Introduction of Union Budget: MPSC Study Notes

By Ganesh Mankar|Updated : August 25th, 2021

'Introduction to Union Budget' is very topic for all MPSC exams. This topic covers the constitutional provisions regarding budget and types of budget in India. This topic is very important for the MPSC State Services Prelims Exam, MPSC Combined prelims exam as well as Maharashtra Police Recruitment etc.

Introduction of Union Budget

Constitutional Provisions

  • The Constitution of India has a provision (Article 112) for such a document called the Annual financial statement, which usually refers to the term Budget.

Introduction of Budget

  • The Budget is a statement of receipt and expenditure of a government in a financial year which begins on 1 April and ends on 31 March.
  • These receipts and expenditures of the Government are in three parts:
  •  1. Consolidated Fund of India
  •  2. Contingency Fund of India
  •  3. Public account of India.
  • The Budget has three sets of data for every concerned sector or sub-sector of the economy.
  • They are
  •  Actual data of the preceding year
  •  2. Provisional data of the current year
  •  3. Budgetary estimates for the following year
  • The Budget contains Estimates of revenue and capital receipts, ways and means to raise the revenue, Estimates of expenditure, the Economic and Financial Policy of the coming year, taxation proposals, spending programme and introduction of new schemes/projects.

Different types of Fund of Government of India

Consolidated fund

  • The Consolidated fund comprises all revenues received by the Government, including the loans raised by it, receipts from recoveries of loans granted by it, tax and other revenues.
  • This fund was established under Article 266 (1) of the Constitution of India.
  • Parliament authorization is required for any withdrawn from this fund.

Contingency fund

  • The Contingency fund is the fund set aside for Government to meet emergency expenditures that cannot wait for authorization.
  • This fund was established under Article 267 of the Constitution of India.
  • This fund is kept at the disposal of the President.

Public accounts of India

  • Public accounts comprise money the Government gets from various schemes like the small savings schemes or dedicated funds like provident funds, deposits and advances.
  • This fund was established under Article 266 (2) of the Constitution of India.

Budget in Parliament

  • First, the Budget is presented in the Lok Sabha by the Finance Minister, and he gives a ‘Budget Speech’.
  • Then the general discussion takes place in the house.
  • Afterwards, it sends it to the Rajya Sabha for discussion.
  • After the discussion is over, the Houses are adjourned for 3 to 4 weeks.
  • During this gap, the 24 departmental standing committees examine and discuss the demands for grants of the concerned ministers and prepare reports on them.
  • With consideration of these reports, voting of the demand for grants will take place.
  • The demands are presented ministry-wise.
  • Demand will be granted after it has been voted.
  •  Article 113 of the constitutions contain the provisions of demand for grants.
  • Voting of demands for grants is the exclusive privilege of the Lok Sabha, Rajya Sabha, who can only discuss it and has no power to vote.
  • Totally 26 days are allotted for the voting of demands. On the last day, the speaker puts all the remaining demands to the Vote and disposes of them whether they have been discussed or not. This is called ‘Guillotine’.
  • So, the amount demanded by the Minister cannot get it without the grants voted by the Lok Sabha.

Motions in Parliament

  • During voting on demand for grants, Members of Parliament can also move motions to reduce any demand for grants.
  • Such motions are
  1. Policy Cut Motion: - It represents the disapproval of the policy underlying the demand and the amount of the demand to be reduced to Re 1.
  2. Economic Cut Motion: - In this amount, the demand is reduced by a specified amount.
  3. Token Cut Motion: - In this motion, the demand was reduced to Rs.100 to ventilate a specific grievance, which is within the sphere of responsibility of the Government of India.

Vote on Account

  • Before starting the new financial year, the Government needs to keep enough finance to allow it to run the administration of the country remains.
  • Article 116 of the constitutions contain the Vote on account provisions.
  • This allowed the Government to fund its expenses for a short period or until a full budget is passed.
  • Generally, the Vote on Account is taken for two months only.

Appropriation Bill

  • It is introduced in Lok Sabha After passing demand for grants to give authority to the Government to incur expenditure from and out of the Consolidated Fund of India.
  • No money shall be withdrawn from the Consolidated Fund of India except under Appropriation made by law (Article- 266).

Finance Bill

  • It is introduced in Lok Sabha after passing the Appropriation Bill to give effect to the Government’s taxation proposals introduced in Lok Sabha immediately after the presentation of the General Budget.

Type of Finance Bill    

1.     Money Bills-

  • These are financial bills that contain provisions related to matters listed in Article-110 (1) (a).
  • It required the prior recommendation of the President before being presented in Lok Sabha.
  • Only Minister can introduce it in Lok Sabha.
  • Lok Sabha only has the power to Vote in the case of Money Bills. Rajya Sabha only can advise Lok Sabha.
  • There is no provision of Joint sitting in case of Money Bills.

2.     Finance Bills category-I

  • It required the prior recommendation of the President before being presented in Lok Sabha.
  • But in this case, Rajya Sabha has the power to reject this bill.
  • There is a provision of Joint sitting in these types of Bills.

3.     Finance Bills category-I

  • These are financial bills that do not contain provisions related to matters listed in Article-110. 

Types of budgets

Five types of budgets are used in India -

  1. General budget
  2. Execution budget
  3. Zero budget
  4. Outcome budget
  5. Gender budget

1. General budget

The main objective of this budget is to control government expenditure and accelerate development work.

2. Output budget

The main purpose of this budget is based on the work that the government wants to accomplish. This budget is also called achievement 3. budget or fulfilment budget. It is based on the results of the work.

3. Zero budget

This budget is released in case of low income and high expenditure so that the deficit can be controlled by reducing the expenditure.

4. Outcome budget

This budget is used for any ministry or department, in which the amount allocated in the budget is used to determine and evaluate the physical objectives.

5. Gender Budget

This budget promotes a budget prepared by the Government of India that allocates works and schemes based on gender, women empowerment and women empowerment.

Time to announce the Budget

  • Until the year 2000, the Union Budget was announced on the last working day of February at 5 pm. This practice was inherited from the colonial period when the British Parliament used to pass the budget in the afternoon, and then India started doing it in the evening.
  • The then Finance Minister of Atal Bihari Vajpayee's NDA government (BJP-led) was Shri Yashwant Sinha, who broke the tradition and announced the time of the 2001 Union Budget at 11 am.

Components of the government budget

1. Revenue Budget-

This includes revenue expenditure and revenue collection.

  • Revenue Deposits:Some deposits do not directly affect the assets and liabilities of the Government. This includes money from the Government through taxes (such as excise duty, income tax) and non-tax sources (such as dividend income, profit, interest receipts).
  • Revenue Expenditure:This is a government expenditure that does not affect its assets or liabilities. For example, it includes salaries, interest payments, pensions, and administrative expenses.

2. Capital budget

This includes capital accumulation and capital expenditure.

Capital Deposit: Which either increases assets or reduces government liabilities.

These include:

  • money earned by selling assets (or disinvestments) such as shares of public enterprises and
  • (Repayment of State Debts or Money Received as Debt Repayment).

Capital Expenditure: Used to build assets or reduce liabilities.

These include:

  • Long-term investment by the Government to build property such as roads and hospitals and
  • Loans made by the Government to the States in loans or repayment of its loans.

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