The Union Budget: how India plans its annual finances

The Union Budget is the central government's annual financial statement, presented to Parliament as required by Article 112 of the Constitution, which calls it the Annual Financial Statement. It sets out estimated receipts and expenditure for the coming financial year, which runs from 1 April to 31 March, and it is the main occasion on which the government's fiscal priorities are debated in public. The Budget is not a single document but a set of statements, including the Budget Speech, the Annual Financial Statement, Demands for Grants, the Finance Bill and supporting statements on fiscal policy and debt.

The process begins months before presentation, with ministries submitting expenditure proposals, the Finance Ministry assessing revenues, and consultations with states, industry and other groups. The Budget is traditionally presented on 1 February, after a change from the earlier end-February practice, so that Parliament can approve spending before the financial year begins. Parliament votes Demands for Grants ministry by ministry, passes the Appropriation Bill authorising expenditure from the Consolidated Fund of India, and passes the Finance Bill giving effect to tax proposals. Without parliamentary approval, the government cannot legally spend or tax beyond existing authority, except through interim arrangements such as a Vote on Account before elections.

Receipts are divided into revenue receipts, such as tax and non-tax revenue, and capital receipts, such as borrowings and recoveries of loans. Expenditure is divided into revenue expenditure, such as salaries, interest and subsidies, and capital expenditure, such as roads, railways and other assets. Capital expenditure is watched closely because it can raise future growth, while revenue expenditure largely maintains current services. The distinction is not perfect: spending on health and education is counted as revenue expenditure even though it builds human capital, so readers should not treat capital spending as good and revenue spending as wasteful by definition.

The Budget is also a political document. It signals priorities, announces schemes, and responds to economic conditions, but announcements are not outcomes: actual spending, revenue collection and deficits often differ from estimates. Analysts therefore compare Budget Estimates, Revised Estimates and Actuals, and ask whether allocations are backed by implementation capacity. For civil studies, the Budget is where constitutional control of the purse, economic policy and democratic accountability meet in a single annual exercise.