Budget is the financial statement of the government. As a financial statement, most notable aspect about budget is that it contains proposed expenditure and estimated receipts of the government for the coming financial year. Besides this financial statement, budget contains lot of other important ingredients. It brings various programmes and schemes for enhancing the welfare of the people, to support different sectors like infrastructure, to facilitate faster economic growth etc. Similarly, the budget contains various policy statements by the government; including reform packages. The technical name for the budget is Annual Financial Statement.
Why budget is important
- Budget brings tax changes
- Budget launches different welfare schemes
- Budget brings economic reform measures
- Budget is often designed as a response to the prevailing macroeconomic environment in the country.
Budget is definitely known for all the above ingredients. A first glance itself may reveal that budget is not just expenditure and revenue statement of the government. Measures to tackle recent economic challenges are often launched in the budget.
For the central government, in the normal case, the general budget is presented towards the end of February every year.
The budget of course, is for a specific financial year. The financial year for the government starts on 1st of April and ends on next March 31st. This means that budget for 2016-17 will be an estimate of expenditure to be made and receipts to be obtained from 1st April 2016 to 31st March 2017.
Why three year’s budget figures?
When we refer to budget 2016-17, it means the detailed statement by the government regarding its estimated expenditure and receipts for the next financial year. That means an estimate of expenditure to be made and receipts to be obtained from 1st April 2016 to 31st March 2017. Thus the general budget is actually an budget estimate for the coming financial year. Though the point of attraction in the budget is the programmes, schemes, expenditure and revenue for the coming financial year; the budget includes statements about two previous budgets. First, there is an actual budget statement of the previous year and a revised estimate of the current year. If you are going through the expenditure and revenue statement of the budget, you can see estimates for figures for these three years. So, there will be three years budget actually in one year’s budget. For example, in the budget 2016-17, there will be:
1. Budget Estimate (BE) for 2016-17 (the most important one of course!!)
2. Revised Estimate for 2015-16(RE)
3. Actual for 2014-15
For understanding all these, you should have in your mind the present date. For example suppose, today is February 29, 2016, and the Finance Minister has presented the budget on the in the Parliament; the budget involves budget statement about three years as we mentioned- an estimate for the next year, a revised estimate for the current year and an actual estimate for the previous year.
1. Budget Estimate
This is for the next year i.e., for 2016-17. The term BE will be used to mention for the year 2016-17. Sometimes a BE of the last budget may also be attached.
2. Revised Estimate
The Revised Estimate (RE) is for the current year i.e., for 2015-16. Because, the year 2015-16 is the current year as February, 29, 2016 falls within the financial year of 2015-16.
The Budget for 2016-17, hence involves a revised statement about the current year (expenditure, receipts etc.). This is often referred as Revised Estimate (RE). Remember that the current year is yet to be completed. (The current year will be completed only on 31st March 2016, which is yet to come). The Revised Estimate indicates what are the deviation from the BE, which was presented a year ago.
3. Actual: this is for the completed year. Here, in our case, the completed year is 2014-15, for which the actual completed data is available about tax revenue, expenditure and borrowings that the government has made.