Introduction:
“Budget is a plan of financing for the incoming fiscal year. This involves an itemized estimate of all revenues on the one hand and all expenditures on the other.”
From this definition of Munro, the idea of what the budget actually is can be gained.
A budget is a financial plan for a defined period, often one year. Companies, governments, families, and other institutions use it to inculcate techniques of activities or schemes in measurable terms.
Financial planning is very crucial as it moves forward and can foresee the challenges. Budget is the remedy for it. It basically plans and forecasts the expenditure and functions as regards production, sales, national income, and purchases. It creates a keen and coordinating bridge between the plan and its execution.
Does the incorporation of budget hold significance in today’s economy?
Unless and until there is an objective associated with a roadman to reach the target or goal nothing can be achieved. The budget is obviously having some objectives with a definite path of financial management. Naturally, yesterday, today, or tomorrow’s budget plays a significant role in the development of the nation.
However, the most common error is that we consider the Money budget and Financial budget as the same one.
Both are the tools that the government uses to plan. But in a true sense, they differ.
Money budgeting quantifies the estimated expectation of revenues that the Government wants to achieve in that financial year, whereas, financial budget only estimates the amount of revenue that would be gained.
Planning of the budget possesses immense importance in a Government as it assigns various resources across the nation to promote economic progress and stability. Besides, it keeps its eyes on the advancement of defense capabilities and sanctions money for educational facilities. By presenting new policies it aids to uplift the economically weak and underprivileged section of the country.
Furthermore, it brings discipline to the financial planning of a country by restricting expenditure and distributing several revenues based on the priorities of the country.
Types of Budget
In the Indian context, primarily budget is classified into three types, those are:
- BALANCED BUDGET: The government’s budget is said to be balanced when presumed expenditure is equal to the expected recipients in a financial year. It generally stables the economy in a country by cutting down wasteful expenses.
- SURPLUS BUDGET: It occurs when the estimated revenue increases that the estimated expenditure. In such conditions, imposed taxes outperform the excess expense, and material price decreases.
- DEFICIT BUDGET: A budget is said to be deficit when expenditure exceeds the revenue generated.[1]
Objectives of Budget
The objective of the budget is the utilization of funds and wealth comprehensively towards the substantial financial management, outstanding and optimum utilization of funds.
- ECONOMIC GROWTH: Budget has been set up to allocate enough resources in every sector of the nation. As the net economic growth mostly depends on investment and revenue collected; the planning of budget mainly focuses on it. The Government’s planning of budget enhances the savings and collection of revenue.
- FINANCIAL STABILITY: Since the economy of a nation is quite dynamic in nature; it often goes through price fluctuation. During the INFLATION and DEFLATION in the country, policies like SURPLUS BUDGET and DEFICIT BUDGET prevail to bring financial stability.
- REMOVING ECONOMIC INEQUALITY: The main and foremost objective of the Budget planning is to focus on bringing down economic inequality in the country. In budget planning, the Government always tries to impose taxes on the economically opulent classes and use it for the welfare and upliftment of the economically weaker sections of the nation.
- REDISTRIBUTION OF INCOME: In developing countries like India, there prevails a huge income gap between the rich and the poor. To eradicate this gap, ample budgetary policies have been introduced such as subsidies, low taxations, rationing policy into two stairs, APL and BPL.
- REDISTRIBUTION OF SOURCES: Government imposes high taxes upon products like cigarettes and alcohol but at the same time, they sanction loans, subsidies for small industries like cottage industries, agriculture. Also, they reduce taxes on raw materials and pesticides. This is just to reallocate or redistribute resources and wealth equally to every sector.
- MANAGING PUBLIC ENTERPRISES: One more objective of the budget is to provide financial help to the public sector industries which are established and working for the social welfare of the citizens. While preparing the budget Government mandatorily makes provisions for managing those enterprises.[2]
History Behind the Metamorphosis of Budget
The word BUDGET has been derived from the French word ‘bougette’ which means leather pouch or bag, which carries papers related to revenue receipt, expenditure, and speeches of the finance minister.[3] It was described by the UK’s Chancellor of Exchequer. However, the ‘budget’ started sarcastically attacking the tax plans of Great Britain’s first Prime Minister Sir Robert Walpole.
The term budget was used in today’s context after the mid 19th century but in an impromptu manner. It had gone through a metamorphosis after the 1950s, when the budget was more logically used for public planning and policy. The uprising of the hypothetical framework of budgeting during the 20th century has been given a shape by the political, social, and administrative players and circumstances.
