Preponing the General Budget: Is preponing the presentation date a good decision?

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Preponing the General Budget: Is preponing the presentation date a good decision?

Government of India has decided to pre-pone the date of presentation of Union Budget from February 28 to February 1 every year. The Union Budget 2017-18 was therefore presented on February 1, 2017 instead of February 28. The decision became a subject of national debate with many politicians, economic experts and fiscal policy experts weighing pros & cons on the topic.

 

IIMs and other top B-schools included this topic in their final selection round. Below are shared the key facts, pros and cons of pre-poning the date of presentation of Union Budget

 

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Key facts

The legacy of presenting the Union Budget on last working day of February has been done away with. Since the British period Union Budget has continued to be presented on February 28 or 29 in a leap year.

 

Government has found the preponed date of Budget presentation a better idea as it will solve many issues like delay in start of implementing the budget proposals.

 

Earlier, during Atal Bihari Vajpayee’s NDA government, the then finance minister Yashwant Sinha had also departed from the tradition of presenting the budget at 5PM and changed the time of the presentation of the Union Budget at 11AM in 2001. Since then 11AM Budget presentation time is followed.

 

The Finance Ministry had proposed that the Budget Session be convened before 25 January, a month ahead of the current practice.

 

The Union Budget 2017-18 was therefore presented on February 1 instead of February 28, 2017 by the Union Finance Minister, Mr Arun Jaitley.

 

Benefits of early presentation of Union Budget-Pros

  • The budget includes Finance Bill. It also has changes in the tax policies and various schemes which affect investors and business people. Since budget used to be passed in May, people had to make adjustments for any changes affecting them. So, individuals and firms were unable to do tax planning, investment and purchase decisions given the uncertainty over the provisions of the Finance Act. The practice of presenting the budget in the last week of February, was therefore going against the principle of ease of doing business.
    Appropriation Bill was needed to be passed to take money from the Consolidated Fund of India (CFI). However, it could not be passed till 1st April but government needs money till the Appropriation Bill is passed. To accommodate this, Vote on Account, which allows the government to take money out of CFI till Appropriation bill is passed had to be passed. Vote on Account in turn has limitations and money for big projects cannot be procured with it. It allows money to be drawn for small things like paying salaries, pensions. Even after passing of the budget in May, it used to take the month of June for money to reach the implementing agencies by which time monsoon set in. During monsoons, big projects like roads, construction can’t be taken up. Till late September, nothing happens on ground though the financial year starts from April.
  • The aim is that all spending authorities within the system and those financially dependent on the Centre be in a position to work out their activities with assured resources in the beginning of the year itself. With annual financial resources approved and bestowed on April 1, a more planned and regulated expenditure profile during the year is expected.
  • It is undeniable that early placing the funds at the disposal of the executive authorities entrusted with Budgets and expenditure responsibilities, to the full extent of their annual requirement has its positive attributes.
  • With the advancement of Budget session parliamentary approval of the final batch of supplementary demands i.e. for additional budgeted funds and re-appropriation relating to the current financial year, may be feasible a few weeks before the end of the financial year. This will enable additional releases from the Centre to the States in February or early March.
  • The State governments will consequently get more time to actually utilise the funds which may become available to them as a result of these approvals, in the year of release.
  • This is instead of receiving the last tranche from the Centre at the end of March and placing such receipts perforce in a transitory accounting head or ‘civil deposits’, for utilisation in the next financial year against financial principles.
  • The earlier practice of presenting the budget was a hangover of British Raj. It was wasting time from March to June. Now the whole process will be completed by March end and the budget will be operative right from the beginning of the new financial year.

Considerations & thoughts on Early Budget-(Cons)

  • The budget presentation could have been postponed to mid- or end-March so that February’s “actual” figures can also be taken into account.
  • Government has stated the reason for preponing the budget presentation date that it will give more time to prepare for the implementation of the budget actions. However, with instantaneous, always available communication and digital government, the time required should be far lesser than the month from Feb 28 to March 31, available with the government since 1947.
  • Early budget presentation has political motive as there were state elections in Uttar Pradesh, Punjab, Goa, Manipur starting from Feb 4th. In 2012, when there was a similar clash between the budget date and multi-state polling, the government had postponed the budget date to avoid conflict.
  • In the first early presented budget on February 1, 2017, it was more estimates than actual as the figures and data from various quarters including states could not be received and compiled with due diligence to arrive at correct budget allocations... Read More GD Topics

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