The Explainer: Understanding the Budget - Part I

In India, there is hardly any economic event that captures
popular imagination as much as the Union Budget.  In a multi-part series, The Explainer will
focus on the complex budget jargon that puts off even interested-in-budget
souls.

I am writing this series of articles after receiving several
requests from this blog’s readers and my friends on Facebook.

So, here we go!

What is a
Fiscal Year?

Any twelve-month period that is used for submission of
accounts, taxation purposes and to state financial reporting by private and
public sector companies is called a Fiscal Year.

In India, the Government has laid down the provision that the
12-month starting on April 1 and ending on March 31 of next year will be
treated as a Fiscal Year.

To put it in perspective, this article is being written on 12
March 2013, i.e., in Financial Year 2012-13. This is also called Fiscal Year ’13.

In the same way, the financial year for 2013-14 will start on
1 April 2013 and will end on 31 March 2014. So from 1 April 2013, we will enter
Fiscal Year ’14.

Why is the
Union Budget presented on the last day of February?

The Finance Minister of India presents the annual Union Budget
in the Parliament of India. It is typically presented on the last day of
February, for the following reasons: 

(a) After
presentation, the Budget is tabled in the Parliament where members of both the
Houses would debate the various provisions listed in the Budget. This would
require a few days of debate and discussion. 

(b) Also,
after such budget debate, any amendment to the original provision (like
increasing or decreasing the allocation for a said ministry/program and rolling
back any budget proposal) will have to be tabled, discussed, passed, and
brought into law by the Parliament. 

(c) Also,
the administrative system, especially in case of tax administration, would need to be geared up to reflect any change in the financial, taxation or any other system.

What is the
Economic Survey?

The Finance Minister's Budget Speech contains two major components: Part A and Part B.



Part A of the Speech contains the Economic Survey while Part B comprises the Union Budget Speech. 



The Economic Survey is tabled by the Ministry of Finance in the Parliament along with the Union Budget. 



The Economic Survey is an assessment of the performance of
the Indian economy in the fiscal year going by. For example, the Economic
Survey 2012-13 presents an assessment of the performance of the Indian economy in
that fiscal year (i.e., 2012-13).

So while the Economic Survey is an assessment of the
performance of the Indian economy in the fiscal year gone by (i.e., the one
that ends on March 31 this year), the Union Budget is a statement of revenues
and expenditures for the coming fiscal year, i.e., the one that starts on April
1 of this year.

(To be continued)