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Journalism of Courage
On the last working day of February, the finance minister will present a statement to Parliament of how much money the central government expects to raise in the next financial year, April 2008-March 2009, and how it will spend that money. The budget speech is also used by the government to propose other policy measures which have little to do with the budget itself. Avinash Celestine lays out the paces that the Union budget must go through
8226; What are the steps involved in approving the budget?
The budget process has four distinct steps: preparation of the budget; the finance minister8217;s speech and tabling of budget papers in Parliament; initial discussion in Parliament on the main features of the budget; and detailed discussion and voting on the budget.
8226; How is the budget prepared?
The budget is prepared by the Budget Division in the ministry of finance after consulting with other ministries and the Planning Commission. The process can be divided into the following steps:
8226; A few months before the budget, individual ministries inform the finance ministry how much their expenditure is likely to be for the next financial year. They also prepare estimates on how much they are likely to actually spend in the current financial year as compared to their budgeted estimates.
8226; The finance ministry, in consultation with the Planning Commission, estimates how much money is available in the next financial year to spend on 8216;Plan8217; schemes the next budget will cover the second year of the 11th Five Year Plan. The Planning Commission then tries to reconcile this figure of 8216;Gross Budgetary Support8217; for the Plan with estimates by individual ministries of how much they need to implement their Plan programmes for the next year. Final estimates of 8216;Plan8217; and 8216;Non Plan8217; expenditure for the next year, and revised estimates for the current year, are drawn up.
8226;The finance ministry estimates how much tax revenue it can raise next year given tax rates and after accounting for increases in income and inflation. It also proposes new revenue raising measures and arrives at revised estimates of tax revenues for the current year and budget estimates for the next year. Other ministries also estimate how much money they can raise through user charges on public services for instance.
8226; The finance minister meets with economists, experts, industry representatives and citizen groups as part of the consultation process for making the budget.
8226;The finance minister briefs the prime minister and the cabinet on budget proposals before presenting it to Parliament.
8226; What happens once the budget is tabled in Parliament?
After the budget is tabled, a general discussion on the broad budget measures takes place. No voting takes place at this stage. Parliament then goes into recess for about three weeks during which detailed estimates of ministries8217; expenditure, called demands for grants, are examined by Standing Committees of Parliament.
8226; What are the Standing Committees and what is their role?
The detailed demands for grants are studied by Standing Committees which together oversee the work of all ministries. There are currently around 24 such committees such as those on industry, home affairs, defence and finance. These committees submit reports to the Lok Sabha on each ministry8217;s demands for grants.
8226; What happens once the reports are submitted?
Once such reports are submitted, a detailed discussion takes place in Parliament, according to a timetable. During the discussion, MPs can call for 8216;cut motions8217; which either reduce the grant amount for the respective ministry to Re 1 to signify disapproval of the policies of that ministry, by a specific amount an 8216;Economy8217; cut, or by a token amount of Rs 100 to express a specific grievance.
8226; What is 8216;guillotining8217;?
The demands for grants which have not been voted on by the last day fixed for the purpose are 8216;guillotined8217;, that is, they are voted upon together. Interestingly, the demands for grants of almost all ministries except two or three are 8216;guillotined8217; in this way. In 2007, for instance, only the demands for grants of the labour ministry, the science and technology ministry and that of the home affairs ministry were discussed separately.
8226; What are the final steps in the budget process?
After discussion on demands for grants, an appropriation bill is introduced and voted on, which authorises the government to spend money from the consolidated fund. The finance bill is then taken up and passed in the Lok Sabha. If the government needs to spend any money during the year which has not been voted on by Parliament, it can introduce demands for supplementary grants. Only the Lok Sabha has the power to approve the budget; the Rajya Sabha can only make suggestions.
8226; Are there certain items of expenditure which are not voted on in Parliament?
Certain items of expenditure are charged directly to the government8217;s consolidated fund which consists of all revenues, interest earnings and fresh borrowings of the government. These include salaries and allowances of the president, senior officers of the Parliament such as the speaker, and judges of the Supreme Court etc. Interest payments of the government and loans to states are also charged directly to the fund.
The writer works with PRS Legislative Research, New Delhi
