BUDGETARY FAQs
1. WHAT IS THE BUDGET?
A Government budget is a legal document that is:
- Passed by the legislature.
- Approved by the President.
It is an annual financial statement of estimated receipts and expenditures of the Government
of India in respect of each financial year.
2. WHAT ARE THE DIFFERENT TYPES OF BUDGET PRESENTED?
The Union Budget is presented to the Parliament in two parts:
a. Railway Budget pertaining to "Railway Finance".
b. General Budget, which gives an overall picture of financial position of the Government of
India. It includes the effect of "Railway Budget”.
3. WHY DO WE NEED A BUDGET?
Government Budget is designed for optimal allocation of scarce resources.
- The main objective of Government financial management is to determine how adequatelythe financial and resource management responsibilities have been discharged.
- It requires the broad objectives of the Government to be broken down into detailed workplans for each programme and sub-programme, activities and projects for each unit of theGovernment organization.
4. WHAT IS THE PROCEDURE FOR APPROVAL OF UNION BUDGET BY THE PARLIAMENT?
The Budget process has the following procedures:
- Before presentation of the Budget, President’s recommendation is obtained under Article117(1) and 117(3) for introduction and consideration in the Lok Sabha.
- After President’s recommendation, Budget is then laid before the Lok Sabha by the Finance Minister with the "Budget speech". It is not discussed in the Lok Sabha on that day.
- It is then laid before the Rajya Sabha, which can discuss it, but cannot vote on thedemands for grants.
- The Discussion on Budget in the Parliament is conducted in two stages - General Discussion and Detailed Discussion.
- After general discussion on the budget is over, Parliament is adjourned for a period during which the 24 Departmental Standing Committees examine and discuss the demands for grants of concerned ministries and prepare reports on them.
- After the demands for grants have been passed by the House, a Bill to provide for appropriation out of the Consolidated Fund of India of all moneys required to meet the grants and the expenditures charged on the Consolidated Fund of India is introduced, considered and passed by the House.
4. WHAT IS PLAN AND NON-PLAN EXPENDITURE?
- Plan expenditure is associated with productive expenditure, which increases the productivecapacity of the economy.
- Non-plan revenue expenditure is accounted for by interest payments, subsidies (mainly on food and fertilisers), wage and salary payments to government employees, grants to States and Union Territories governments, pensions, police, economic services in various sectors, other general services such as tax collection, social services, and grants to foreign governments.
- Non-plan capital expenditure mainly includes defence expenditure, loans to public enterprises and loans to States, Union Territories and foreign governments.
5. WHAT ARE THE CATEGORIES OF GOVERNMENT ACCOUNT?
The Government account is categorised into the following -
- Consolidated Fund of India
- Contingency Fund of India
- Public Account
6. WHAT IS CONSOLIDATED FUND OF INDIA?
Under Article 266(1) of the Constitution of India, Consolidated Fund of India is the most
important of all government funds. All revenues raised by government, money borrowed and
receipts from loans given by government flow into it. All government expenditures other
than certain exceptional items met from Contingency Fund and Public Account are made
from this account.
No money can be appropriated from the fund except in accordance with the law.
7. WHAT ARE THE DIVISIONS IN CONSOLIDATED FUND OF INDIA?
The Consolidated Fund of India is divided into:
a) REVENUE ACCOUNT: It deals with the proceeds of taxation and other receipts classed
as revenue and expenditure from it. Any expenditure that doesn’t involve creation of
assets is treated as revenue expenditure. Salaries, subsidies and interest payments are
examples of revenue expenditure.
b) CAPITAL ACCOUNT: It deals with the expenditure to create durable assets. It also
includes the receipts and borrowings required to cover the expenditure.
CAPITAL ACCOUNT is further divided into three:
1) CAPITAL EXPENDITURE: Expenditure incurred for the purpose of creation of
permanent assets or reduction of recurring liabilities. It also includes receipts of a capital
nature to be applied as set off to capital expenditure.
2) CAPITAL RECEIPTS: Receipts of capital nature which cannot be used as set off to
capital expenditure.
3) PUBLIC DEBT AND LOANS AND ADVANCES: Loans raised and their repayment,
advances made and their recoveries.
8. WHAT IS CONTINGENCY FUND OF INDIA?
Any urgent or unforeseen expenditure is met from this fund. It is constituted under Article
267 of the Constitution of India. It is a Rs 500 crore fund which is at the disposal of the
President of India. Any expenditure from this fund requires subsequent approval from the
Parliament and any amount withdrawn must be returned to the Contingency Fund from the
Consolidated Fund of India.
9. WHAT IS PUBLIC ACCOUNT?
Under provisions of Article 266(1) of the Constitution of India, Public Account is used in
relation to all the fund flows where Government is acting as a banker.
For e.g., Provident Funds and Small Savings. This money does not belong to government but
is to be returned to the depositors. The expenditure from it need not be approved by the
Parliament.
10. WHAT IS THE FRBM ACT?
The Fiscal Responsibility and Budget Management Act or the FRBM Act, 2003 is an Act
mandating Central Government to ensure intergenerational equity in fiscal management and
long term macro-economic stability.
The Act also aims at prudential debt management consistent with fiscal sustainability
through-
- Limits on the Central Government borrowings, debt and deficits,
- Greater transparency in fiscal operations of the Central Government
- Conducting fiscal policy in a medium term framework and
- Other matters connected therewith or incidental thereto
11. WHAT DOCUMENTS ARE LAID BEFORE THE PARLIAMENT UNDER
THE FRBM ACT 2003?
The Act stipulates that the following documents shall be laid before Parliament in addition to
the Budget documents -
- Medium Term Fiscal Policy Statement
- Fiscal Policy Strategy Statement
- Macro-economic Framework Statement
12. WHAT IS THE OUTCOME BUDGET?
- From the fiscal year 2006-07 every Ministry presents a preliminary Outcome Budget to the Finance Ministry, which is responsible for compiling them.
- The Outcome Budget is a progress card on what various Ministries and Departments have done with the outlays in the previous annual budget.
- It measures the development outcomes of all government programmes and whether the money has been spent for the purpose it was sanctioned including the outcome of the fund-usage.
Outcome budget is a performance measurement tool that helps in:
- Better service delivery
- Decision-making
- Evaluating programme performance and results
- Communicating programme goals
- Improving programme effectiveness
- Make budgets cost effective
- Fix accountability
- Aid better scheme management
13. WHAT ARE REVISED ESTIMATES?
- Revised Estimates are mid-year review of possible expenditure, taking into account the trend of expenditure, New Services, New Instrument of Services etc.
- Revised Estimates are not voted by the Parliament, and hence by itself do not provide any authority for expenditure.
- Any additional projections made in the Revised Estimates need to be authorized for expenditure through the Parliament’s approval (in case of New Service/New Instrument of Service, etc) or by Re-appropriation order.
14. WHAT ARE EXCESS GRANTS?
If the total expenditure under a Grant exceeds the provision allowed through its original
Grant and Supplementary Grant, if any, the excess requires regularization by obtaining
excess Grant from the Parliament under Article 115 of the Constitution of India. It will have
to go through the whole process as in the case of the Annual Budget, i.e. through
presentation of Demands for Grants and passing of Appropriation Bills.