Budget overhaul: All you need to know

The Narendra Modi government today cleared several proposals to overhaul the manner in which the annual Budget is presented in India. Here’s all you want to know about the changes that were announced:

The Union Budget presentation has been advanced:

The annual Budget, traditionally presented on the last working day of February will be tabled about a month earlier now. This will ensure that the government completes the entire Budget exercise by March 31, before the new financial year kicks in.

In the present setup, though the budget is presented in February, several tax proposals kick-in only from June after Parliament passes the annual finance bill in May. Income tax changes come into force only after the finance bill is passed, but these are retroactively implemented from April 1.

The government will move to “outcome-based budgeting”

By scrapping the distinction between plan and non-plan expenditure and moving to an “outcome-based budget”, the finance ministry is trying to shift from traditional performance-based budgeting by planning expenditure to fixing appropriate targets and quantifying deliverables of each scheme.

The government classifies its expenditure into plan and non-plan. Non-plan expenditure is what the government spent on salaries, subsidies, loans and interest. While plan expenditure is the money spent on productive purposes, such as the money spent on the various flagship programmes of the government.

Merger with the rail budget

Rail minister Suresh Prabhu told Rajya Sabha on August 9 that he had asked the finance minister to merge the Railway Budget with General Budget, citing the long-term interest of national transporter as well as the country’s economy. The cabinet today approved this.

“If the rail budget is merged then, Railways will not have to pay the annual dividend for gross budgetary support to the government,” a top source in the government who did not wish to be named told HT.

Discarding the rail budget is a politically sensitive issue. This 92-year-old tradition has been used as a populist tool to announce new trains and routes by governments to reach out to constituencies.

Apart from the Cabinet nod, the move to advance the budget and merge the rail budget will require bi-partisan political support as it will involve changes in Parliament sessions.

Read: How does an early Budget impact you