Meaning of Budget and Related Documents

 The Budget plays a crucial role in shaping the socio-economic condition of a country. It is a method through which government collects revenues by raising taxes and decides various schemes and non-schemes expenditures for the welfare of its people. So, let’s read this article on the ‘Meaning of Budget’…

By Aakriti Yadav

Meaning of Budget-

The Budget is the primary tool used by the government to implement its fiscal policy. The Budget comes from the French word ‘Bougette’ meaning a leather bag. The Constitution of India under Article 112 refers to the Budget as the ‘Annual Financial Statement’ which consists of:

• Actual of the previous year (Actual)
• Budget estimate of current year (B.E.)
• Revised estimate of current year (R.E.)
• Proposed budget estimate for next year (B.E.)

Three Documents Related to Budget-

ARTICLE 112: ANNUAL FINANCIAL STATEMENT(AFS)- It contains receipts and expenditures of the last year and projections for the next year.

ARTICLE 265: FINANCE BILL- This bill is required to obtain parliament’s permission to collect taxes. Parliament can reject or reduce the tax proposed by the government but can not increase the tax.

ARTICLE 114: APPROPRIATION BILL- This Bill is required to obtain parliament’s permission to spend money from the Consolidated Fund of India  (CFI).

Such expenditure can be of two types-the expenditure ‘Charged’ upon the Consolidated Fund of India (CFI) and the expenditure ‘Made’. The charged expenditure is non-votable in nature. The parliament can only discuss it. It includes emoluments of the President and the salaries and allowances of the Chairman and Deputy Chairman of the Rajya Sabha, Speaker and Deputy Speaker of Lok Sabha, Judges of the Supreme Court, Comptroller and Auditor General (CAG) OF India, and certain other bodies or agencies as specified in the Constitution of India. While non–charged expenditure is votable by the Parliament.

The finance bill and appropriation bill are considered money bills under Article 110.

Three Funds Related to Budget-

(1) ARTICLE 266: CONSOLIDATED FUND OF INDIA

It is a fund to which all receipts are credited and all payments are debited. It includes-

 (a)All revenues received by the government of India;

 (b)All loans raised by the government of India by issuing T-Bills, G-Sec., Ways and Means of Advance (WMA) to states, etc.

 (c)All money recovered by the government of India in repayment of loans.

Withdrawal of money from the Consolidated Fund of India needs parliament’s permission. However, no permission is required for charged expenditure.

(2) ARTICLE 266: PUBLIC ACCOUNT OF INDIA

This includes provident fund deposits, small savings, postal deposits, remittances, etc. This account is operated by executive action, mostly in the nature of banking transactions. So, parliamentary approval is not necessary. However, if the separate fund is created for the first time then parliamentary approval is required.

(3) ARTICLE 267: CONTINGENCY FUND OF INDIA

This fund is held by the finance secretary on behalf of the president for unforeseen events. Parliamentary approval is subsequently obtained after expenditure.

Six Stages of Passing the Budget-

(1) Presentation of Budget with Finance Minister’s speech

(2)General discussion of the budget

(3) Scrutiny by departmental committees

(4) Voting on demands for grants, cut motions, guillotine

(5) Passing of Appropriation Bill

(6) Passing of Finance Bill.

Vote on Account-

Since the passing of the Budget takes almost two months, the government requires the sanction of an amount to maintain their routine expenditure (like salaries to the employees, maintenance of defense, petrol or oil purchase, etc.) during this period.

While those six stages of passing the Budget are going on, the financial year will be over. So previous year’s appropriation act’s validity ended. Then the government can not withdraw money from the Consolidated Fund of India. Therefore, under Article 116, a special provision called ‘Vote on Account’ is created by which the vote of parliament is obtained by the government for two months to incur the country’s routine expenditure.

Vote on account is generally granted for two months for an account equivalent to the total Budget estimation. During the election year, a vote on account may exceed from 2-4 months’ expenditure until a new government is formed. Now Vote on Account is no longer necessary as the government began tabling the budget on the first working day of February.

Who Presents the Budget-

The Budget division of the Department of Economic Affairs of the Ministry of Finance is the nodal body responsible for the preparation and presentation of the Budget. Union Finance Minister presents the Budget in Parliament.

Departments under the Ministry of Finance-

• Department of Economic Affairs
• Department of Expenditure
• Department of Revenue
• Department of Financial Services
• Department of Investment and Public Asset Management (DIPAM)
• Department of Public Enterprises (DPE)

Who has the Power to Sanction the Budget-

For the implementation of policy, the government needs money. However, the government is an executive so Lok Sabha allowed or sanctioned the government to take money because no grant of funds can be made without due appropriation by Lok Sabha. Thus, the Budget is nothing but executive asking the Lok Sabha to give them funds to allocate the government’s welfare policies or expenditures.

Types of Budget-

The Budget based on income and expenditure of the government are as follows-

(1) Surplus Budget– A Budget is said to be in surplus when the government’s income is more than its expenditure. 

i.e. Government’s income > Government’s expenditure = Surplus Budget

(2) Balanced Budget- If the government’s income is equal to its expenditure, then it will be a balanced budget.

i.e. Government’s income = Government’s expenditure = Balanced Budget

(3) Deficit Budget– A Budget is in deficit when the government’s income is less than its expenditure. 

i.e. Government’s income < Government’s expenditure =Deficit Budget

Budgeting-

It is a process by which the Budget is created. 

• Zero-Based Budgeting: Zero-Based Budgeting is a method of budgeting in which all expenses are evaluated each time a Budget is made. It is viewed as a fresh exercise from zero base.
• Sunset Budgeting: In sunset budgeting, schemes are announced with a deadline. Thus, this scheme will self over after the deadline just like the sun sets during sunset time.
• Performance Budgeting: Such kind of budgeting is designed for measuring the cost-benefit and efficiency of a particular project.

• Gender Budgeting: This system was started in Budget 2005. This Budgeting targets gender equality. Through Gender Budgeting the government declares an amount to be spent on the development, welfare, empowerment schemes, and programmes for females.

Objectives of Budget-

The government targets the following objectives through the Budget-

(a) Promote economic growth- By allocating resources to the sectors of the economy, the Budget helps in factory expansion, creating job opportunities, reducing unemployment, etc. ultimately it boosts the GDP and economic growth of a country.

(b) Price stability- By balancing the Rupee: Dollar exchange rate, the government tries to stabilize the price volatility. For this government gives benefits to exporters to boost export; while imposing higher taxes on imported items to reduce imports.

(c) Reducing gender inequalities- Through gender budgeting government tries to reduce the wide trench of inequality among the people of the society, especially for women. This helps in the emancipation of women in society and helps in their empowerment.

(d) Promote inclusive growth- The government introducing various schemes and allocating revenues for every strata of society, helps in boosting social and economic development of a country. 

Conclusion of Meaning of Budget-

Thus a good Budget can help in enhancing the living standard of the people, especially those from the lower strata of the country, help the corporate sector in boosting their revenues, provide various tax benefits to the households, and channelizing their savings into investments which drive country on the path of prosperity.

 

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