KNOW YOUR BUDGET

By: Shakya Khatri

Every year, on the first day of February, the Indian government releases its annual budget to the public. This financial plan serves as a guide for economic policy and development programmes by outlining the government's plans for revenue and expenditure for the next fiscal year. Yet, despite seeing its yearly announcement in the papers, it's hard to figure out why it even matters. In this piece, we examine the complexities of the Indian government's budget, including its importance, goals, and how it affects the country's economy, as well as you and me.

What is the Indian Government's Budget?

The Indian government's budget is a comprehensive financial statement that details its income and expenditure for a specific period, typically one fiscal year. It comprises various components, including revenue receipts, capital receipts, and expenditure classifications such as revenue expenditure, capital expenditure, and grants-in-aid to states and union territories. The budget encompasses the financial activities of the central government, reflecting its priorities, policies, and strategies for economic growth and development.

Why is it Announced?

The budget announcement is a critical event in India's economic calendar, attracting widespread attention from policymakers, economists, businesses, and citizens alike. There are several reasons why the budget was announced:

Fiscal Planning and Allocation of Resources: The budget provides a platform for the government to allocate resources efficiently, prioritizing spending on key sectors such as healthcare, education, infrastructure, agriculture, and defence. It enables strategic planning to address the nation's socio-economic challenges and promote inclusive growth.

Policy Formulation and Implementation: Through the budget, the government articulates its policy objectives and proposes measures to achieve them. This may include taxation policies, fiscal incentives, subsidies, and regulatory reforms aimed at stimulating economic activity, attracting investments, and fostering entrepreneurship.

Transparency and Accountability: The budgeting process fosters transparency by disclosing the government's revenue sources, expenditure plans, and debt obligations. It enables stakeholders to assess the government's financial management practices, evaluate the efficacy of public spending, and hold authorities accountable for their decisions.

Economic Stability and Investor Confidence: A well-crafted budget signals the government's commitment to fiscal discipline, macroeconomic stability, and investor-friendly policies. It instils confidence among domestic and international investors, promoting capital inflows, business expansion, and job creation.

What is it Intended for?

The Indian government's budget serves multiple objectives, each aimed at advancing the nation's socio-economic development and welfare:

Economic Growth and Development: The budget allocates resources to critical sectors to spur economic growth, enhance productivity, and create employment opportunities. Investments in infrastructure, innovation, and human capital development are prioritized to foster long-term sustainable development.

Social Welfare and Inclusive Growth: Social welfare schemes and poverty alleviation programs receive significant attention in the budget, aiming to improve the standard of living and reduce income disparities. Initiatives such as subsidized food distribution, healthcare subsidies, and rural development projects target marginalised communities and vulnerable populations. A version of this can be seen in the current budget’s focus on making real estate more affordable.

Infrastructure Development and Public Services: Adequate funding is allocated for infrastructure projects, including transportation, energy, water supply, and urban development, to bridge infrastructure gaps and enhance quality of life. Investments in public services such as education, healthcare, and sanitation aim to improve access and delivery of essential services to all citizens.

Why should you care?

Now, the Interim budget, with its outline of expenditure, provides a comprehensive idea about the upcoming policies of the year. It gives economists and citizens an idea about the sectors the government intends to focus on and develop, along with providing a fixed amount to be spent there. This helps map out a trajectory of the government’s actions, which frame all policies to come during the rest of the year. As such, the budget is worth something to look into and set expectations with, looking back at it by the end of the year to see how much has changed.