How Government of India prepares Union Budget? 5 key steps explained

File photo of Union Finance Minister Nirmala Sitharaman

Union Budget Latest News: The countdown has begun for the Union Budget 2025. The most important financial exercise carried out by the Government of India will see the Ministry of Finance, headed by Nirmala Sitharaman, prepare the Union Budget, which will be presented on February 1st, 2025. The Department of Economic Affairs in the finance ministry carries out the mammoth exercise of preparing the documents. The Union Budget, which is an annual exercise, shows the health of the government’s finances in terms of estimated expenditures and earnings. It is also a document that showcases new financial schemes and plans that the Centre wishes to introduce in the upcoming fiscal year. Here are five essential steps in the Union Budget formation:

Budget Circulars: The process of preparing the Union Budget starts six months in advance. This means that for the Union Budget 2025, the Department of Economic Affairs kickstarted the process back in August this year. The first step in Budget preparation is sending out Budget Circulars. The Union Ministry of Finance sends these circulars to all ministries and departments. The circulars contain necessary information and crucial instructions related to the Union Budget that each department needs to follow. Subsequently, the departments forward these Budget Circulars to field officers to collect updates on receipts and expenditures for the current and past fiscals. The field officers and officials also prepare the budgetary outlay requirements for the upcoming fiscal year.

2: Verification of data: The next step in Budget preparation is the verification of data. After the Budget Circulars are issued, the field officers accumulate all the essential data. Subsequently, the data is reviewed by senior officials and sent to the ministries. After further scrutiny, the data is submitted to the Ministry of Finance. Here, the data is aligned with the budgetary outlay roadmap and resource allocation.

3: Allocation: Once all financial figures and reports are verified and submitted, the finance ministry decides on the most crucial part of the Union Budget – allocation of financial resources to the ministries. In simple terms, this means that the finance ministry decides on how much money each ministry and department will get in the Union Budget for intended welfare schemes or other programmes. Should there be any dispute in this regard, the Ministry of Finance takes advice from Union Cabinet. In case there is no resolution, Prime Minister is consulted and his/her word is final. After the future expenditures are decided, Central Board of Excise and Customs, Central Board of Direct Taxes and the Ministry of Finance prepares an exhaustive report that has details of the estimated revenues for the upcoming fiscal. This government also consults small business owners and farmers.

4: Printing of Union Budget documents: While the tradition of ‘bahikhata’ was done away with during the 2021-22 Union Budget, the budgetary documents are still printed on a small scale. This usually takes place after the tradition of the ‘halwa ceremony’ is carried out in the Finance Ministry office. For a long time, the Union Budget was published at a printing press located in the Rashtrapati Bhawan. But after a leak, the printing of the document was moved to the Finance Ministry.

5: The lockdown: The halwa ceremony marks the lockdown period at the Finance Ministry. This ensures the confidentiality of the budgetary documents. All officials stay inside the ministry until the Finance Minister tables the Budget in Parliament. The halwa ceremony usually takes place around Republic Day.