Why 'Budget' is required for a country? Ancient reference and background to Indian budget system.

The Union Budget of India, known as the Annual Financial Statement in Article 112 of the Constitution of India, is the yearly budget of the Republic of India. It used to be presented by the Finance Minister of India in Parliament on the last working day of February.

Budget now is presented every year, on the 1 February doing away with the system setup by the British, that is the March schedule. However the revenue system is still on the 31st March cycle. The budget must be approved by the Parliament (primarily the Lok Sabha) before it can take effect on 1 April, which marks the beginning of India's financial year.

Also, the practice of announcing the Union Budget at 5:00 pm on the last working day of February was followed until the year 1999. This tradition was inherited from the colonial era, with the intention of providing Britishers with a convenient time of 11:30 am at their location. This clearly reflects the colonial mindset that Indian politicians had to endure. Additionally, this timing allowed producers and tax collecting agencies to work out the changes in prices overnight, as budgets during that time seemed to primarily focus on raising taxes. However, it was Yashwant Sinha, the Finance Minister of India in the NDA government led by the Bharatiya Janata Party under Prime Minister Atal Bihari Vajpayee, who broke this ritual by announcing the 1999 Union Budget at 11 am. This new tradition began in 2001.

Background on Budget

References to budgeting can be found in Kautilya's Arthashastra. According to this text, the Chancellor should first estimate the revenue from each place and sphere of activity under different categories. Then, the Chancellor should calculate the total revenue by adding the receipts into the treasury for the current year and the delayed payments received from previous years. From this total, the Chancellor should deduct the expenditure on the king, standard rations, other exemptions granted by the king, and authorized postponement of payments into the treasury. The outstanding revenues should be estimated based on work under construction, unpaid fines, unrecoverable dues, uncollectible sums, and advances to be repaid by officers, among other factors.

The origins of the modern Budget can be traced back to the Norman period, where two departments were responsible for finance: the Treasury and the Exchequer. The Treasury handled the receipt and payment of money on behalf of the monarch, while the Exchequer had separate offices for receiving money and regulating the King's accounts.

The Term 'Budget'.

The term "budget" is derived from the old French word "bougette," which means a leather bag or wallet. The first recorded use of the term "budget" may date back to a financial statement by Walpole, who served as Prime Minister and Chancellor of the Exchequer in 1733. A satirical cartoon depicting Walpole opening a patent medicine seller's wares was published at the time, with the caption "The Budget Opened." The word "budge" was an old term for a bag or small case.

Why it is required to present a budget?

The government of any political party that assumes power in India bears a range of responsibilities towards society, politics, and the economy, budgetingis one of it. This involves identifying areas of weakness and strategically distributing resources to address them. The primary objective of framing a government budget is to ensure that funds are directed towards the sections of society that are most in need. By utilizing past data, the government can identify areas that require economic welfare policies and effectively implement them, thereby demonstrating efficient governance and promoting economic stability.

A budget also allows the government to regulate taxation in various sectors. Investment and expenditure are key factors that contribute to a nation's economic growth. By providing tax rebates and subsidies, the government can incentivize individuals to focus more on savings and investments. This, in turn, fosters economic prosperity and contributes to the overall development of the country.

Furthermore, a budget enables business owners to adjust their policies accordingly and contribute to the economic progress of the nation. It serves as a roadmap for economic development and guides businesses towards success.

Another important responsibility of the government is managing economic inequality, as it poses a significant threat to the economy of any country. Through the budget, the government can address this issue by introducing public and economic welfare policies for the underprivileged sections of society. By targeting these disparities, the government aims to create a more equitable and inclusive economy.

Lastly, a well-planned budget enables the government to focus on specific industries and introduce policies that facilitate their growth. This ensures the continued operation and success of public sector enterprises.

Fun fact about Budget.

On 5 July 2019, the Finance Minister Nirmala Sitharaman, broke the tradition of carrying budget in a breifcase by carrying the budget in a Bahi-Khata (digital tablet). On 1 February 2021, Finance Minister Nirmala Sitharaman presented the first paperless budget.