NARSEE MONJEE INSTITUTE OF MANAGEMENT

STUDIES, SCHOOL OF LAW, BENGALURU

BUDGETARY CONTROL AND UNION BUDGET 2022-23

FINANCE

BATCH OF 2022-2027

SUBMITTED TO SUBMITTED BY
PROF. VIDYA CM BHARGAVI SHROFF
NMIMS SOL 81022200467
BENGALURU NMIMS SOL
BENGALURU

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 CONTENTS

1. ABSTRACT……………………………………………………………………………………. 3

2. INTRODUCTION……………………………………………………………………………… 4

3. RESEARCH OBJECTIVES……………………………………………………………………. 5

4. RESEARCH QUESTIONS………………………………………………………………….…. 5

5. HYPOTHESIS………………………………………………………………………………….. 5

6. LITERATURE REVIEW………………………………………................................................. 6

7. HYPOTHESIS BASED ON LITERATURE REVIEW………………………………………... 7

8. RESEARCH METHODOLOGY……………………………………………………………….. 7

9. DISCUSSION…………………………………………………………………………………… 8

10. LIMITATIONS OF STUDY……………………………………………………………………. 13

11. CONCLUSION………………………………………………………………….…………….... 13

12. REFERENCE………………………………………………………………….………………... 14

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 ABSTRACT

Setting goals and creating a procedure that serves as a framework for a company to clearly express
its overall planned activities are both components of budgeting and budgetary control. Budgeting is
the process of putting these planned actions into monetary terms, and budgetary control is the
process of setting up a reliable system to ensure the desired outcome. As a result, this study aims to
provide an overview of budgeting and budgetary control as well as an analysis of the Union Budget
2022–23. The 2022 Budget was proposed by the finance minister in 1 st February, 2022. Indian
economy is staging a sustained recovery from the Covid-19 pandemic. The country’s GDP had
recovered twice with the two waves of the pandemic reflecting the nation’s economic resilience. The
results of this research show that participation of all relevant stakeholders in the budget preparation,
given the established procedures in government circles, while emphasising a deliberate and faithful
implementation by all responsible officers, is a necessary and sufficient condition for achieving
effective budgeting and budgetary control. This is predicated on the organisation having a mental
image of the current situation in relation to the anticipated future situation. Therefore, the study
suggests that in order to ensure overall goal attainment, all essential stakeholders should be included
in the budget process, from planning to implementation, since budgeting and budgetary control
contribute to management efficiency and higher productivity of the organisation.

Keywords: Budgeting, Budgetary Control, Union Budget, Effective, Efficient, Management,

Performance.

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 INTRODUCTION
Introduction to Budget and Budgetary Control
One of the most crucial components of a system, be it family, business, or a whole country, is the
budget. We frequently create budgets at home that govern our expenses and savings on an annual,
monthly, weekly, or even daily basis. Any organization's budget reveals its goals for expansion and
growth. In addition to allocating funds for various initiatives that determine the progress of our
country, the Union Government Budget has an impact on both you and I since it establishes the
income tax rate and other tax rates that will either directly or indirectly effect each and every person.

At personal level, almost everybody make budgets for future plannings. Most people make estimates
of their income and plan expenditure for food, education, entertainment, savings, housing, clothing
and so on. As a result of this exercise, people restrict their spendings to some predetermined,
allowable amount. Knowingly or unknowingly most of us undertake a budgeting process. The goals
of the budget of a commercial firm are similar to the budget of an individual. Contrary to personal
budgets, however, company budgets require more work and are produced in depth. A company's
success is not a coincidence. Budgeting is necessary for all commercial and service organisations.

A formal statement of management’s financial plans for future as well as the means as to how they
will be undertaken is called Budget. It is a plan for finance and accounting which involves the
management of an entity’s finances and financial decisions. It is often interpreted as a statement of
the expected expenses and income. It also includes a plan of action and a quantified roadmap of the
tasks to complete in order achieve the pre-determined objectives and goals. Effective planning
of operations is critical for the achievement of goals and thus, management has a key role in creating
budget for its company. Plans of action for future should be created in order to coordinate various
activities within a corporation. The term "budgets" is frequently used to describe these detailed plans.

