How to Read the Union Budget
This note provides brief guide on how the budget papers are organised, and how to find the exact information that a reader wants (expenditure on a particular scheme of interest, or total budget allocation of a ministry, for instance). For note on the Budget process, click here.The Finance Minister presents an annual statement to Parliament of how much money the central government expects to raise in the next financial year and how it plans to spend that money. The documents also contain information on how much money was budgeted for various schemes or ministries in the past year, and an estimate of how much it is likely to spend by the end of the current financial year. These statements, taken together, are called the union budget. There are a number of separate documents which comprise the budget papers. They can seem confusing and technical, and the same information can often be found in different documents.
|Category||Explanation||Documents in this category (with colour coding)||Most Useful documents|
|Summary Documents||These documents summarise the budget in different ways, either in terms of the main policy measures proposed, or in terms of the major types of expenditure. These documents are not convenient if you want to understand the allocation to a given ministry or one of the lesser known schemes.||Budget Speech: The document familiar to most – the government uses this speech to highlight new schemes, or increased allocations to existing schemes (like NREGA). Also used to announce new tax proposals.||Use the Budget Speech to understand important economic policy changes; use the ‘Budget at a Glance’ to get data on broad types of expenditure, revenue collections and the fiscal deficit.|
|Budget at a Glance: information on total funds raised by the government (through taxes or borrowing i.e. the fiscal deficit), and how that money is to be spent.|
|Annual Financial Statement: Similar to the ‘Budget at a Glance’ but organised in a different way to reflect requirements under the Constitution.|
|Expenditure Documents||Present more detailed information on the expenditures of the government for the current year, and the budgeted amounts for the following year.||Expenditure Budget Vol I: Presents a summary of the total expenditure of all ministries; Also presents expenditure according to different categories of interest-i.e. summary of funds allocated to schemes for women or minorities.||The two ‘expenditure budget’ volumes are probably the most useful. Use Vol I to understand total budget allocation for welfare of certain segments (such as women or children or minorities). Use Vol II to understand the total budget allocation to a ministry and how that ministry intends to use the money across different schemes.|
|Expenditure Budget Vol II: Presents a detailed breakdown of the expenditure of each ministry and summarises data for all ministries.|
|Demands for Grants / Appropriation Bill: Two documents required under the constitution, asking parliament to allocate the stated amount of funds to different ministries and different schemes. Parliament votes to pass these two documents.|
|Revenue Documents||Presents detailed information on the money raised by the government by way of taxes or borrowing.||Receipts Budget: Presents detailed information on how the government intends to raise money through different sources.||The Receipts budget is the main document required to understand how the government is raising money; the Memorandum explains the tax changes proposed in the Finance Bill in greater detail and in non-legal language.|
|Finance Bill: A bill presented to Parliament (and to be voted on) containing the various legal amendments to bring into effect the tax changes proposed by the government.|
|Memorandum on the Finance Bill: Explains the various legal provisions contained in the Finance Bill and their implications in non-technical language|
|FRBM Documents||Documents presented under the provisions of the Fiscal Responsibility and Budget Management Act, 2002. Under this Act, the government is required to follow sound fiscal policies and must set limits on the size of the budget deficit over the next few years.||Macro Economic Framework: Explains the government’s assessment of the economic growth prospects.||In recent years, the government has not been able to keep to its deficit targets. Use the statements on ‘Medium Term Fiscal Policy’, and the ‘Fiscal Policy Strategy’ to understand how these targets are changed and why.|
|Medium-Term Fiscal Policy: A statement setting limits on the size of the budget deficit for the next three years, as well as targets for taxes to be raised.|
|Fiscal Policy Strategy: A statement explaining the government’s efforts to follow sound fiscal policies and reasons for any departure from the targets set by it for deficits under the FRBM Act (see Medium Term Fiscal Policy above).|
The data in the Expenditure Budget reflects the expenditure of a ministry for the following year after accounting for ‘recoveries’ e.g. revenues the ministry may have from charging of user fees for public services. The summary at the beginning of the ‘Demands for Grants’ does not make this adjustment. However, in the detailed data for each ministry, such an adjustment is shown along with the original number. So the two sets of data are not really different. They are just presented in different ways.
The table on the very first page of ‘Budget at a Glance’ summarises the entire budget in one table.
February 16, 2010.