Explain the budget making process of the Government of India. Also explain the difference between plan expenditure and non-plan expenditure

The Union Budget of India is one of the most important financial events in the functioning of the government. It is an annual financial statement presented by the Government of India that outlines the estimated receipts (income) and expenditure (spending) for the upcoming financial year. The financial year in India runs from 1st April to 31st March. The budget reflects the government’s priorities, development goals, economic policies, and welfare objectives. Preparing the budget is a detailed and lengthy exercise involving coordination among various ministries, departments, states, and financial institutions. At the same time, understanding the difference between Plan and Non-Plan expenditure is important for understanding how the government allocates funds to different sectors.

Budget Making Process of the Government of India

The process of making the Union Budget takes around six to eight months and involves several steps. Below are the major stages:

1. Issue of Budget Circular by Ministry of Finance

The budget-making process officially begins around September every year when the Ministry of Finance issues a Budget Circular. This circular contains guidelines to all ministries and departments regarding:

How to prepare estimates of revenue and expenditure
Format for presenting financial data
Deadlines for submission

This ensures uniformity in budget proposals from all departments.

2. Estimates by Various Ministries and Departments

Each ministry and department starts preparing its financial requirements for the upcoming year. They estimate:

Revenue expenditures (salaries, subsidies, maintenance)
Capital expenditures (building infrastructure, buying equipment)
New policy proposals

These estimates are prepared after discussions with attached offices, public sector units, and autonomous bodies under them.

3. Discussions with the Ministry of Finance

Once each ministry prepares its financial proposal, it is sent to the Department of Expenditure in the Ministry of Finance.

The Ministry of Finance reviews these proposals and holds discussions to:

Ensure financial discipline
Maintain expenditure within government limits
Avoid unnecessary expenses

Sometimes, the Ministry of Finance may reduce the proposed spending if revenue expectations are low.

4. Meeting of the Department of Revenue and Economic Survey

Parallel to this, the Department of Revenue estimates how much money the government will earn through:

Taxes (Income tax, GST, customs, excise duties)
Non-tax sources (fees, dividends, profits of PSUs)

Before the budget is presented, the Economic Survey is released. It provides a review of the economy’s performance during the previous year and gives suggestions for the future.

5. Role of NITI Aayog

In earlier years, the Planning Commission played a central role in deciding development expenditure. Today, NITI Aayog advises the government on:

Development priorities
Allocation of funds to sectors such as health, education, transport, etc.
Long-term economic planning

However, the final decision on expenditure rests with the Ministry of Finance.

6. Cabinet Approval

Before the budget is finalized, the Union Cabinet approves it. The budget proposals are discussed confidentially, and secrecy is maintained to prevent leakage of tax changes or incentives that could affect markets.

7. Printing of the Budget

Once approved, the budget goes for printing at the Government of India Press, located in North Block.

Before printing, all officials involved remain in a state of ‘lock-in’, meaning they cannot communicate with outsiders until the budget is presented. This ensures complete secrecy.

8. Presentation of Budget in Parliament

The Finance Minister presents the Union Budget in the Lok Sabha. Earlier, the budget was presented at 5 PM, but now it is presented at 11 AM on February 1 every year. The speech includes:

Review of the economy
Government’s achievements
New schemes, policies, and tax proposals
Allocations to various sectors

The budget document is then tabled in the Rajya Sabha.

9. General Discussion in Parliament

Members of Parliament discuss the overall budget. At this stage, no voting occurs. The discussion mainly focuses on:

Broad policy issues
Allocation priorities
Economic direction of the government

10. Department-Wise Review and Voting

After general discussion, the budget is discussed in detail for each ministry. This is known as Demand for Grants.

Members of Parliament can:

Approve expenditure
Reduce expenditure (Cut Motions)
Reject expenditure (although this rarely happens)

Rajya Sabha can discuss but cannot vote.

11. Passing of the Appropriation Bill and Finance Bill

After voting:

Appropriation Bill is passed, allowing withdrawal of money from the Consolidated Fund of India.
Finance Bill is passed to give effect to taxation proposals.

Once both bills are passed by Parliament and signed by the President, the budget comes into force from April 1.

Difference Between Plan and Non-Plan Expenditure

The terms Plan and Non-Plan expenditure were used in India until 2017-18, after which the classification was replaced with Capital and Revenue expenditure classification. However, understanding Plan and Non-Plan expenditure is still important for exams and analysis of older budgets.

1. Plan Expenditure

Plan expenditure refers to the money spent by the government on developmental and welfare programs under the Five-Year Plans (before 2017) and annual plans.

Examples of Plan Expenditure:

Funds for building roads, railways, bridges
Investments in irrigation and power projects
Expenditure on health, education, and poverty alleviation schemes
Grants to states and Union Territories for development

Purpose:

To promote economic development, growth, and modernization.

Characteristics:

Planned and systematic
Focused on long-term development goals

2. Non-Plan Expenditure

Non-Plan expenditure refers to the routine or administrative expenses that the government incurs every year regardless of planning.

Examples of Non-Plan Expenditure:

Salaries and pensions of government employees
Interest payments on loans
Expenditure on defense services
Subsidies (food subsidy, fertilizer subsidy)
Grants to states not related to development plans

Purpose:

To maintain the regular functioning of the government.

Characteristics:

Essential for governance
Not directly linked to development projects

Key Differences

Basis	Plan Expenditure	Non-Plan Expenditure
Objective	Promotes development and growth	Ensures regular functioning of government
Nature	Developmental	Administrative and maintenance-based
Funds Used For	Schemes and projects	Salaries, pensions, subsidies, defense
Time Period	Planned for a specific duration	Recurring every year
Impact	Long-term impact on economy	Essential but not directly growth-oriented

Why the Classification Was Removed

This classification sometimes led to misunderstandings. For example, building a hospital was considered Plan expenditure, but running it (doctors’ salaries) was Non-Plan. Both are important. So, from 2017-18, India shifted to:

Capital Expenditure (creates assets)
Revenue Expenditure (operational expenses)

This helps in better transparency and efficient planning.

The Union Budget is a critical financial document that reflects the government’s economic vision, priorities, and development goals. It is prepared through a detailed and systematic process involving various ministries, NITI Aayog, and the Ministry of Finance, and is finally passed by Parliament.

Understanding the difference between Plan and Non-Plan expenditure helps in analyzing how the government allocates money for development and how it manages routine governance functions. While the classification has now changed, the concept remains important for understanding the historical pattern of government spending and policy-making in India.