The Union Budget 2025 will be presented on February 1, 2025, by Finance Minister Nirmala Sitharaman. If the Union Budget 2025 is not passed in the Lok Sabha, the government loses its majority support, leading to a financial and political crisis. Since the Budget is a money bill, failure to pass it means the government cannot withdraw funds, affecting essential expenses. To prevent a shutdown, a Vote-on-Account may be passed for temporary funding. However, if the deadlock continues, it can trigger a no-confidence motion, Prime Minister’s resignation, dissolution of Lok Sabha, and fresh elections, potentially causing the government to collapse.
NEW DELHI: The Union Budget 2025 will be presented on February 1, 2025, by Finance Minister Nirmala Sitharaman. If the Union Budget 2025 is not passed in the Lok Sabha, the government loses its majority support, leading to a financial and political crisis. Since the Budget is a money bill, failure to pass it means the government cannot withdraw funds, affecting essential expenses. To prevent a shutdown, a Vote-on-Account may be passed for temporary funding.
However, if the deadlock continues, it can trigger a no-confidence motion, Prime Minister’s resignation, dissolution of Lok Sabha, and fresh elections, potentially causing the government to collapse.
As we get closer to Budget Day (Feb 1,2025) , it is important to understand what is a Budget?what are the various components of it ?, process of passing a budget in the Parliament and what happens if the Government fails to pass the budget?
WHAT IS A BUDGET ?
The Budget is an important document that outlines the estimated income and planned expenses of the Government for the upcoming financial year. This financial year starts on 1st April and ends on 31st March of the following year.
The Budget acts as a detailed financial plan that highlights the Government’s economic strategy and key policy decisions. It plays a crucial role in deciding how money will be collected and spent to support the country’s development.
Both the Central Government and State Governments prepare their respective budgets every year. The budget prepared by the Central Government is known as the Union Budget, while the one prepared by a State Government is called the State Budget.
The Indian Constitution does not specifically use the term ‘Budget.’ Instead, Article 112 of the Constitution uses the phrase ‘Annual Financial Statement’ for the same.
COMPONENTS OF THE BUDGET
The Union Budget of India, also known as the Annual Financial Statement, consists of three key components:
- Budget Estimates: This includes the projected income and expenses for the upcoming financial year, also known as the Budget Year.
- Revised Estimates: These are updated figures for income and expenses for the ongoing financial year.
- Provisional Actuals: These represent the actual income and expenses recorded for the previous financial year.
For example, the Union Budget for 2024-25 was presented in February 2024, towards the end of the 2023-24 financial year. In this case:
- The financial year 2024-25 is considered the upcoming financial year, with its data categorized as Budget Estimates.
- The financial year 2023-24 is the current financial year, with figures labeled as Revised Estimates.
- The financial year 2022-23 is the previous financial year, with figures listed as Provisional Actuals.
PRESENTATION OF BUDGET
The budgetary process in India officially begins with the presentation of the Budget.
Earlier, the Union Budget was traditionally presented on the last working day of February. However, since 2017, the date has been moved forward to 1st February.
In certain cases, the Budget may be presented in the Lok Sabha in two or more parts. When this happens, each part is treated as a separate budget.
On the day of the Budget presentation, no discussions take place regarding its contents.
PROCESS FOR THE PASSING OF BUDGET
The process involves several steps that ensure proper allocation and approval of funds for the country’s development.
Budget Presentation: The Union Budget, which includes the Demand for Grants, is presented by the Finance Minister. It provides details about government income and planned expenses for the upcoming financial year.
Departmental Demands: Different government ministries and departments submit a formal request for funds, known as ‘Demand for Grants.’ These requests include estimates of expenses for the next year. All the demands from various ministries are compiled into individual grants for parliamentary review.
Scrutiny by Committees: The demands for grants are carefully examined by various Parliamentary Committees. These committees review the financial requests and may suggest changes or reductions.
