The Budget cycle comprises steps beginning in the run-up to the Budget and culminates into its presentation.
The preparation of the Budget involves the Ministry of Finance, along with multiple bureaucrats. Before the Budget is prepared, expert advice is also taken from economists and other stakeholders.
The cycle includes the following steps — estimating the amount of expenditure and receipts, estimating the fiscal deficit, trying to narrow the fiscal deficit, the presentation of the Budget, and getting the approval from Parliament.
First, plans of expenditure of various ministries are looked at. According to the resources available, the amount is allocated for ongoing plans and new plans which can be taken up.
Some non-plan expenditure, such as subsidies and wage payments, is also taken into account.
Next, revenue payments in the form of capital and current receipts are estimated. Money from disinvestment or repayment of government loans falls into the category of capital receipts. Income from taxes, dividends from state-run companies, etc, fall under the category of revenue receipts.
After these amounts are estimated, expenditure and receipt under each head are matched to see the shortfall, also known as deficit. This is deliberated upon and the government then decides how much it shall borrow to be able to meet the same.
The government decides on the amount of borrowing after considering what amount of deficit it would like to maintain.
Then, the government presents the Budget, which comes into effect on April 1, the beginning of a new financial year, after being approved by the Lok Sabha and signed by the President. The Rajya Sabha can give comments on the same.