printed just a few days before the big day.
On the day of the Budget, the Finance Minister first goes to the President to get his signature on the file approving the Budget. This is followed by a short Cabinet meeting in Parliament where the Finance Minister briefs the cabinet on the main features of the Budget. No details of tax proposals are given out.
Minutes before 11 am, by tradition, the Prime Minister leads the Finance Minister to the Lok Sabha, where they take their seats. The Minister then begins reading the Budget speech after seeking permission from the Speaker.