Discussion and Approval: The Lok Sabha debates the demands for grants. Members of Parliament (MPs) discuss the importance and details of each demand. The Lok Sabha must approve these grants, and it has the authority to reduce or reject any request.
Voting on Demands for Grants: The Lok Sabha then votes on the demands for grants during the financial process based on the reports of the Parliament’s Departmental Standing Committees. Following a proper Lok Sabha vote, a ‘Demand for Grant’ turns into a grant.”
Cut Motions: MPs have the right to propose cut motions, which are formal objections to specific demands. There are three types of cut motions: Disapproval of Policy Cut, Economy Cut, and Token Cut. These motions allow MPs to express their disagreement with certain parts of the budget.
Guillotine: Due to time constraints, not all demands for grants can be discussed separately. On the last day, the remaining demands are put to vote without debate, a process known as Guillotine.
Passing of the Budget: Once the Lok Sabha approves the demands for grants (with or without changes), they become part of the Appropriation Bill. This Bill allows the government to withdraw money from the Consolidated Fund of India to cover its expenses and liabilities.
Passing of Appropriation Bill: According to the Constitution of India, during the budgetary process, ‘no money shall be withdrawn from the Consolidated Fund of India except under appropriation made by law. Once the Lok Sabha approves the grants, the Appropriation Bill is introduced to provide for the use of government funds.
The grants are voted on and passed by the Lok Sabha, and the expenses charged to the Consolidated Fund of India. After approval from the President of India, the Appropriation Bill becomes the Appropriation Act.
Passing of Finance Bill: The Finance Bill is introduced to bring the government’s financial policies into effect. The term ‘Finance Bill’ refers to the legislation that is typically proposed annually to implement the Government of India’s financial plans for the upcoming fiscal year, as well as a Bill that lays out supplementary budgetary.
Once the President signs the Finance Bill into law, it becomes the Finance Act.
The Finance Act legalizes the income side of the Budget for the financial year and it concludes the entire process for the passing of the budget.
WHAT HAPPENS IF IT IS NOT PASSED IN LOK SABHA?
The purpose of the budget is to inform the members of Parliament and the public about how the government plans to spend its money and manage the country’s finances.
If the Lok Sabha (the lower house of Parliament) does not pass the Union Budget, there are serious consequences.
“When the annual Union Budget is not passed by the Lok Sabha, the Prime Minister submits the resignation of the Council of Ministers.”
This means that the entire Council of ministers, led by the Prime Minister, will have to resign from their posts.
If the money bill, which is a part of the budget, is not approved by the Lok Sabha, it results in the dissolution of the house.
Essentially, this situation raises questions about the government’s majority in the Lok Sabha, and the government must pass a confidence motion to show that it still has the support of the majority members.
DIFFERENCE BETWEEN REGULAR BUDGET AND INTERIM BUDGET
Regular Budget
The Regular Budget, also referred to as the annual budget or Union Budget in India, is a detailed financial statement presented as per Article 112 of the Indian Constitution outlining the government’s projected revenue and expenditure for the upcoming financial year.
Interim Budget
An Interim Budget is presented when the government seeks approval for expenditure during an election year or when it is unable to present a full budget due to exceptional circumstances. It serves as a temporary financial arrangement until a new government can introduce the Regular Budget.
Typically, an Interim Budget is presented in the year of General Elections to the Lok Sabha. Once the elections are concluded and a new government assumes office, and the Regular Budget is presented to Parliament on a date determined by the new administration.
In conclusion, the Union Budget is not just a financial roadmap; it is a key political document that helps shape the direction of the government. Its approval in Parliament is vital for the government to continue its work and implement its plans. The process ensures that the government remains accountable to both the Parliament and the people.
As we approach the Budget 2025, the focus will be on whether the government can secure approval for its proposals and move forward with its vision for the nation’s growth.
With the right support and collaboration, the passing of the Budget will pave the way for a prosperous and stable future for India 2025!
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