Union Budget 2026: The budget of a government is its annual financial plan, which outlines the expected revenues and expenditures. It assists in maintaining control over finances and provides a foundation for development, social security and construction. In India, budgets are generally divided into three broad types are balanced budgets, surplus budgets and deficit budgets, which are designed for different purposes.
What is the Union Budget of India
- Article 112 of the Constitution mandates the Annual Financial Statement (Union Budget) detailing estimated receipts and expenditure.
- Presented annually in Parliament on 1st February since 2017–18; earlier it was in late February.
- Divided into three components:
- Budget Estimates (BE): Projected receipts and expenditures for the upcoming fiscal year.
- Revised Estimates (RE): Updated projections for the current fiscal year.
- Provisional Actuals (PA): Final figures for the previous fiscal year.
- The Railway Budget was merged with the General Budget in 2017–18.
- Managed by the Budget Division, Department of Economic Affairs, Ministry of Finance.
- Four stages of government budgeting:
- Formulation: Estimation of revenue and expenditure.
- Enactment: Approval through Finance and Appropriation Bills.
- Execution: Revenue collection and fund disbursement.
- Legislative Review: Parliamentary audits and post-budget scrutiny.
Different Types of Government Budgeting in India
- Balanced Budget – Receipts = Expenditure (rare in practice)
- Surplus Budget – Receipts > Expenditure (used to control inflation)
- Deficit Budget – Expenditure > Receipts (used during recession or depression)
Balanced Budget
A balanced budget occurs when a government’s total revenue equals its total expenditure in a fiscal year. It promotes fiscal discipline, maintains economic stability, and avoids borrowing, though it may limit growth during recessions.
- Advantages:
- Maintains economic stability.
- Controls unnecessary government spending.
- Disadvantages:
- Ineffective during recessions or unemployment crises.
- Limits public welfare and growth initiatives.
Surplus Budget
A surplus budget arises when government revenue exceeds its expenditure. This allows extra funds for debt repayment, investments, or fiscal reserves, enhancing financial stability, though it may require higher taxes and reduce disposable income.
- Advantages:
- Generates extra funds for debt repayment or investments.
- Strengthens fiscal stability and creditworthiness.
- Disadvantages:
- May require higher taxes, impacting economic activity.
- Could reduce disposable income for citizens.
Deficit Budget
A deficit budget happens when government expenditure surpasses revenue. It is often used to stimulate the economy, fund infrastructure and welfare programs, but can increase long-term debt and risk inflation if not carefully managed.
- Advantages:
- Supports employment and economic stimulus during slowdowns.
- Enables funding for infrastructure and welfare programs.
- Disadvantages:
- Can increase the government’s debt burden over time.
- Risk of inflation if deficit is not managed prudently.
