Bidding adieu to the Railway Budget

Bidding adieu to the Railway Budget

Have you heard about the buzz of desolation of the Indian Railway budget? This means that there will be a unified budget from the next financial year. Now, you must be wondering about the implications of this budget merger.

In order to boost your General Awareness preparation, we bring to you a post featuring key highlights of the budget merger. Let’s read further and gain valuable insights into the integration of the Railway budget with the Union Budget.

Long tradition of the Railway Budget

  • The Railway budget was introduced by William Ackworth in 1924. Since a major chunk of finance was allocated to building railway lines in the British era, William Ackworth suggested the need of a separate Railway budget.
  • The Railway Budget is presented in the Parliament a few days ahead of the Union Budget.
  • As per the available data, the railway budget is sized at Rs.1.21 trillion, which is very small in comparison to the overall budget of Rs.19.8 trillion.

After getting a fair idea about the Railway budget, let us now discuss the merger of the Railway budget and its implications.

A significant move proposed in the annual budget

  • The move to discard separate Railway budget was suggested by a two-member committee comprising Niti Aayog member Bibek Debroy and Kishore Desai.
  • The Railway Minister Suresh Prabhu on receiving a green signal from the finance minister Arun Jaitley has decided to merge the Railway budget with the general budget in the interest of national transporter as well as the country’s economy.
  • The 92-year-old practice of having a separate Railway Budget will be scrapped from the next financial year, thereby making it difficult for politicians, who take shelter of the Railway budget, to build their own image and seek public support.
  • To begin the budget merger process, the Finance Ministry has constituted a five-member committee to devise a plan and work out on its approach. The deadline to submit the report is August 31.

Needless to say, any new development or changes in any policy create unrest among the people associated with that particular ministry.

Financial implications of merging the Railway budget

  • As per a financial report released after the 7th Pay Commission, the Railway Ministry was bearing an additional burden of Rs. 40,000 crore along with the annual subsidies of Rs. 32,000 crore. The merger is likely to reduce this financial burden by sharing it across various sectors under the Finance Ministry.
  • The merger is likely to relieve the Railway ministry from paying the annualdividend to the government in order to avail Gross Budget Support.
  • According to the Railway Minister Prabhu, the Railways has potential to contribute 2-2.5% of GDP but it requires investment.
  • Apart from this, the Railways will not remain a separate entity and will be like any other government department under the Finance Ministry.
  • As a result, the decision of raising passenger fares will be taken by the Finance Ministry.
  • After the integration, the Railway revenue and expenditure will be considered as a part of the general revenue and expenditure.


It is too early to comment on how successful this move will be. Let us keep a watch on new policies and amendments by the Government.

Stay tuned for general awareness and exam specific blogs….