The process of making a budget is called Budgeting. An organisation may have some success
without a budget, but it will not be able to achieve the level of success that would have been possible
with a well-organized budgeting system. The management now uses the budgetary control as a
crucial instrument for reducing expenses and maximising profit.

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RESEARCH OBJECTIVES
The purpose of this research paper is:
 To study the meaning and definition of Budget, Budgeting, and Budgetary control.
 To study budgetary control and understand its objectives.
 To study briefly how the Union Budget is formed.
 To study the constitutional provisions for Union Budget.
 To take a look at the key highlights of the Union Budget for the financial year 2022-23.

RESEARCH QUESTIONS
1. What is the meaning of Budget, Budgeting and Budgetary Control?
2. Why is Budgetary control useful?
3. What are the objectives of budgetary control?
4. How is the Union Budget of India formed?
5. What are the key highlights of the Union Budget FY 2022-23?

HYPOTHESIS
Budget is a form of financial planning that can be used either at an individual, organizational or
national level. For the simple reason that finance is one of the biggest aspects, of any organization or
economy or even for an individual for that matter, that is also reflective of its economic growth and
success. Other objectives of research include setting of a certain direction to work in or having some
control to ensure that the organization’s objectives are achieved. Budgetary control on the other hand
refers to a bigger picture wherein a part is the process of budgeting or making the budget. It refers to
the establishment of rules or guidelines (usually for the top management) to keep in check the
planned budget and the ongoing performance and if required make required changes. As the phrase
‘Budgetary Control’ suggests, it gives a certain control over the budget as budget is a plan for the
foreseeable future. However, there are always chances of the occurrence of unexpected changes or
disasters in which case it is only reasonable to change the previously made plan to take into account
the new added factor into the new plan. Thus, because of budgetary control, budget is not absolute
and subject to essential changes during the course of the financial year.
The Budget released by the central government in India that states the expenditures, receipts etc for
the entire country in complete detail is called the Union Budget. It is released annually for each
financial year is the responsibility of the Ministry of Finance.

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LITERATURE REVIEW
In “A Systematic Review of Budgeting and Budgetary Control in Government Owned
Organizations1”, the authors undertake a systematic review of budgeting and budgetary control in
Government owned organizations as well as their roles in determination of profit making and
corporate objectives. They state that budgeting and budgetary control are indispensable tolls for any
organization that must be carefully planned and implemented as they lead to increase or decrease in
revenue and profit maximization. Although, these tools could enhance the efficiency and
performance of the organization, it cannot be replaced with effective management. Their findings
show that achievement of goals and coordination in organization is substantially enhanced when
budgets are used effectively within the set structure of effective control.
In “Budgetary Control and Organization Structure 2”, the authors try to relate the organizational
structure to budget-related behavior. In spite of extensive use of budgets for establishing a sense of
control for the organizational activities, the question of how budgets influence human behavior
mostly remains under lowlight. They find that change in the structure of organization leads to more
effectiveness of budgetary control. The findings also include that the organization structure is
significant upon the organization characteristics and environment. Which leads to the conclusion that
alternative prescriptions or control strategies should be used in different organizational structures
regarding budgets and budgetary control.
In “The Budgetary Control Function3”, the author focuses on the control function and explains the
concept of how formation of budgets helps establish control assisting management in fulfilling its
functions and the organization’s objectives of planning, coordinating and controlling the activities of
the enterprise. The concludes that in order to increase the effectiveness of budgetary control, the
authority and attainability must be properly applied.
According to Demski and Feltham in “Economic Incentives in Budgetary Control Systems 4”,
attainability of the budgetary goals is not a direct issue rather an above expected performance is
noticed when additional incentives are to be obtained. Moreover, their study analyses if the

1
Lambe Issac, Mary Lawal & Theresa Okoli, “A Systematic Review of Budgeting and Budgetary Control in
Government Owned Organizations”, Research Journal of Finance and Accounting, Vol. 6, No.6, (2015), ISSN 2222-
2847 (Online), https://core.ac.uk/download/pdf/234630573.pdf
2
Bruns, William J., and John H. Waterhouse, “Budgetary Control and Organization Structure”, Journal of
Accounting Research 13, no. 2 (1975): 177–203. https://doi.org/10.2307/2490360.
3
Hanson, Ernest I. “The Budgetary Control Function.” The Accounting Review 41, no. 2 (1966): 239–43.
http://www.jstor.org/stable/243271.
4
Demski, Joel S., and Gerald A. Feltham. “Economic Incentives in Budgetary Control Systems.” The Accounting
Review 53, no. 2 (1978): 336–59. http://www.jstor.org/stable/245898.

