Budget and Recent changes: Decoded !!


Author: Suchak Patel


Why Indian Finance year begin in April ?

  • India is Mainly agrarian economy where the new season start in the Vaishakha which coincide with the April 1 . British adopted this cause, Since most of their taxes were from the crops, the ruling government prepared its annual budget keeping these crop patterns in mind.

  • Practical reason :- For instance in India itself, festivals like Navratri and Diwali fall in the month of October and November, followed by Christmas in December. These account for heavy sales for the retailers and value buying’s for the shoppers making accounting complex and time consuming.

  • To avoid the collision of both so as each of the activity gets efficient time and attention, December is not preferred as the month of closure of the financial year.

  • Colonial reason :- December has a Christmas rush, you can’t really have it in June to  September (summer in the northern hemisphere) as many people take  vacations during this time so there will be no staff around.  


How Budget making procedures changed in past ?

  • Time of presentation :- Up to 1998s , Budget was presented in the evening which was the Colonial tradition as Evening in India mean morning in Britain. After that Budget present in the morning session.

  • MPs can present the over all views on budget. Media can analyze in briefly and Publish balanced views in next morning etc.

  • Budget Document mainly publish in white color but afterwards 1998 , different documents of the Budget like financial memorandum , Expenditure etc. publish in different color.

  • One Can easily read the specific information.

What Changes that Likely to make in future ?

  • Budget as the Statement of the revenue and expenditure not the massive and secretive affair – GST will be soon there and there will be no anxiety over the Tax exemptions except Income tax.

  • Financial cycle of the Jan to Dec instead of the April to March.

  • Advancing the budget presentation day by a month will do away with the need for a vote on account. It will help departments start spending the money allocated to them right from the beginning of the fiscal year instead of waiting for the budget to be passed by the Parliament. It will also help in resource mobilization as budget proposals can be implemented from 1 April.

Why There is separate rail budget for railways ? A separate Railway Budget – a necessity for the Britishers 

  • We must understand that for the British, a good rail network was necessary to rule the country. It was the largest British project in India and while it changed the fortunes of the British mercantile class and also had a cascading effect on Indian economy.

  • William M Ackworth Committee in 1920-21, that recommended “the railways should have a separate budget of their own and assume responsibilities for earning and expending their own income”.

  • It made sense then because in 1924, the railway budget formed about 70 per cent of the country’s budget and by making it separate allowed better focus on each budget’s priorities.

Why should there be a separate budget for the Railways?

  • The fact is that the Railways is indeed unlike any other Central ministry in size and scope: It is an operational ministry; it earns as well as spends, unlike other ministries that only spend.
  • Its gross earnings (Rs.1.68 lakh crore in 2015-16) are among the highest for any Indian organisation, public or private. it has a staff strength (13.2 lakh) that exceeds that of the Indian Army; it fully meets the pension liabilities of its retired employees (13.8 lakh) out of its own earnings unlike other ministries;

Is a separate railway budget required even today? NO

  • There is no constitutional or legal requirement for a separate railway budget. While the Union budget is a Constitutional requirement and is presented under Article 112 of the Indian Constitution, which mandates an annual financial statement, the Constitution does not talk about the railway budget in particular.

  • Rail have to pay the salary as per the pay commission and soon there will be tariff authority which will govern Railways income. So , Merging the railway budget and Union budget would mean the Indian Railways will not have to separately bear the burden.

Role of Rail :-

  • There is gradual decrease in the Share of Goods and passenger Transport through rail, Road play lead role in Indian transport.

  • The Allocation for the sectors like defence and Oil is more then rail. They need separate budget then rail.

  • Political tool :- In the history of alliance govt. rail always handled by the Ally partner. Rail became tool for to achieve political mileage. Trains on less economic viable routs , Populist measures by not reducing passenger tariff and Increasing freight etc. ( Dinesh trivedi).

  • The railway budget has also become an avenue for populism with members of Parliament demanding new trains and stops.

Cover Under the General union budget :-

  • The Income inured by the railways goes to the consolidated fund of India. Union Budget includes the rail budget revenues and expenses.

  • The demands for grants are included in the General Budget, for parliament’s approval of expenditure from the Consolidated Fund.

Why only today govt decision to merge the rail budget with General Budget ? The Railways’ financial position is precarious :

  • Expenditure hike due to the 7th pay commission report.
  • Heavy market borrowing for the expansion – bullet and talgo train.
  • Income – That going to the autonomous affairs when the Rail tariff authority formed.

( Ref – Reuters , Indian express , Mint ) 



Post By Mr. Suchak Patel (9 Posts)

A PG student of Transportation Engineering , Preparing For civil service, Ahmadabad !