Fiscal Policy & Budget

📖 The Union Budget

The Union Budget, presented annually (usually 1 February) under Article 112, is the government's statement of estimated receipts and expenditure for the coming financial year. It must be passed by Parliament, with the Lok Sabha having the decisive say since Money Bills originate there.

📉 Types of deficit

• Fiscal Deficit — total expenditure minus total receipts (excluding borrowings); represents how much the government needs to borrow.
• Revenue Deficit — revenue expenditure minus revenue receipts; indicates the government is borrowing to meet regular expenses, not just investment.
• Primary Deficit — fiscal deficit minus interest payments; shows the deficit excluding the burden of past borrowing.

⚖️ The FRBM Act, 2003

The Fiscal Responsibility and Budget Management Act, 2003, was enacted to bring discipline to government finances by setting targets to reduce fiscal and revenue deficits over time — though these targets have been revised and relaxed several times, including during economic shocks like the 2008 financial crisis and the COVID-19 pandemic.

💰 India's tax structure

Taxes are broadly direct (income tax, corporate tax — paid directly by the taxpayer) and indirect (paid indirectly, embedded in the price of goods/services). The most significant recent indirect tax reform was the Goods and Services Tax (GST), rolled out on 1 July 2017, which replaced a patchwork of central and state indirect taxes with a unified "one nation, one tax" system.