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performance should only consist of aspects which are controllable by the workers to which their
findings are affirmative in spite of other issues that arise such as sharing of risk.
In “Product innovation, budgetary control, and the financial performance of firms5”, the author finds
that organizations are increasing budgetary oversight and with a major focus on the costs associated
along with their need to enhance financial performance. However, their analysis suggests that the use
of management control is largely ineffective with creativity and innovation and even that budgets
may suffocate innovation. They find that the positive impact of product innovation on financial
performance is dependent on the way budgets are used in the firm. Performance is enhanced when
the firm uses budgets as a tool for planning instead of a control mechanism.

HYPOTHESIS BASED ON LITERATURE REVIEW

Budgets are an indispensable part of planning in every organisation irrespective of its size or level. It
is a fundamentally essential tool used to manage and plan the financial part of an entity. It determines
the increase or decrease of revenue and profits. Generally, use of budget helps increase the efficiency
but studies (mentioned above) have found that budgets do not have a direct impact on efficiency and
is more complicated depending on type of work or performance. One can note that when authority
and attainability of the budget is properly applied, it increases the effectiveness of budgetary control.

RESEARCH METHODOLOGY
Doctrinal, analytical, and comparative research was the methodology adopted for this study. The
Constitution, governmental directives, and committee reports are the main sources of information
used in this study. Published books, journals, scholarly articles, news releases, print media, online
journals, research reports, and others were employed as secondary sources of data.

DISCUSSION
5
Alan S. Dunk, “Product innovation, budgetary control, and the financial performance of firms”, The British Accounting
Review, Volume 43, Issue 2, 2011, Pages 102-111, ISSN 0890-8389, https://doi.org/10.1016/j.bar.2011.02.004.

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Meaning and Definition
Budget
Chartered Institute of Management Accountants (CIMA) defines budget as “A plan quantified in
monetary terms prepared and approved prior to a defined period of time, usually showing planned
income to be generated and, expenditure to be incurred during the period and the capital to be
employed to attain a given objective.” It is a plan of future activities for an organization. According
to Keller & Ferrara, “a budget is a plan of action to achieve stated objectives based on predetermined
series of related assumptions.” G.A.Welsh views budget as, “A budget is a written plan covering
projected activities of a firm for a definite time period.”
Thus, the main features of budget are as follows:
• It serves primarily as a forecasting and management tool.
• It is prepared in advance of the project or company's real functioning.
• It applies to a specific time period in the future.
• The management must approve it before its application.
• It also lays out the capital that will be used during the time.

Budgeting
The entire process of creating, enacting, and utilising a budget is known as budgeting. The provision
of resources to support plans that are being implemented is the main focus of this short-term
budgeting process.

Budgetary Control
The creation of budgets is a way of cost management known as budgetary control. Therefore,
budgeting is only a portion of budgetary control. Chartered Institute of Management Accounts
(CIMA) states “Budgetary control is the establishment of budgets relating to the responsibilities of
executives of a policy and the continuous comparison of the actual with the budgeted results, either
to secure by individual action, the objective of the policy or to provide a basis for its revision.”
The creation of budgets for each of the business's purposes is one of the primary components of
budgetary control. Budgetary control is very helpful as they help in budget revision in light of
evolving circumstances, constant comparison of actual performance with the budget, taking
appropriate corrective action as necessary, and analysing differences between actual performance
and budgeted performance to determine the causes.

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Establishing budgets that are related to executives' duties and policy requirements is known as
budgetary control. Continuous comparison of actual and budgeted results is necessary, either to
ensure that the policy's goal is achieved via individual action or to serve as a basis for its review.

