Finance Minister Nirmala Sitharaman will present the Union Budget 2021-22 in the Lok Sabha on February 1.
On February 1, Finance Minister Nirmala Sitharaman will rise up in the Lok Sabha to present the Union Budget 2021-22. All nations have their budgets, but perhaps nowhere it is such a national occasion with set traditions and pageantry, as it is in India.
It is one of those days in a year when the general public hears terms like fiscal deficit, divestment, gender budget, capital gains tax, and recapitalization, among other, which may sound unfamiliar to most. What most people are interested in how much they will be taxed, and which items will get cheaper or dearer.
So here is a quick guide on how to read the budget. All the documents mentioned below are uploaded onto www.indiabudget.gov.in within hours of the finance minister’s speech in Parliament.
While the speech itself is a small part of the budget documents, it is the most important. The speech can be divided into two parts. Part A spells out the finance minister’s expectations and reform direction for the coming financial year.
It announces various planned schemes and measures for farmers, rural sector, health, education, small and large businesses, service sector, women, start-up, banks and financial services, capital markets, infrastructure and others. The finance minister also announces some of the budgeted targets like divestment, fiscal deficit, how much the government will borrow from bond markets, among other things.
Part B of the budget carries direct and indirect tax announcements (excluding GST, which does not come under the purview of the budget, but instead is decided by the GST Council). This is the part where any changes in income tax slabs, corporate tax, capital gains tax, custom and excise duties are announced.
After part B comes the annex, which gives, in brief, the breakdown of the tax announcements, and the budgeted spending on various schemes, programmes and ministries. And for the past two years, the annex has been containing something very important. How much of the budget is being funded through extra-budgetary resources, apart from the tax and non-tax revenue and borrowing programme.
Budget at a glance
This document can be taken as a primer for the main budgeted targets for coming financial year, like tax revenue, non-tax revenue, capital expenditure and administrative expenditure of the government. It also contains the fiscal deficit target (the difference between the Centre’s expenditure and revenue) and the nominal gross domestic product growth target for the coming year.
This document also contains details like fuel, fertilizer, and food subsidy outlays, how much of the Centre’s divisible revenues will be transferred to states and Union territories, and spending on major schemes. There are two types of schemes listed. Central sector schemes, which are fully funded by the Indian government, and the central sector schemes, which are jointly funded by the Centre and state governments.
Revenue and expenditure
These two documents list out in details the various sources of revenue and heads of expenditure. The Revenue Budget breaks down what is expected from income tax, corporate tax, GST, excise duty etc, and non-tax soures like disinvestment, privatization, telecom, aviation and other revenues.
The Expenditure Budget gives a Ministry-wise breakdown of the budget size (the total expenditure being planned is what the size of the budget is). Here one can find in details how much is being spent by the central government on anything and everything, including defence acquisitions, MGNREGA, PM Kisan, primary education, healthcare, administrative spending, specific infrastructure projects, etc.
Ultimately, the speech is only the beginning of a long process. Being a Money Bill, the budget has to be passed by the Lok Sabha, and will also go to the Rajya Sabha. There will be lengthy debates in both the houses, and the finance minister replies to all the queries. What is passed is the Finance Bill, which puts into law the budget, as well as amending other acts like the RBI Act, Income Tax Act, Companies Act, Banking Regulation Act, based on whatever measure has been announced. It is the Finance Bill/Act which gives legal backing to the budget
Medium Term Fiscal Policy
There are many other documents, including this one, which have been mandated by the Fiscal Responsibility and Budget Management Act. In the Medium-Term Fiscal statement, the central government projects fiscal deficit, revenue deficit, gross tax and non-tax revenue and central government debt two years into the future, beyond the coming financial year. It also lists out its assumptions of global and the Indian economy, based on which it has drafted the budget for the coming year.