Q.4. Explain the budget making process of the Government of India. Also explain the difference between plan expenditure and non-plan expenditure.

The budget-making process of the Government of India is a comprehensive procedure that involves several stages:

1. Preparation and Submission: The process begins around August or September, approximately six months before the presentation of the budget. Ministries and departments send their expenditure proposals to the Ministry of Finance.

• Scrutiny: The proposals are scrutinized, and discussions are held with the representatives of the concerned ministries. The Finance Ministry assesses the revenue and expenditure for the next fiscal year.

• Consolidation: After discussions, the Finance Ministry consolidates the budget proposals and prepares the final budget documents.

• Presentation: The Union Budget is presented by the Finance Minister in the Parliament on a date decided by the President. The presentation includes the Budget Speech and laying down of budget documents.

• Parliamentary Approval: The budget goes through a general discussion followed by a detailed examination by Parliamentary Committees. The demands for grants are then voted on, and the Appropriation and Finance Bills are passed.

• Implementation: Once approved, the budget is implemented from the start of the financial year, April 1.

Regarding the difference between plan and non-plan expenditure, it’s important to note that this classification has been abolished since the fiscal year 2017-18. The Government of India now classifies expenditures as capital and revenue spending.

Plan Expenditure (now obsolete) referred to the spending aligned with the government’s development plans, including investments in projects, schemes, and Central Assistance for States and Union Territories.

Non-Plan Expenditure (also obsolete) encompassed all expenditures not included in the government’s development plans, such as salaries, subsidies, loans, interest payments, and defense services.

The new classification focuses on the nature of the spending rather than its alignment with planned or non-planned activities Capital Expenditure includes investments and loans, while Revenue Expenditure covers operational expenses and payments that do not result in asset creation. This change aims to provide a clearer picture of the government’s spending and its outcomes.