Budget Basics: What goes into the making of the Union budget? Here's a step-by-step breakdown

Nirmala Sitharaman is expected to present her seventh consecutive budget in the second half of July, marking the full budget for the year 2024-25. Earlier in February, the finance minister presented an Interim Budget due to the Lok Sabha polls.

While the budget presentation may seem like a one-day event to the public, its preparation involves months of meticulous planning and complex stages. Here is a basic outline of the budget's journey from the finance ministry to Parliament.

Read our full Budget 2024 coverage here

The beginning of the budget

A core Budget group starts work on the budget. It consists of the finance minister, finance secretary, revenue secretary, expenditure secretary and the chief economic advisor.

It all starts with the Budget Circular which is issued by the Budget Division in the Department of Economic Affairs in the Ministry of Finance. The Budget Circular goes to all the ministries, departments and similar institutions of the Union government. The circular alerts these entities on how to prepare the budget estimates. So the Budget Circular puts all the Union government entities to the budgeting work.
Then the Expenditure Department of the Finance Ministry asks all the ministries and departments for the expenditure they plan to do in the next financial year. The expenditure estimates must contain numbers on actual expenditure of the previous financial year, budget estimates for the current financial year, revised estimates for the current financial year, and budget estimates for the next financial year.

After this information is sent to the finance ministry, the ministry holds discussions with different ministries and departments about their expenditure estimates. The ministry also holds discussions with other stakeholders such as various business and industry groups, research institutes, industrialists, trade unions, farmer groups, etc. so as the government can have sense of demands and expectations of these different segments which are directly impacted by the budget.

Once the finance minister has a clear idea about the broad numbers, he holds several rounds of discussions with the prime minister where the definite contours of the budget emerge. The finance minister incorporates all the changes suggested by the PM. The entire process of budget-making remains top secret and after a stage the employees who work on the budget are put under several restrictions.

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The budget in Parliament

The budget passes through three distinct stages in Parliament: presentation, discussion and passing of the bills.

The Central Government can raise revenue and incur expenditure only upon the approval of the Appropriation Bill and the Finance Bill by the Lok Sabha (Lower House of the Parliament) and subsequently by the Rajya Sabha (Upper House of the Parliament). The budget speech gives synopsis of the state of the economy as well as the budget proposals. After the speech, the budget documents are distributed among the MPs as well as uploaded on the finance ministry website. A general discussion is held on the budget in Parliament after which the finance minister gives a reply to the House.

After the voting on Demand for Grants, the Appropriation Bill is introduced which authorises the government to spend money from the Consolidated Fund of India. This is followed by the Finance Bill which consists of the financial proposals such as taxation.

The Appropriation Bill aims at authorising the government to access money from the Consolidated Fund, while the Finance Bill empowers it to collect taxes. Both these Bills, when passed, become Acts. The Rajya Sabha has no power to block these Bills and can only make recommendations to the Lok Sabha which can accept or reject them. After both the Bills are passed by Parliament, they are sent for the approval of the President after which the budget comes into force.

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