Objectives of Budgetary Control:

Setting a budget is part of financial planning. It functions primarily as a management control tool as
well as the focal centre of any efficient control strategy. The following are the objectives of
budgetary control:
1. Planning: Planning creates a future position for an entity based on the notion that the position
may be attained via constant managerial effort. Plans for production, sales, raw material
requirements, labour requirements, capital additions, etc. are outlined in detail. By carefully
planning, many issues can be predicted well in advance and solutions can be developed. Simply
put, budgeting forces management to plan ahead, anticipate problems, and be ready for them.
Because it needs to be revised frequently due to shifting circumstances, planning is a continuous
process.
2. Co‐ordination: Coordination is established and maintained in large part because of budgeting.
Budgeting helps managers coordinate their efforts so that company challenges are resolved in
line with the divisions' goals. Achieving the goals is greatly aided by effective planning and
business practises. When a department head is allowed to expand their department solely to meet
their demands, even when this could have a detrimental impact on other departments and affect
how well they operate, there is a lack of coordination within the organisation. Therefore,
coordination is necessary at all horizontal and vertical levels.
3. Measurement of Success: Budgets are a useful approach to inform managers of their progress
toward accomplishing objectives they helped set in the past. Employees are frequently rewarded
for achieving low budget goals in their workplaces, and managers are frequently promoted based
on their track record of managing their budgets well. Success is assessed by contrasting past
performance with that of the prior time period.
4. Motivation: Budgets are consistently seen as a helpful tool for motivating managers and
employees to take actions for keeping with the company's goals. When people have invested a lot
of time and effort into creating budgets, it serves as a strong motivating factor to reach the
objectives.
5. Communication: A budget is a tool for sharing information inside a company. The standard
budget copies that are provided to all management staff include information about the constraints

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 that must be followed in addition to providing enough understanding and knowledge of the
programmes and rules that must be followed.

6. Control: Control is essential in ensuring that the purposes and goals of the budget (and the
organisation) are met. Control in budgeting refers to a systematic effort to inform management of
whether or not anticipated performance is being accomplished.

Union Budget 2022-23

Union Budget is the annual financial statement prepared by the Ministry of Finance in consultation
with Niti-Aayog that lays out the fiscal roadmap for the country for the upcoming financial year. The
Department of Economic Affairs (DEA) under the Ministry of Finance is the nodal agency in charge
of creating the budget. The process of budget-making is initiated in August-September, that is, six
months earlier to its presentation date. It involves a number of stages such as the sending out
circulars to all ministries, discussions on the proposals obtained, allocation of funds and per-budget
meetings. And finally, the finance minister presents the Union Budget in the Lok Sabha. It then
needs to be passed by both houses of Parliament before beginning of the financial year, that is, April
1.

Constitutional provisions related to Budget

The Union Budget for a given year is referred to as the Annual Financial Statement in Article 112 of
the Indian Constitution (AFS). It is a formal declaration of the government's anticipated receipts and
outlays for the upcoming fiscal year.
The budget includes an estimate of revenues and capital receipts, strategies for increasing revenues,
estimates of expenses, information about actual receipts and expenses from the previous fiscal year,
the causes of any deficit or surplus, and the economic and financial policy for the upcoming year,
including taxation proposals, revenue projections, expenditure plans, and the launch of new
programmes or projects.
The budget primarily goes through six steps in the parliament: the finance minister presents the
budget, there is a general discussion, the budget is examined by committee departments, grants are
voted on, an appropriation bill is passed, and finally the finance bill is passed.

Key highlights of Budget 2022

 Growth rate:

