In which of the following budget, the Railway Budget was merged with the Union Budget in India?

Correct — option (4), Budget 2017 – 18.

On 21 September 2016 the Union Cabinet approved three budget reforms proposed by the Ministry of Finance, according to PIB's release that day: merging the Railway budget with the General budget, advancing the date of Budget presentation, and merging the Plan and Non-Plan classification.

The release says “All these changes will be put into effect simultaneously from the Budget 2017-18.”

Finance Minister Arun Jaitley presented that budget on 1 February 2017. His speech calls the merger of the Railways Budget with the General Budget “a historic step” and says “We have discontinued the colonial practice prevalent since 1924.”

Later in the speech he says he felt privileged to present “the first combined Budget of independent India that includes the Railways also”. The merged budget is Budget 2017 – 18.

The idea to remember: the separate Railway budget ran from 1924; the merged Union Budget began with 2017-18, presented on 1 February 2017.

Why the others are wrong

• (1)
  Budget 2019 – 20 — By Budget 2019-20 the Railways had already been part of the Union Budget for two years. Jaitley's 2017-18 speech describes that budget as the first combined one.

  The year of the merger is 2017-18, the first budget covered by the Cabinet's September 2016 decision.

• (2)
  Budget 2018 – 19 — Budget 2018-19 came one year after the merger, so it was the second combined budget, not the one in which the merger was made.

  PIB's 21 September 2016 release fixes the start at Budget 2017-18 for all three reforms, including the merger.

• (3)
  Budget 2016 – 17 — Budget 2016-17 came before the Cabinet decision of 21 September 2016, which put the merger into effect only from Budget 2017-18.

  So 2016-17 falls in the period of separate Railway budgets, the practice PIB's release says started in 1924.

Until 2016-17, India presented a Railway budget separately from the General budget. PIB's release of 21 September 2016 says the separate Railway budget started in 1924 and continued after independence “as a convention rather than under Constitutional provisions.”

Under the arrangements approved that day, the Railways were to keep their distinct entity as a departmentally run commercial undertaking, and their functional autonomy. Their appropriations were to form part of the main Appropriation Bill.

The release also says the Railways' capital at charge, about ₹2.27 lakh crore, was to be wiped off, so the Railways would pay no dividend to the Government from 2017-18.

Key facts

• 21 September 2016: the Union Cabinet approved merging the Railway budget with the General budget, effective from Budget 2017-18 (PIB).
• The separate Railway budget started in 1924 and continued as a convention, not under a constitutional provision (PIB).
• 1 February 2017: Arun Jaitley presented Budget 2017-18, calling it the first combined Budget of independent India that includes the Railways.
• Budget 2017-18 pegged the Railways' total capital and development expenditure at ₹1,31,000 crore, including ₹55,000 crore from the Government.
• The same budget advanced presentation to 1 February and ended the Plan and Non-Plan classification of expenditure.

Common traps

• Confusing the decision year with the budget year: the Cabinet decided in September 2016, but the first merged budget was 2017-18.
• Reading a budget year as the year of presentation: Budget 2017-18 was presented on 1 February 2017.
• Mixing the three 2017-18 reforms: the merger, the earlier date and the end of Plan/Non-Plan were decided together but are separate changes.

UnlockIAS will link similar questions from RAS Pre 2018 here once that paper is published on this site.

• practice — not a real PYQ

  Which of the following reforms took effect from the Union Budget 2017-18? A. Merger of the Railway budget with the General budget B. Advancement of Budget presentation from the last day of February C. Merger of the Plan and Non-Plan classification in the Budget and Accounts

  • (a)A and B only
  • (b)B and C only
  • (c)A and C only
  • (d)A, B and C
  Answer(4) — PIB's release of 21 September 2016 says all three changes would take effect simultaneously from Budget 2017-18. Options (1), (2) and (3) each leave out one of them.
• practice — not a real PYQ

  According to PIB's release on the Cabinet decision of 21 September 2016, the separate Railway budget had been presented since

  • (a)1921
  • (b)1924
  • (c)1947
  • (d)1950
  Answer(2) — The release says the presentation of a separate Railway budget started in 1924 and continued after independence as a convention. Options (3) and (4) are years after it began, and option (1) is not the year the release gives.