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The Union Budget is an annual financial statement presented by the Government of India, detailing its revenue and expenditure strategy for the upcoming fiscal year. The Union Budget 2024-25, presented by Finance Minister Nirmala Sitharaman, focuses on nine key priorities to achieve ‘Viksit Bharat.‘

Key Components of the Union Budget:

• Revenue Receipts: Revenue receipts are non-redeemable government receipts that do not create a claim and primarily fund current expenses. They comprise tax revenues and non-tax revenues.
  • Tax Revenues: Derived from taxation, these include direct taxes like personal income tax and corporation tax, and indirect taxes like excise duties and customs duties.
    For example: Income from GST constitutes a major part of tax revenue.
  • Non-Tax Revenues: Recurring income from sources other than taxes, such as interest receipts, dividends, and fees.
    For instance: Dividends from government investments in public enterprises.
• Capital Receipts: Capital receipts for the government involve monetary gains from loans or asset sales, impacting liabilities or reducing financial assets.
  • Loans: Money borrowed by the government from financial institutions or other sources.
    For example: Government borrowing from the Reserve Bank of India.
  • Sale of Government Assets: Disinvestment of Public Sector Undertakings (PSUs).
    For example: Sale of shares in companies like Air India.
• Revenue Expenditure: Spending incurred for purposes other than the creation of physical or financial assets of the central government. It covers normal functioning expenses, interest payments, and grants.
  • Interest Payments: On loans and various reserve funds, the largest component of revenue expenditure.
    For example: Interest payments on external loans.
  • Subsidies: Financial support to various sectors, such as agriculture and food.
    For example: Fertiliser subsidies for farmers.
• Capital Expenditure: Government spending that results in the creation of physical or financial assets or a reduction in financial liabilities. It includes investments and major infrastructure projects.
  • Infrastructure Projects: Building highways, railways, and other major public works.
    For example: Investment in the Bharatmala project for road development.
  • Investment in Shares: Government investing in public sector enterprises.
    For example: Equity investments in major public sector banks.
• Fiscal Policy Statements: These are mandated by the Fiscal Responsibility and Budget Management Act, 2003, and include the Medium-term Fiscal Policy Statement, Fiscal Policy Strategy Statement, and Macroeconomic Framework Statement.
  • Medium-term Fiscal Policy Statement: Sets a three-year target for fiscal indicators.
  • Fiscal Policy Strategy Statement: Examines current fiscal policies and sets priorities.
    For instance: Strategies for enhancing tax compliance and reducing subsidies.

Impact of Budget Components on Overall Economic Policy:

• Revenue Receipts Impact: Efficient tax collection and non-tax revenue generation ensure fiscal stability and enable the government to meet its expenditure needs without excessive borrowing.
  For instance: High GST collections can reduce fiscal deficit, providing more funds for public welfare.
• Capital Receipts Impact: Capital receipts finance long-term investments and development projects catalysing economic growth by providing necessary funds.
  For instance: Borrowing for the construction of new highways boosts connectivity and trade.
• Revenue Expenditure Impact: Revenue expenditure affects short-term economic activity by funding government operations, subsidies, and welfare programs. It ensures the smooth functioning of public services and supports vulnerable populations through subsidies.
  For instance: Subsidies on essential goods like fertilisers ensure affordability for farmers.
• Capital Expenditure Impact: Investments in physical and financial assets improve productivity and economic capacity, leading to sustainable development.
  For instance: Building new railways and highways enhances transportation efficiency and economic integration.
• Fiscal Policy Statements Impact: This ensures a balanced approach to managing revenues, expenditures, and debt. They help maintain fiscal discipline and align budgetary policies with long-term economic goals.
  For example: The Medium-term Fiscal Policy Statement sets targets for fiscal deficit reduction, ensuring sustainable fiscal management.

The Union Budget is a comprehensive tool that shapes India’s economic policy by allocating resources, managing deficits, and promoting growth through strategic investments and welfare schemes. Contemporary developments, such as economic recovery post-pandemic, underscore the importance of a balanced budget that fosters sustainable growth and social equity. Effective budget management ensures economic resilience and inclusive development, aligning with the government’s long-term economic goals.