In accordance to the Constitution of India’s Article 112, it is necessary to present a budget at the Parliament before the beginning of every financial year. The Union Budget is allotted for the upcoming fiscal year, which starts from 1st of April and ends on 31st March of the next year.
About Union Budget
The Union Budget contains details about the projected receivables and payables of the government for a particular fiscal year. This budget statement is divided into two major parts—capital budget and revenue budget.
- Capital budget
Capital budget accounts for government-related capital payment and receipts. Capital receipts include loans from the public or that from the Reserve Bank of India (RBI), while capital payment includes expenses incurred towards health facilities, development and maintenance of equipment, as well as educational facilities.
- Revenue budget
As the name suggests, a revenue budget accounts for all the revenue expenditure and receipts. If the revenue expense is in excess of the receipts, the government suffers a revenue deficit.
Understanding the importance of a Union Budget
The general objective of the Union Budget is to bring about a rapid and balanced economic growth of our country coupled with social justice and equality. Following are the key objectives that highlight the importance of Union Budget in India.
- Ensure efficient allocation of resources
It is necessary to employ the available resources in the best interest of the country. Allocating resources optimally helps to achieve profit maximization for the government so as to foster public welfare.
- Reduce unemployment and poverty levels
Another objective of the Union Budget is to wipe out poverty and create more job opportunities. This will ensure that every citizen of the country is able to meet his/her basic needs of food, shelter, and clothing, along with facilities for health care and education.
- Reduce wealth and income disparities
The budget aids in influencing the distribution of income through subsidies and taxes. It helps to ensure that a high rate of tax is levied on the rich class, thereby reducing their disposable income. On the other hand, a lower rate of tax is charged on the lower income group to ensure they have sufficient income in hand.
- Keep a check on prices
The Union Budget aids in controlling the economic fluctuations as well. It ensures proper handling of inflation and deflation, thus bringing about economic stability. During inflation, surplus budget policies are implemented, while deficit budget policies are devised during deflation. This aids in maintaining a price stability in the economy.
- Change tax structure
The Union Budget also dictates the possible changes in the direct and indirect taxes of the country. It brings about changes to income tax rates and tax brackets. For instance, the upcoming income tax slab A.Y. 2018-19 is part of this budget.
The Union Budget is indeed crucial as it has a widespread impact on numerous areas. Hence, it is imperative to have knowledge about what it stands for and its importance.