Budget System in India – How it Began


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

 ‘Budget System’ was introduced in India on 7th April, 1860. James Wilson the first Indian Finance Member delivered the budget speech expounding the Indian financial policy as an integral whole for the first time (Principles of Civil Government: Akshaya K. Ghosh). Post independence, the first budget was  presented on November 26, 1947 by India's first Finance Minister Sri R.K. Shanmugham Chetty. The national independence brought about budgeting
reforms with the Government of India primarily through the launching of comprehensive socioeconomic development through five year plans, divided into Annual Plans. A sound system of sharing of resources with the States was also established through the successive Finance Commissions. By and large the system in place at present has evolved over a period of time.
 
The annual exercise of budgeting is a means for detailing the roadmap for efficient use of public
resources. Although the Indian Constitution does not mention the term ‘Budget’, it provides that the President shall in respect of every financial year cause to be laid before both the Houses of
Parliament, the House of People (Lok Sabha) and the Council of States (Rajya Sabha), a statement of the estimated receipts and expenditure of the Government for that year. This statement known as the ‘Annual Financial Statement’ is the main fiscal or budgetary document of the Government.
 
The financial year for the Union and the State Governments in India is from April to March. Each financial year is, therefore, spread over two calendar years. The period of financial year as from April to March was introduced in India from 1867. Prior to that, the financial year in India used to commence on 1st May and ended on 30th April (L.K. Jha Committee’s Report of the Committee On Change in Financial Year).
 
L.K. Jha Committee was appointed in May, 1984 to look into the issue of financial year. The
Committee while recommending the commencement of financial year from January mainly with reference to the impact of South West monsoon on the economy, had mentioned in their Report that if for any reason, a changeover to the calendar year is not acceptable despite its many advantages, then on balance, it might be best to live with the existing financial year and avoid the problems of transition.
 
Government of India did not favour any change in the financial year for some of the reasons
which are brought out below,-
 
i. The advantages arising out of the change would only be marginal in view of the innumerable considerations in the formulation of budget policies;
ii. Change in the financial year would upset the collection of data and it might take a long
time to return to normalcy in this regard; and
iii. The change would create a large number of problems, as extensive amendments to tax
laws and systems, financial procedures relating to expenditure authorization and other matters would become necessary and in that process the administrative machinery would get diverted to problems of transition instead of concentrating on improving the tax collection machinery.


Saturday, 13th Feb 2016, 08:30:07 PM

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