Govt hits fast forward on the budget process

NDA to merge rail budget with Union budget, which will now be presented earlier than usual


Railway minister Suresh Prabhu (left) with finance minister Arun Jaitley in New Delhi on Wednesday. Photo: PTI
Railway minister Suresh Prabhu (left) with finance minister Arun Jaitley in New Delhi on Wednesday. Photo: PTI

New Delhi: For 92 years, the Union government presented a separate budget for the Railways. On Wednesday, it buried this colonial legacy too, merging it with the general budget.

It also agreed in principle to advance the presentation of the Union budget, which in normal course is unveiled on the last day of February. However, it declined to name a date—which informally is assumed to be 1 February—claiming that it would prefer to await the timetable for the five upcoming assembly polls.

Significantly, the tweaks in the process and schedule of the budgets happen at a time when India is in the middle of its transition to a new federal polity. In future, budgets will be more predictable, with greater emphasis on expenditure and less on revenue aspects.

The implementation of the recommendations of the 14th Finance Commission increased the share of states in the centre’s net tax revenues and also allowed them greater freedom to decide on their spending. The implementation of the goods and services tax will only further deepen the federal relations.

This is the second major shift in the budget schedule by a National Democratic Alliance (NDA) government. The previous NDA regime, under prime minister Atal Bihari Vajpayee in 2001, changed the time of presenting the budget to 11am from the British era practice of presenting it at 5pm.

The government hopes advancing the date will help initiate revenue mobilization and capital expenditure measures right from the beginning of the fiscal year.

Briefing reporters after the cabinet meeting, finance minister Arun Jaitley said all proposals of the railway budget will be part of the general budget. “However, functional autonomy of railway will be maintained. There will also be separate discussion on railway expenditure each year in the Parliament,” he added.

The move follows a suggestion to the effect by Niti Aayog member Bibek Debroy in his report on restructuring the public transport behemoth. It suggested the railway budget should be phased out progressively and merged with the general budget.

Jaitley said the cabinet has also in principle agreed to advance the date of presentation of the general budget to make sure the budget is passed by Parliament by 31 March, before the new financial year begins on 1 April. “A final call on the actual date of the budget presentation will be taken after consultations, depending on the calendar of state assembly elections next year.”

Implicitly, it also means the budget session of the Parliament will be advanced. Usually, the budget session begins in the last week of February and runs till mid-May with a recess in between. Both Houses of Parliament clear the appropriation bill only in the second half of the budget session.

To address the issue of data inadequacy if the budget date is advanced, economic affairs secretary Shaktikanta Das said the Central Statistics Office will release a provisional advance estimate of gross domestic product for 2016-17 around a month earlier on 7 January. “The department has held extensive consultations with the financial advisers of various ministries and departments and the revised calendar has been drawn up. There is a state of preparedness already in place. We will issue the budget circulars in a day or two,” he said.

It is likely the date of presentation of the budget may see another revision after the Shankar Acharya committee, tasked to examine the desirability and feasibility of having a new financial year, submits its report. Its report is due on 31 December.

India follows the April-March fiscal year; most countries follow a January-December financial year.

D.K. Srivastava, chief policy advisor, EY India, welcomed the move. “Currently the infrastructure spending usually gets delayed by 4-5 months as the rainy season starts soon after the budget approval. With the advancement of budget, the funds may get released as early as April, which may provide the government with at least two-and-a-half-three months to spend on infrastructure,” he added.

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