The Union Budget is India’s yearly financial roadmap, presented by the Finance Minister in Parliament. It provides a clear picture of the government’s expected income and planned spending for the upcoming financial year, which runs from April 1 to March 31. It reflects the government’s financial health, detailing expected earnings and expenditures. It’s a document that unveils new financial plans and initiatives the government intends to roll out in the coming fiscal year.

The Union Budget is being prepared by the Ministry of Finance under the leadership of Nirmala Sitharaman. All eyes are set on February 1st, 2025, when it will be officially presented, shaping the country’s financial future. The Budget process begins six months prior, around August or September. Have you ever wondered how the budget is prepared? What is the timeline, and what steps does the entire process involve? Here are the 5 major steps in the Union Budget formation.

Key Components of the Budget

Expenditures: Public welfare programs, defense funding, salaries, pensions, interest on debts, and imports.
Revenue: Generated through tax collections, public sector business operations, borrowings (e.g., government bonds), and other sources.

Budget Circulars

Circulars are considered to be the initial step where the budget process starts. The Department of Economic Affairs’ Budget division within the finance ministry leads the budget creation. They have sent budget circulars back in August this year. The circulars provide important details and instructions regarding the Union Budget that each department must adhere to. The department issues guidelines and forms to all ministries, states, union territories, and autonomous bodies, requesting their spending estimates for the upcoming year, along with details of their past revenues and expenditures. These circulars are also sent out to field officers, who gather data on receipts and expenditures for both the current and previous fiscal years. The officers and officials also work on preparing the budgetary plans for the upcoming fiscal year.

Proposal Review

These proposals are reviewed by government officials. An extensive discussions occur between the ministries and the expenditure department. Here, the data is aligned with the budgetary outlay roadmap and resource allocation. After further scrutiny, the data is submitted to the Ministry of Finance, which allocates revenues to different departments. If in case any disputes about funding arises, they are resolved through consultations with the Cabinet or Prime Minister.

Budget Allocation

After the detailed submission and verification of fund requests, the Ministry of Finance decides how much money each ministry and department should be allocated in the Union Budget for intended welfare schemes or other programs. If the Ministry of Finance finds any disputes in the allocation, it seeks advice from the Union Cabinet. Further disputes may involve the Prime Minister’s intervention, whose decision will be final. After determining future expenditures, the Central Board of Excise and Customs, the Central Board of Direct Taxes, and the Ministry of Finance create a detailed report outlining the estimated revenues for the upcoming fiscal year. The government also gathers input from stakeholders like farmers, business owners, entrepreneurs, and investors.

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Pre-Budget Meetings

Pre-budget meetings take place between the finance minister and various groups, including state representatives, bankers, farmers, economists, and trade unions. After these consultations and discussions with the prime minister, the finance minister finalises the budget.

Printing of Union Budget documents

The “halwa ceremony” has traditionally marked the beginning of the printing of the Union Budget documents. However, things have changed in recent years. Unlike in the past when these documents were printed on a large scale, since 2021, Finance Minister Nirmala Sitharaman has presented the budget in a paperless format. Instead of printed documents, she uses a digital tablet wrapped in a ‘bahi-khata’ style cover. This shift happens after the halwa ceremony is held in the Finance Ministry office. In the past, the Union Budget was printed at a press located in the Rashtrapati Bhawan, but following a leak, the printing was moved to the Finance Ministry to ensure greater security.