HOW THE BUDGET IS FORMED AND EXECUTED IN INDIA

The term ‘budget’ has been derived from the French word ‘bougette’, which implies a leather bag or wallet. The primary use of the term 'budget' may go back to the 1733 financial plan by Walpole as Prime Minister and Chancellor of the Exchequer. 

To function effectively and discharge its duties and obligations, every government needs resources. Through the budgetary process, the Indian Parliament authorizes the govt. of the day to collect funds by way of taxes, duties, cess, borrowings so on. The funds so collected by the government are used, with the approval of Parliament to fulfil its expenditure. The President of India is obliged constitutionally to possess the Annual finances for the following fiscal year laid on the table of the House under Article 112. But, in step with Art. 77(3), the minister of finance has been made responsible to arrange the Annual financial plan and pilot it through Parliament. The budget process in India, like in most other countries, comprises four distinct phases.

1. Budget formulation: A preparation of estimates of expenditure and receipts for the following financial year;

2. Budget enactment: Approval of the proposed Budget by the Legislature through the enactment of Finance Bill and Appropriation Bill;

3. Budget execution: Enforcement of the provisions within the Finance Act and Appropriation Act by the government—a collection of receipts and making disbursements for various services as approved by the Legislature; and

4. Legislative review of budget implementation: Audits of government’s financial operations on
behalf of the Legislature.

Normally, the budget-making process starts within the third quarter of the fiscal year. In India, the Railway Budget is separately presented by the Union Railway Minister, two days before the general Budget. The Railway Budget figures regarding the receipt and expenditure of the railway also are shown within the General Budget, since they're part and parcel of the entire receipts and expenditure of the Government of India.

In the Union government, there's a budget division within the department of economic affairs under the Ministry of Finance. To begin the method, the budget division issues an annual budget circular around the last week of August or the primary fortnight of September each year. This annual budget circular contains detailed instructions for the Union government ministries/departments referring to the shape and content of the statement of budget estimates to be prepared by them. Each form contains the following columns:

• Actuals for the previous paper
• Sanctioned Estimate for this Year
• Revised Estimate for the present Year
•  Budget estimate for the subsequent year

Then review and consolidation of these estimations are getting done by the respective
departments/ministries and after consolidation the identical is to be forwarded to the minister of finance by the middle of November.

The Budget Estimates prepared by various administrative ministries are broadly divided into three parts:

• Standing Charges (pay, allowances, honorarium, etc.)
•  Continuing Scheme
•  New Scheme

Consultations: Budget making exercise isn't unilateral work undertaken by Finance Ministry
exclusively. It involves various stakeholders of the economy and it holds wide-ranged consultations with

1.  Administrative Ministries ;
2. Interest Groups the consultation with farmers, labour unions, business, economic and civil society groups etc.
3. State Governments: demands to the state are sent to the concerned finance ministry department for evaluations.

Once the pre-budget meetings are over. The approved ceiling for expenditure, as finalized in these meetings, is communicated. It includes internal ceilings of revenue and capital expenditure. Based on these limits, each ministry/department will prepare a final statement of budget estimate and sent it to the budget division. Then the Budget department gets on with the task of preparing the budget documents. There are over 13 documents, which are tabled within the Lok sabha. These are:

Role of Parliament - The procedure adopted in parliament coping with the budget involves the following stages:

1. Presentation of the Budget (PartA&Part B)
2. Discussion on Budget(General &detailed)
3. The budget goes to the committee

The presentation of the budget for the following financial year (beginning April 1) is typically done on the last working day of February. The Indian constitution has made the Parliament supreme in financial matters. The Union government, under Article 112 of the constitution, is required to get an annual financial statement of estimated receipts and expenditure before both Houses of Parliament. It can levy taxes or disburse funds only on approval in both houses of Parliament. However, the proposal for taxation or expenditure has got to be initiated within the Council of Ministers--specifically by the Minister of Finance. The finance minister presents before the Parliament, a financial statement detailing the
estimated receipts and expenditures of the central government for the forthcoming year and a
review of the present financial year

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Under Article 114 of the Constitution, the govt. can withdraw money from the Consolidated
Fund of India only on approval from Parliament then it's to urge the Appropriation Bills approved by Parliament. This authorises the chief to spend money. Article 265 of the Constitution prohibits the government from collecting any taxes without the authority of law. Therefore, the government comes up with the Finance Bill. The Bill may levy new taxes, modify the present tax structure or continue the prevailing tax structure beyond the period approved by Parliament earlier. The bills are forwarded to Rajya Sabha for comment. The Lok Sabha, however, isn't obligated to accept the comments and therefore the Rajya Sabha cannot delay the passage of those bills. The bills become law when signed
by the President. The Lok Sabha cannot increase the request for funds submitted by the executive, nor can it authorize new expenditures.

 Method of Control: it's the constitutional device to initiate discussion on demands. Usually three kinds of cut motions are in vogue to exercise parliamentary supremacy, and that they are as follows:

1. Policy Cut, also known as re 1 cut to express disapproval of policy; 
2. Economy cut to press for lump sum cut in budgetary allocation; and 
3. Token Cut to or rs. 100 cut to ventilate specific grievances 

However, the Parliament has no right to seek an increase in budgetary allocation. It can only ask for the reduction. 

Once the budget is approved by both houses, funds are allocated to different departments for the expenditure, it has to be audited by the Constitutionally mandated Comptroller and Auditor General of India (C&AG). The reports of the same are to be discussed and deliberated by the Houses and Public Account Committee re-examines it in the light of the report submitted by the CAG