In India, the first-ever Budget was presented by James Wilson, the then Finance Minister of India Council on February 18, 1869.
But the first UNION BUDGET of independent India was presented by RK Shanmukham Chetty on 26 November 1947.[4]
Union Budget of India
In India, the annual proposed financial statement is known as Union Budget. Article 112 of the Indian Constitution lays down the provision for the execution of the financial statement. According to the article, the President shall in regards to every financial year is supposed to lay before both the Houses of Parliament an annual financial statement commonly known as the Budget.[5] This statement clarifies the estimated expenditure and income of that financial year.
Article 113, 114 also provides provisions in regards to the Union budget of India.
Up to the year 2016, it had been presented on the last working day of February for executing the plan from the immediate next financial year i.e. 1st of April. Currently, the date of the presentation has been rescheduled to the 1st of February.
This year’s annual financial statement was presented on 1st February by the finance minister Mrs. Nirmala Sitaram. She is the 2nd woman finance minister of India to present a budget speech after Indira Gandhi
The core ideas of the Budget are “Aspirational India, Economic development, A Caring Society”. These three central themes are connected by governance that is corruption-free and a financial sector that is clean and sound.[6]
The Union Budget of 2020 had been laid down with a bright side of investing in skill-up-gradation and keening on technological and infrastructure advancement. The sectors for education and healthcare got special emphasis in the annual financial statement with an aim to provide a healthy and secure life to the future generation.
However, the most worthy part of the budget lies in the planning for rural development. Tons of fruits and vegetable decay due to a shortage of storage and refrigeration facilities in the rural areas. The government had set up a plan to facilitate the rural areas for this purpose. The government also planned for the refrigerated railway services to prevent the rotting of the agricultural products.[7]
But the planning for fiscal year 2020 has a very dark side behind. The planning keenly focuses on the long term measures and has put the minimum effort in the short term ones.
Additionally, the budget has no mention of the backbone of the nation’s economy i.e. PROPER FUNDING OF BUSINESS, FLEXIBLE LABOUR LAWS, AVAILABILITY OF LAND FOR INDUSTRIAL PURPOSE, and EMPLOYABLE OF MANPOWER. Avoiding these aspects, the Government cannot bring success in reaching the exact goal that has been set up to revive the economy of the country. To enhance industrialization and uplift the economy these major issues are to be kept in mind.
The government also set up some risky plans for this fiscal year. They are as follows:
- In a developing country like India, the tax and revenue collection has a vivid contribution to the economy of the country. Whereas, according to the Union Budget 2020, the Government anticipatorily sacrificed 40,000 crores by reducing tax on individuals.
- The budget has also planned for contradictory ‘tax buoyancy’. The estimated rise in the gross tax revenue is 12% against 4% in the current fiscal year, which is quite risky for a government.
- From Indian economic history, it is evident that neither of the Government has a good report card in DISINVESTMENT. Still, the Government took the risk of raising Rs. 2.1 lakh crore by selling Government companies.[8]
Nevertheless, according to the majority of eminent economists, the 1991 Union Budget of India (The Epochal Budget) holds the prior rank in the history of independent India. It deeply focused on the import-export policy and had forwarded the Indian economy to be more global trade-friendly. Also, the Government took mention-worthy steps to promote exports.
Present Scenario of the Country
The present scenario of the country is simple wrenching. GDP went negative. In all fields of revenue earning like the industrial sector, the agricultural sector, and tertiary sector are so pitiful that it threatens the budget as well as the development of the country with its red eyes. Since the budget is the estimated allocation of funds with respect to the estimated revenue collected obviously, the budget is to fail due to negative GDP.
Apart from this, the long innings of pandemic situation and lockdown in the country, all opportunities and probabilities of finding out any alternative to make up the crisis has been stopped. This is also to mention that capital support through FDI is not showing a silver lining may be the effect of a worldwide pandemic crisis. In such conditions, it can be undesirably be said the Union budget of 2020-21 will be of no such significance.
Special Cases and Provisions
In the context of the budget, the case mostly comes up on the Department of income tax and assesss or regarding the customs and service tax-related.
Commissioner of Customs & Central Excise v. M/S Majestic Auto Ltd., 2004, was an appeal case under section 35G(2) against the judgment of Custom Excise and Service Tax Appellate Tribunal. The question of law prevailed that, “Whether the appellate Tribunal on the facts and circumstances of the case could reduce the penalty amount, which is less than the amount of penalty specified under section 11 AC of the Central Excise Act, 1944.”