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The highest among all major economies, the economic growth in India is anticipated to reach 9.2%
of GDP in the current year (2021–2022). The revised Fiscal Deficit for the current year is anticipated
to be 6.9% of GDP as opposed to the 6.8% forecast in the budget estimates (Gross Domestic
Product). The general fiscal consolidation plan published last year, which calls for a reduction of the
deficit to roughly 4.5% by 2025–2026, is consistent with the budget deficit projection of 6.4% of
GDP in 2022–2023.
 Amrit Kaal:
The 25-year countdown to India at 100 has begun in India with Amrit Kaal. During the Amrit Kaal,
the government hopes to achieve: (1) Combining a microeconomic level inclusive welfare focus with
a macroeconomic level growth focus (2) Advancing the use of fintech, digital economy, climate
action, and energy transition (3) Relying on a feedback cycle in which private investment stimulates
state capital spending, which in turn stimulates private investment.
 Four Priorities in the Amrit Kaal Blueprint are below:
(1) PM Gati-Shakti (2) Financing of Investments (3) Productivity Enhancement and Investment,
Sunrise Opportunities, Energy Transition, and Climate Action and (4) Inclusive
Development.
 Creation of 60 lakh new jobs in 14 sectors under the productivity linked incentive scheme.
 Following are a few other important announcements made in the Union Budget:
o Railways: ‘One Station, One Product’ idea to help support local businesses.
o National Ropeways Development Program: Parvatmala
o Kisan Drones: To assist farmers with crop evaluation and insecticide and nutrient application.
o MSME: The portals for Udyam, e-Shram, NCS, and ASEEM to be connected.
o The Digital Ecosystem for Skilling and Livelihood (DESH-Stack e-portal) was launched with
the goal of empowering citizens through online training.
o Education: The PM e-VIDYA initiative "One class, One TV channel" will be expanded to
200 TV channels.
o Health: The National Digital Health Ecosystem's open platform to be launched.
o Saksham Aanganwadi (New Generation Anganwadi): Benefits for both women and children
are integrated.
o PM-DevINE: Prime Minister's Growth Initiative for North-Eastern Region, which aims to
finance the region's social and economic development.
o Vibrant Villages Program: Development of border villages on the northern border with
minimal infrastructure and connectivity.

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 o Sunrise opportunities: The government will fund research and development in areas like
artificial intelligence, renewable energy, clean transportation systems, genomics,
pharmaceuticals, and the space industry.
o GIFT-IFSC: Establishment of foreign universities and institutions in the GIFT City is
permitted.
o Digital Rupee: The Reserve Bank of India introduced the digital rupee.

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LIMITATIONS OF STUDY
The scope of this research is limited to comparative analysis of secondary sources of data comprising
of articles, books, journals, news articles and online databases. This study is primarily focused in the
context of India. The paper only covers in brief the highlights of Union budget 2022-23.

CONCLUSION
Budget is a written plan of managing finances and financial decisions for an organisation for a
specific duration of time. It serves primarily as a forecasting and management tool that is prepared in
advance for a specific time period with the approval of the management. Budget help in planning,
coordination, measurement of success, motivation, communication and control. The management of
any organisation must set goals and create a procedure that acts as a framework for properly carrying
out planned activities. Budgeting is the process of creating a budget, that is, estimating the cost of
these planned activities, and budgetary control is the process of putting in place a reliable system to
ensure the desired outcome. Budgets are an indispensable part of financial planning for any entity.
The bigger the entity, the more detailed the budget and budgeting process.
It is suggested that all relevant stakeholders should be involved in the budgeting process. The
budgeting process is reliant on the ability of the organisation to compare the current situation to the
anticipated future state of things. In order to ensure that the overall aim is attained, it is advised that
all key stakeholders be included in the budget process from preparation to implementation, as
budgeting and budgetary control contribute to management efficiency and high productivity of a
company.

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 REFERENCES
1. Lambe Issac, Mary Lawal & Theresa Okoli, “A Systematic Review of Budgeting and Budgetary
Control in Government Owned Organizations”, Research Journal of Finance and Accounting,
Vol. 6, No.6, (2015), ISSN 2222-2847 (Online), https://core.ac.uk/download/pdf/234630573.pdf
2. Bruns, William J., and John H. Waterhouse, “Budgetary Control and Organization Structure”,
Journal of Accounting Research 13, no. 2 (1975): 177–203. https://doi.org/10.2307/2490360.
3. Hanson, Ernest I. “The Budgetary Control Function.” The Accounting Review 41, no. 2 (1966):
239–43. http://www.jstor.org/stable/243271.
4. Demski, Joel S., and Gerald A. Feltham. “Economic Incentives in Budgetary Control Systems.”
The Accounting Review 53, no. 2 (1978): 336–59. http://www.jstor.org/stable/245898.
5. Alan S. Dunk, “Product innovation, budgetary control, and the financial performance of firms”,
The British Accounting Review, Volume 43, Issue 2, 2011, Pages 102-111, ISSN 0890-8389,
https://doi.org/10.1016/j.bar.2011.02.004.
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