The Pros and Cons of Advancing Budget Date

Mridusmita

8 years ago

Advancing budget date — Image credits: //www.pointblank7.in/

In 2016, the Cabinet advanced the date of presentation of the Union budget by a month. This article details the pros and cons of Advancing Budget Date

[You may also read: What is Union Budget of India? How is it prepared?]

Till 2016-17, the budget was unveiled on the last day of February. But, in 2017-18, the budget presentation was advanced to the first working day of February.

The advancement of budget presentation has been done to ensure that the budget is passed by 31st March, that is, before the beginning of the next financial year.

Previously, the budget was passed in two parts. It was announced on the last day of February, but its provisions become law only when the Parliament passed the Finance bill in May and was approved by the President.

The budget has been advanced so that this entire budgetary exercise gets completed and the Finance bill is passed and becomes law before Ist April.

The budget session has been advanced as well. Previously, the budget session started from the last week of February and went on till Mid May with a recess in between. Now, the Budget Session is convened in the last week of January.

The proposal for a change in the budget presentation date was first mooted by some of the government’s senior-most bureaucrats as part of a ‘Transforming India’ initiative in January 2016.

Pros of Advancing Budget Date

If the budget is passed early, its implementation can be done as soon as the financial year begins (rather than from June after the passage of the finance bill in the Parliament). It will help the states and the Government ministries to plan their activities (spending etc.) in a better way as the funds will be released early.
An early budget presentation would enable expenditure to be streamlined throughout the year. As per the official expenditure data, spending is the lowest in the first two months of the financial year (April & May). This could be because the parliament passes the finance bill only in May. The expenditure is maximum in the last two quarters when the ministries have to exhaust the funds allocated to it by the Government.
The infrastructure spending will get a boost. Currently, the infrastructure spending usually gets delayed further as the rainy reason starts soon after the budget approval in May. As per a report by The Hindu, “around 51 % of the 738 promises in the UPA’s 10 full budgets remained unmet by the time the next budget was presented.” It is because of less time for implementation.
It has to be noted that there is a provision to incur expenditure during the first quarter (April-June) through vote-on-account. The departments are provided with a 6th of their total allocations. But, it only makes the budgetary exercise time-consuming and could be done away.
Tax payers and business men will know the tax rules before the financial year begins and plan accordingly. Though proposals are announced in February, it can be rolled back during the passage in May. (Eg: taxation on withdrawal of Employee Provident Fund was rolled back this year)

Cons of Advancing Budget Date

There will be inadequate data. This issue has been addressed as the Central Statistical Office (CSO) has agreed to release an estimate of GDP for 2016-17 on 7th January ( a month earlier). But, the former Finance Minister, Yashwant Sinha asserts that the outgoing years fouth quarter will remain a dark area while formulating the budget for the next year. The estimates will not be that credible. Also, comprehensive data on income and expenditure will not be available.
Chief Economic advisor will have to put together the economic survey with less data. There will be a time constraint as well
Parliament and standing commitee will not get enough time to deliberate on the budget and scrutinise it in detail.
Some people have opined that that such a drastic measure is not required. The Government could instead convene a special session to pass the finance bill on March 30 and 31.

Lastly, the cabinet made other changes in the budget also. The Railway Budget was merged with the general budget and the distinction between plan expenditure and non-plan expenditure was done away with.

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References:

Government hits fast forward on the budget process (Livemint)

Advancing the budget (The Hindu)

Pros and Cons of advancing budget (Hindu Business Line)

Union Budget in January (Business Standard)

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