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    [Economy] Why do we need budget?

    The Two problems

    Ask yourself a question : How does government earn the money?

    Obviously, by collecting taxes from us : income tax , sales tax , customs duty and so

    on

    but here is the first problem:

    Constitution of India says: The government cannot put any tax on us without thepassing a Law in Parliament..(Problem #1)

    Anyways, All this tax money goes in the Consolidated fund of India.

    When government wants to pay salaries to bureaucrats, create new (bogus)

    schemes like MNREGA etc., wants to purchase new missiles and fighter

    planes, it will take out money from this Consolidated fund of India.

    But here is the second problem:

    Constitution of India says, The government cannot take out even a s ingle penny from this fundwithout authorization from the Parliament..(Problem #2)

    So, What do we conclude from Problem #1 & #2?

    Government will need the permission of Parliament for to earn money and to spend

    money.

    Hence each year, the Finance Minister prepares two files: they have the details of

    1. How government wants to earn money from citizens

    2. How government wants to spend the money.

    He puts these files in a leather suitcase. French word for this bag /Purse:bougette. Thats how we got the word Budget.

    You must have seen the Finance Minister holding a brown colored leather bag

    andgetting photographs outside the Parliament on the dayof budget.

    The Two files

    The first file (how government wants to earn money by taxing us)

    it is called Finance bill .

    The second file (how government wants to spend the money)it is called Appropriation bil l

    We call them Bills because they are only proposed by government and not

    yet passed by the Parliament. (Just like Lokpal Bill)

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