The Beginner’s Guide To The Annual Budget

Here is a universal truth. The more boring a policy, the more important, the more complicated it is. And the more critical it is that you don’t fall asleep while it’s being discussed in Parliament. For instance, did you know Demands for Grants were discussed last week in Parliament?

For those of you fell asleep at the sound of “demand for grants”…

Now that I have your attention, last week, Home Affairs, Defence, Agriculture, Coal and Railways made their cases for the amount of money each of these ministries will get in the annual budget. You think it doesn’t affect your life? Trust me, it does.

Look, I’m not going to pretend the Budget is like fun. It’s extremely complicated and, therefore, boring. It involves pouring through large tomes of account books containing financial details of each and every aspect of our government. If you are brave enough, check out: http://indiabudget.nic.in/. For the less brave, this is a look at its contents:

For the downright cowardly, click nowhere, just stay with me and I’ll be your guide. We’ll talk about this year’s budget later, but first, allow me to first break down what the budget is and why it’s important. Keep close, and we’ll bring this monster down its knees.

Step 1: Collect Taxes

You pay taxes to the government. The government also gets taxes indirectly from you by charging different cesses, duties and surcharges. This part of the budget, you can see in the Receipt Budget. These taxes go into a mega account called the Consolidated fund of India (CFI).

Step 2: Proposal to Withdraw

Every year, the government creates a proposal about how much money it intends to withdraw from the CFI and spend it on things like roads, railways, atomic weapons, free meals for tiny kids, pensions, Swacch Bharat etc. Basically, everything the government does. That is, in very basic terms, the Annual Financial Statement.

This year, the Budget was presented to Parliament on February 1. This date was advanced by a month from February 28 when the Budget was proposed in earlier years.

Step 4: Budget Speech

The Government brings this proposal to Parliament. The Finance Minister gives a speech outlining that proposal while the MPs nod and clap away. You may think this means the budget is all done and dusted, but no. That’s just the FM laying lays down the intent.

FM Arun Jaitley’s Budget Speech:

Step 5: Introduction of Finance Bill

Along-with the Budget, the Finance Minister also presents a Finance Bill. This legislation primarily deals with how the collection of taxes i.e. Step 1, will be done for the following year. It makes changes to the income-tax act if the government wants to increase/decrease the slab rates and makes changes in the deductions that are allowed.

For the brave and the nerds, here’s the complete text of Finance Bill, 2017.

Step 6: Discussion on General Budget

There is a general discussion held right after the Finance Minister’s speech, during which MPs let it loose and talk about the state of the economy, their views on projections and present the major financial problems their states have had.

This year, the discussion happened on February 7, two days before the first half of the Budget session ended.

Step 7: Recess & Consideration by committees

Parliament goes into recess. Standing Committees for each ministry examine and approve the proposals for their respective ministries. These proposals are called “Demand for Grants”.

Random Trivia: There is a big building right beside the circular building called the “Parliament House Annexe”. There are multiple nice big carpeted committee rooms in that building where these meetings are held. Also, that is where all the Secretariat babus have their offices.

Step 8: Discussion on Demand for Grants

Parliament reconvenes and these Demand for Grants are brought into Lok Sabha for discussion. Individual ministries have individual demands. Since there are a crapload of ministries (57 to be precise) there is no time to discuss ALL of them. It usually takes a whole day to discuss and vote on a single Ministry. So the government picks out 5-6 important ministries which it feels should be discussed in detail. This what happened last week in the Lok Sabha. Railways, Agriculture and Defence are done and dusted. Home Affairs is halfway through and Coal will come up on Monday.

Step 9: Passing Demand for Grants & Cut Motions

Each Demand for Grants is voted upon. MPs are allowed to put in these things called “Cut motions”. Basically, if an MP is upset that the government is spending too much money on say Teacher recruitments, they will put in an amendment that says: “PLZ REDUCE THE FUNDING FOR TEACHER RECRUITMENTS TO Re. 1 BECAUSE I HATE IT! HATE IT!” Kinda like this, just not quite as cute.

And yes, ONE RUPEE. It’s just a token cut to show their disapproval. An MP can’t possibly anticipate exactly how much money needs to be spent for a particular scheme or service. They’re only kittens, sorry, mortal humans, after all. The Government is in the right place to do that because they have a lot of data which forms the rationale behind the expenditure.

Step 10: “GUILLOTINE”

After the minister (ideally) gives a response for every cut motion, the Demand for Grants is put to vote & passed in Lok Sabha. After the selected ministry grants are approved, the remaining grants are bunched up and passed together. It’s unofficially called “Guillotine Day”.

(Why is it called that? Search me.)

Step 11: The Finance Bill is discussed and passed.

The Finance Bill 2017 will be discussed on March 21, 2017.

This is easily the most important aspect of our budget because the provisions in this affect us profoundly and directly. It’s a yuge bill, of course, which amends multiple acts like Income Tax Act, Customs Act, Securities and Exchange Board of India Act etc.

And sometimes, just sometimes, It contains fascinating provisions, like last year when they allowed foreign funding to political parties.

Or this year where they are making dubiously seized demonetized cash legal and creating special ‘electoral bonds’ for political parties to keep their donors totally anonymous.

After completing all these steps, the ministries are now free to spend spend spend, go crazy crazy crazy and party party party. Because that’s what governance is all about, folks.

Coming up in part two: Details of this year’s budget and demand for grants of different ministries.