The national budget sets out estimates of government expenditure and revenue for the financial year, and is presented by Finance Minister by the end of February every year. The budget year (also called a fiscal year or sometimes financial year) is a period used for calculating annual ("yearly") financial statements. In many jurisdictions, regulatory laws regarding accounting and taxation require such reports once per twelve months, but do not require that the period reported on constitutes a calendar year (i.e., January through December).

In the budget presentation, the Finance Minister reviews economic conditions and government expenditure for the past year, makes forecasts for the coming year and announces proposed changes in taxation. With the increasing importance of government expenditure in the economy, the annual budget is an important instrument in government economic policy. Fiscal changes have less to do with planned expenditure and more to do with decisions to modify the budget deficit (or more rarely surplus) especially in a developing economy in the interest of demand management. Economic and political conditions (like elections, as happened last year) sometimes require interim budgets, although the government normally has sufficient discretionary powers to make necessary changes in fiscal monetary policy.

Budgetary control is an important aspect of any management. It is understood as a system of control that checks actual income and expenditure against a budget so that progress towards the set objectives may be measured and remedial action taken if necessary. Budget control statements comparing actual and estimated expenditure are issued quite often. These statements are issued in considerable details to departmental heads and in less detail to higher management. Budget control statements must, if any necessary remedial action is to be taken in time, be issued as soon as possible after the close of the period to which they relate, and for this reason need not be of the same accuracy as accounting statements and may be based partly on estimated data.

In the case of developing countries, especially India, fiscal deficit plays a highly crucial role.

Fiscal deficit is an economic phenomenon, where the Government's total expenditure surpasses the revenue generated. It is the difference between the government's total receipts (excluding borrowing) and total expenditure. Fiscal deficit gives the signal to the government about the total borrowing requirements from all sources. In other words, fiscal deficit is the difference between the government's total expenditure and its total receipts (excluding borrowing). The elements of the fiscal deficit are (a) the revenue deficit, which is the difference between the government's current (or revenue) expenditure and total current receipts (that is, excluding borrowing) and (b) capital expenditure. The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also called deficit financing or money creation) and market borrowing (from the money market that is mainly from banks). Revenue deficit is an economic phenomenon, where the net amount received fails to meet the predicted net amount to be received. Capital expenditure is the fund used by an establishment to produce physical assets like property, equipments or industrial buildings. Capital expenditure is made by the establishment to consistently maintain the operational activities.

In India, the fiscal deficit is financed by obtaining funds from Reserve Bank of India, called deficit financing. The fiscal deficit is also financed by obtaining funds from the money market (primarily from banks).According to the view of renowned economist John Maynard Keynes, fiscal deficits facilitates nations to escape from economic recession. From another point of view, it is believed that government needs to avoid deficits to maintain a balanced budget policy. In order to relate high fiscal deficit to inflation, some economists believe that the portion of fiscal deficit, which is financed by obtaining funds from the Reserve Bank of India, directs to rise in the money stock and a higher money stock eventually heads towards inflation.

Financial advisors recommend that the Government should not promote disinvestment to reduce fiscal deficits. Fiscal deficit can be reduced by bringing up revenues or by lowering expenditure. Fiscal deficit reduction has an impact over the agricultural sector and social sector. Government's investments in these sectors will be reduced.

There are some basic issues in respect of fiscal deficit. These are

• Does a Fiscal Deficit Necessarily Lead to Inflation?
• Doesn't a Greater Fiscal Deficit Lead to a Greater Drain on the Exchequer in terms of Interest Outlay?
• Is it a Good Idea to Reduce Fiscal Deficits through Disinvestment?
• Does increased government expenditure necessarily lead to a greater fiscal deficit?

The answers to these queries are highly controversial. Much depends on the on-going economic and social (and also political) situation in the country?
There is enough evidence to show that India's fiscal deficit, including the Centre and states, would be among the highest in the world and likely to be a little more than 10 per cent of GDP in the current fiscal (2009-2010) and 10 per cent in the next fiscal (2010-2011).