Module 122. Union Budget and Economic Survey
The Union Budget and the Economic Survey are two of the most significant instruments of economic planning and governance in India. Together, they provide a comprehensive picture of the nation’s fiscal health, development priorities, and policy directions. The Union Budget outlines the government’s financial plan for the upcoming year, while the Economic Survey reviews the performance of the economy during the preceding financial year and offers analytical insights and policy recommendations.
Concept and Purpose of the Union Budget
The Union Budget is the annual financial statement of the Government of India, presented under Article 112 of the Indian Constitution. It details the estimated receipts and expenditures of the government for a particular financial year, which runs from 1 April to 31 March.
The primary objectives of the Budget include:
- Allocation of resources among competing sectors.
- Reducing inequalities in income and wealth distribution.
- Maintaining economic stability and promoting growth.
- Managing inflation, employment, and foreign trade through fiscal policies.
The Budget is a key tool for implementing the government’s economic agenda and for stimulating or moderating the pace of economic activity depending on prevailing conditions.
Structure of the Union Budget
The Budget comprises two main parts—Revenue Budget and Capital Budget.
1. Revenue Budget: Includes the government’s revenue receipts and expenditure.
-
Revenue Receipts: Comprise tax and non-tax revenues.
- Tax Revenue: Income tax, corporate tax, GST, customs duties, excise duties.
- Non-Tax Revenue: Dividends from public enterprises, interest receipts, fees, and fines.
- Revenue Expenditure: Refers to current expenses such as salaries, pensions, subsidies, and interest payments that do not result in asset creation.
2. Capital Budget: Includes capital receipts and capital expenditure.
- Capital Receipts: Include loans raised by the government, borrowings from the public and foreign governments, and disinvestment proceeds.
- Capital Expenditure: Involves spending on asset creation such as infrastructure, machinery, buildings, and development projects.
A key distinction lies in that revenue items affect current income and expenditure, whereas capital items affect future productive capacity.
Stages in the Budget Preparation and Presentation
- Preparation: The Budget is prepared by the Ministry of Finance, particularly the Department of Economic Affairs, in consultation with other ministries and departments. Estimates of expenditure are submitted by ministries and aggregated into the annual statement.
- Presentation: The Union Budget is presented in Parliament by the Finance Minister—usually on 1 February—to allow time for approval before the start of the financial year. The presentation is accompanied by the Budget Speech, highlighting key fiscal policies and schemes.
- Parliamentary Approval: After presentation, the Budget undergoes debate and scrutiny. The Finance Bill and Appropriation Bill are passed to authorise the collection of taxes and allocation of funds.
- Execution and Audit: Once approved, the government departments implement budgetary provisions. The Comptroller and Auditor General (CAG) audits expenditure to ensure accountability.
Types of Budgets
Depending on the balance between revenue and expenditure, budgets can be classified as:
- Balanced Budget: Revenue equals expenditure.
- Surplus Budget: Revenue exceeds expenditure.
- Deficit Budget: Expenditure exceeds revenue—commonly used to stimulate economic growth through borrowing.
Additionally, Performance Budget, Gender Budgeting, and Outcome Budgeting are used to monitor effectiveness, inclusivity, and results of public spending.
Fiscal Deficit and Other Key Indicators
- Fiscal Deficit: The difference between total expenditure and total non-borrowed receipts; an indicator of government borrowing needs.
- Revenue Deficit: Excess of revenue expenditure over revenue receipts, implying the government is spending beyond its current income.
- Primary Deficit: Fiscal deficit minus interest payments, showing current borrowing excluding interest obligations.
- Budgetary Deficit: A general shortfall when total expenditure exceeds total revenue and capital receipts.
These indicators are vital for assessing fiscal discipline and sustainability.
Importance and Functions of the Union Budget
The Union Budget plays several vital roles in economic management:
- Resource Allocation: Ensures equitable distribution of resources among sectors such as defence, education, and healthcare.
- Economic Stability: Helps control inflation or deflation through fiscal adjustments.
- Growth Promotion: Provides stimulus through public investment in infrastructure and industry.
- Social Welfare: Funds schemes aimed at poverty alleviation, employment, and rural development.
- Public Accountability: Reflects transparency in government priorities and spending.
Concept and Role of the Economic Survey
The Economic Survey is an annual document prepared by the Department of Economic Affairs under the Ministry of Finance. It is presented in Parliament usually a day before the Union Budget. The Survey reviews the economic developments of the previous financial year, analyses trends in major sectors, and provides policy insights to guide the upcoming Budget.
The document, authored under the supervision of the Chief Economic Adviser (CEA), is divided into two volumes:
- Volume I: Analytical, focusing on theoretical and policy discussions, long-term challenges, and reform suggestions.
- Volume II: Descriptive, providing detailed statistical data and sector-wise performance review.
Key Areas Covered in the Economic Survey
- Growth rate of GDP and sectoral contributions (agriculture, industry, services).
- Fiscal performance and tax collection trends.
- Inflation and monetary policy developments.
- Employment, poverty, and social sector indicators.
- External sector developments—trade, balance of payments, foreign exchange reserves.
- Climate, sustainability, and green development initiatives.
- Digital economy, innovation, and start-up ecosystem.
The Survey often introduces innovative concepts and economic frameworks to enhance understanding of India’s growth path. For example, recent surveys have discussed themes such as “Viksit Bharat by 2047”, “Digital Public Infrastructure”, and “Amrit Kaal”—the vision for India’s journey over the next 25 years.
Relationship Between the Economic Survey and the Union Budget
While the Economic Survey provides an analytical and factual basis for economic policymaking, the Union Budget operationalises those insights through fiscal measures. The Survey identifies areas of concern and opportunities, whereas the Budget translates them into concrete allocations, tax reforms, and development programmes.
For instance, if the Survey identifies a slowdown in manufacturing, the Budget may respond with incentives such as tax relief, capital subsidies, or production-linked incentives (PLI) to boost output.
Fiscal Policy and Economic Planning
The Budget serves as a principal instrument of fiscal policy, influencing aggregate demand and economic stability through taxation, public expenditure, and borrowing. Fiscal policies derived from the Budget aim to:
- Stimulate growth during economic slowdown (expansionary policy).
- Control inflation during overheating (contractionary policy).
- Promote equitable income distribution and sustainable development.
Recent Trends in Union Budget and Economic Policy
Recent budgets have emphasised themes such as:
- Infrastructure Development: Expanding roads, ports, and digital networks under the Gati Shakti initiative.
- Green Growth: Promoting renewable energy, electric mobility, and carbon-neutral strategies.
- Inclusive Development: Targeting social welfare, health, education, and women empowerment.
- Digitalisation: Expanding digital payments, AI, and data governance for efficient delivery of services.
- Fiscal Consolidation: Aiming to reduce fiscal deficit gradually while sustaining growth.
Significance in Governance and Economy
The Union Budget and Economic Survey together form the backbone of India’s economic governance.