Govt's Budget preparation advanced

Govt's Budget preparation advanced

Govt's Budget preparation advanced
In order to have wider consultations with stakeholders and provide more time for planners, the government on Monday decided to advance the Budget formulation exercise for 2016-17 by over two months, and it will now start next week.

This is for the first time that India is beginning Budget preparations seven months ahead of presentation. 

Normally, the Budget-making process starts in the third quarter (October-December) of the financial year. The Budget is made in four stages — estimates of expenditures and revenues, first estimate of deficit, narrowing of deficit, and presentation and approval of Budget.

But the Finance Ministry said it is advancing the process to the second quarter to plan the exercise better.

“It has been decided to start the Budget exercise by the middle of August 2015, for the forthcoming Financial Year 2016-17. The Budget circular which marks the beginning of the budget formulation exercise is being issued by the budget division, the Department of Economic Affairs (DEA). This advances the process by over two months,” the Finance Ministry said in a statement.

The Budget making process begins with various ministries providing initial estimates of plan and non-plan expenditures. An assessment of expected revenues likely to flow into the government treasury is also done.

After the estimates of revenue and expenditure are made, they are matched. This provides the first estimate of expected shortfall in revenue to meet the projected expenditure. The government then, in consultation with the chief economic advisor, decides on the optimum level of borrowings to meet this deficit.

After this comes the third stage. At this stage, any remaining shortfall is filled through a revision in tax rate. In the Budget-making exercise, suggestions of different stakeholders are kept in mind. By this time, the Finance Minister is in a position to estimate as to how much it will get through taxes and how much it has to spend in the coming financial year.