The history of budgeting in India is closely tied to the country’s economic and political evolution. Here’s a detailed overview of key milestones and developments in the Indian budget history:

 

 

 

Pre-Independence Era

1. 1860: The first budget for India was presented by James Wilson, a Scottish economist, and politician, on February 18, 1860. This was during the British colonial period when India was governed by the British East India Company.
2. 1919: The Government of India Act 1919 introduced the concept of a federal budget, marking a significant shift in the fiscal management of the country. It provided for the division of financial responsibilities between the central and provincial governments.

Post-Independence Era

1. 1947: After gaining independence on August 15, 1947, India presented its first independent budget on November 26, 1947. The budget was presented by the first Finance Minister of India, R. K. Shanmukham Chetty.
2. 1950: The adoption of the Constitution of India on January 26, 1950, established the framework for the financial administration of the country. The budget began to play a crucial role in planning and economic development.

Significant Developments

1. Five-Year Plans: Initiated in 1951, the Five-Year Plans aimed at planned economic development and were closely linked with the annual budgeting process.
2. 1969: The budget was presented separately for the first time in two parts – the Railway Budget and the General Budget. This practice continued until 2017.
3. 1991: The budget presented by Dr. Manmohan Singh under the leadership of Prime Minister P. V. Narasimha Rao marked the beginning of economic liberalization in India. This budget introduced significant reforms such as reducing import tariffs, deregulating markets, and opening up the economy to foreign investments.

Modern Era Reforms

1. 2000: The Fiscal Responsibility and Budget Management (FRBM) Act was enacted to bring in fiscal discipline, improve macroeconomic management, and reduce fiscal deficits.
2. 2017: The Railway Budget was merged with the General Budget, and the tradition of presenting the budget on the last working day of February was shifted to February 1st. This allowed the budgetary allocations to be implemented from the beginning of the financial year starting April 1st.
3. 2019: The interim budget of 2019 saw the introduction of the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme, aimed at providing income support to farmers.

Key Components of the Budget

1. Revenue Budget: This includes the government’s revenue receipts (tax and non-tax revenues) and expenditure met from these revenues. Revenue expenditure is for the normal running of government departments and various services, interest charges on debt incurred by the government, subsidies, etc.
2. Capital Budget: This includes capital receipts and payments. Capital receipts include loans raised by the government from the public (borrowings) and loans received from foreign governments and bodies. Capital payments include capital expenditures on the acquisition of assets like land, buildings, machinery, and equipment.

Presentation Process

1. Preparation: The budget preparation process starts in August-September when the Ministry of Finance issues guidelines to all ministries and departments to prepare their estimates for the next financial year.
2. Scrutiny: These estimates are scrutinized and discussed by the Finance Ministry, leading to the preparation of the draft budget.
3. Approval: The draft budget is then presented to the Cabinet for approval before being presented in the Parliament.
4. Presentation: The Finance Minister presents the budget in the Lok Sabha. The budget speech is divided into two parts: Part A deals with the general economic survey of the country and policy measures, and Part B contains tax proposals.
5. Discussion and Voting: The budget is discussed and voted upon in the Lok Sabha. The Rajya Sabha can only make recommendations.
6. Finance Bill: The Finance Bill, which contains the government’s taxation proposals, is also introduced and must be passed by both houses of Parliament.

The budget is a crucial instrument for the Indian government, reflecting its economic policies and priorities. It plays a vital role in resource allocation, economic stabilization, and distribution of income.