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Debate to Advance the Budget (Relevant for GS Mains Paper II)

Present time line for passage of Budget
As of now, though the Budget is tabled before the commencement of a new financial year in April, its provisions often do not become the law of the land till some time in May, when Parliament passes the Finance Bill. 

Implications
1. So whether it is a new social sector scheme, a highway project for which the Finance Minister has allocated funds, or simply the transfer of funds to States, there is little action till, say, June. Official expenditure data confirm that spending remains particularly low in the first two months of the financial year. 

2. There is a spike in the last two quarters not just because ministries scramble to exhaust their allocated funds, but also because, for instance, the onset of the monsoon season in June makes it difficult to execute infrastructure projects in the second quarter. Effectively, proposed annual capital expenditure is rushed through from October to March rather than through the year, creating a tardy and bumpy transmission mechanism for any intended stimulus.
This now assumes greater importance especially since in the past two years public investment has been the government’s mantra to revive growth, and is likely to remain the key determinant of the economy’s direction for a while. 

New Proposal
The Centre is contemplating to advance presentation of the budget by a month. Whether presented in the end of December or in January, a budget endorsed by Parliament by the end of March could allow ministries, State governments and businesses to get down to implementation as soon as the year begins and plan their spending based on the requirement for a project rather than weather exigencies. 

Challenge to adopt new proposal
There is, of course, the challenge that the government may lack enough data about the state of the economy by January, be it tax collections or GDP numbers. So the Chief Economic Adviser’s team will have to grapple with tighter deadlines to put together the Economic Survey with less data at its disposal. Then again, the February 28 Budget also relies on revised estimates. And while Finance Ministry mandarins may find themselves pressed for time if Finance Minister Arun Jaitley manages to move to an earlier Budget in 2017, the Goods and Services Tax rollout deadline of April 2017 would mean much less work for them at least on the indirect taxes side of the Budget document. 
 



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