Guide To Understand the Union Budget

31 January, 2024

The Union Budget is a financial statement released by the Indian government that accounts for its expenses in one fiscal year. A Union Budget is essentially a group of documents that, when combined, give you a complete understanding of the government's finances. This financial document also helps us get a clear understanding of the various taxes that are levied by the government. You can find all the budget documents on the official website of the Ministry of Finance.

You can easily understand the Union budget if you know how it is presented in the Lok Sabha. As per Article 112 of the Indian Constitution, the Union Budget comprises the Annual Financial Statement (AFS) which is to be presented to the parliament. The entire budget process in parliament goes through multiple stages. It starts with the presentation of the budget, followed by a general discussion. After that, departmental committees scrutinise the budget, and then there is a vote on demands for grants. The next stages involve the passing of the appropriation bill and, finally, the passing of the finance bill.

The Budget Division within the Department of Economic Affairs in the Finance Ministry is responsible for preparing the Union Budget. These stages and the involvement of different entities ensure a thorough and democratic process in shaping the financial plans for the country.

While understanding the Union Budget can be quite insightful, there are many who do not know how to read the budget document. If you too are wondering how to understand budget report details, here is a guide to help you with the same.

Listen to the speech that introduces the budget in the Lok Sabha

Before the new budget is incorporated into the finance laws of India, Finance Minister Nirmala Sitharaman will first deliver a speech on the proposed budget in the Lok Sabha. The speech is simply an overview on what the previous budget has to offer and helps you get an idea of the sectors that the government is targeting for upliftment. It also helps you understand the alterations made in the tax policies. Furthermore, the Finance Minister also declares some of the important targets of the budget such as the fiscal deficit, divestment of government assets, and how much money the government will need to borrow in the said fiscal year through the issuance of bonds.

See what is included in the budget and go through the summary

The Ministry of Finance issues a document named ‘Budget at a Glance’ along with the original detailed budget document. You can read ‘Budget at a Glance’ and get a brief understanding of the contents of the detailed budget. Furthermore, the main budget document that helps you get a detailed understanding of the government’s financial standpoint also comes with executive summaries after the completion of almost every topic. This allows you to save time and get a quick understanding of what the government has proposed in each section. To get a complete overview of the government’s financial standpoint, you can refer to a financial report called ‘Annual Financial Statement’.

Understand the government's revenue and expenditure

The operating budget reports are the most crucial factors that determine the efficiency of the proposed Union Budget. While you can find the revenue expectations of the government in the document named ‘Receipt Budget’, the expense estimations of the government can be found in the document named ‘Expenditure Budget’.

The document named ‘Receipt Budget’ helps you get an understanding of the consolidated funds of India. This could either be through divestment or privatisation of assets, taxes and excise duties, income expected from non-taxable sources, and other income-generating avenues.

‘Expenditure Budget’ helps you understand how much the government is planning to spend in one fiscal year. This includes expenses incurred due to government initiatives, purchasing defence equipment, upgrading healthcare facilities, and financing specific real-estate projects, among various other expenses that are expected to be borne by the government.

Analyse the proposed fiscal policy

A fiscal deficit is a difference between the government’s revenue and its expenditure. The fiscal policy strategy statement has a major impact on the Indian capital markets. If the projected fiscal deficit in the upcoming budget is smaller than the fiscal deficit projected in the previous budget, you can expect the Indian market to react positively to the same. The fiscal policy strategy statement also includes the debt that is expected to be borne by the government in the next two financial years. The fiscal policy also helps you understand the valuation of the rupee in comparison to the global markets by comparing the Indian economy with the global economy.

Read more about the Union Budget terms here.

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.