The case gave the kick start when M/s Majestic Auto Ltd. (respondent in this appeal) had manufactured two-wheelers scooters and mopeds and a team of Central Excise Officers of Preventive Unit Meerut-I made a surprise visit to the factory premises on 10.1.2011. The officers conducted physical verification of the finished goods. On comparison of stock of finished goods, it was found that 276 numbers of two-wheelers of different models were in excess and 365 numbers of two-wheelers of different models were short. A Panchnama (legal document) was prepared on the spot. The stock of excess finished goods were seized which were subsequently released on bond along with bank guarantee. Naturally, a show cause was issued to the respondent. Also a penalty of Rs. 6,23,391/- was levied on the respondent.[9]
The cases like Sunil Mallo v. Department of Income Tax; Sushil Karwa v. Assessee, 2013 went through enormous trials and took a quite long time to reach the end.
So to obliterate this issue, a direct tax scheme was announced during the budget for fiscal year 2020, named ‘Vivad se Viswas’ for resolving tax disputes between individuals and the income tax department.
As per the scheme, the disputes regarding income tax that has been solved by this scheme cannot be reopened in other proceedings by the income tax department or any other authorities.
This made the process more time consuming and flexible.
International Perspective
Countries of G20 are mostly affected by pandemic situations and their economy is also not in a pink state. Naturally, international trade with those countries will show a good avenue of earning. Furthermore, the expectation of their investment in the Indian market by any means will produce any sweet fruit. As a result, the international scenario does not show any supportive measures to materialize the Indian budget for 2020-21.
If you look at the United States’ budget scenario and economic status is also in an unstable condition.
US President Donald Trump presented an estimated record of $4.829 trillion federal budget for the upcoming year 2021 on February 5 of the current year. But due to the coronavirus pandemic, the federal budget of the US broke down and the country had the largest external debt globally 14% largest government debt as % of GDP in the world.[10]
It is known from the CBO forecast prior to Trump’s inauguration, the budget deficits for 2019-21 almost doubled, due to Trump’s tax cut and other spending legislation.
Additionally, the committee for a Responsible Federal Budget assumed that the budget deficit for the fiscal year 2020 may increase to a record of $3.8 trillion.
Conclusion
Budget is the e-factor of financial management. Now, what will be the measure of success of a budget obviously depends upon the appropriate and justified allocation of funds and the ceaseless supply of resources to materialize the projected development work. But alas! Whenever the revenue collection, the mainstream of government fund shows a pale face and deep breathe indicating fatal condition, estimated allocation can never be materialized and it is more than sure, supply of resources would be discontinued even can get stopped. Therefore, the projected picture of development will remain as an unpainted portrait. So, before estimating a project, the available fund and resources are to be foreseen positively. In this context, we can say, “cut your court according to your cloth”.
References:
[1] https://www.vedantu.com/commerce/objectives-of-government-budget#:~:text=Government%20budget%20is%20an%20annual,112%20of%20the%20Indian%
[2] Smriti Chand, 6 Important Objective of Government Budget, Yourarticlelibrary.com (2018) https://www.yourarticlelibrary.com/economics/budgeting/6-important-objectives-of-government-budget/30410.
[3]ET Online and agencies, All you need to know about the Union Budget, The Economics Times (Feb. 1, 2020, 11;59 AM) https://economictimes.indiatimes.com/news/economy/policy/all-you-need-to-know-about-the-union-budget/what-is-union-budget/slideshow/73831928.cms?from=mdr.
[4] Supra note 1
[5] Dr. JN Pandey, ‘Constitutional Law of India’ (55th ed. 2018).
[6] Ministry of Finance , Summary of Union Budget 2020-21, Press Information Bureau, Government of India(Feb. 1, 2020) https://www.caclubindia.com/news/files/40_17983_budgetsummary.pdf.
[7] Robin Banerjee, The Good And Not So Good Of Union Budget 20-21, Outlook (Feb. 3, 2020) https://www.outlookindia.com/website/story/opinion-the-good-and-not-so-good-of-union-budget-20-21/346672.
[8] id.
[9] Commissioner Of Comstoms & Central Excise vs M/S Majestic Auto Ltd on 6 July, 2012 Bench: Ashok Bhushan, Prakash Krishna, https://indiankanoon.org/doc/102970051/.
[10] Kimberly Amadeo, US Federal Budget Breakdown, The balance ( July 1, 2020) https://www.thebalance.com/u-s-federal-budget-breakdown-3305789#:~:text=The%20Budget%20Components%20and%20Impact%20on%20the%20US%20Economy&text=President%20Donald%20Trump%20released%20a,%24966%20billion%20deficit%20for%20Oct.
0 Comments