Government Finance & Budget

Points to Ponder in This Article – Read this article thoroughly as it describes the documents that forms part of Indian budget system. Know the different between different types of funds along with their applications & uses in different times.

A government budget is an annual financial statement presenting the government’s proposed revenues and spending for a financial year that is often passed by the legislature, approved by the chief executive or president and presented by the finance minister to the nation.

Types of funds in Budget

Consolidated fund of India (Article 266)

• All revenue received from direct and indirect taxes.
• All loans taken by government of India.
• Principle + Interest received by Government of India on loans given.
• Needs parliament’s approval to spend from this fund.

Public Accounts of India (Article 266)

• Bank savings account of the departments/ministries (for day-to-day transactions)
• National Investment fund (NIF) – Money earned from disinvestment.
• National Calamity & contingency fund (NCCF) (Under Home ministry) → Now merged with National Disaster Relief Fund (NDRF)
• National small savings fund, defence fund, provident fund, Postal insurance etc.
• All Cess & Specific purpose surcharges
• Government schemes Fund (E.g., MNREGA)
• No need of Parliament’s approval to spend from this fund.

Contingency fund of India (Article 267)

• Held by the President of India viz. Rs. 500 CR.
• Operated by finance Secretary on accounts of President.
• President can spend cash from this fund for emergency/unforeseen circumstances without the authorization of parliament.
• Though parliament’s approval is needed to again replenish this fund

National investment fund

• Disinvestment → When Government sells its shares of public sector undertaking.
• Money earned via disinvestment doesn’t go into Consolidated Fund of India
• It goes to National investment fund (under public accounts of India), therefore, outside parliament control.
• Three fund managers look after NIF viz. UTI, LIC and SBI
• Money from NIF goes in

• Buying shares of CPSE to ensure 51% government ownership.
• Recapitalizing public banks and insurance companies
• Investing in EXIM bank, NABARD, Regional rural banks,
• Uranium corporation, Nabhikiya Vidyut Nigam
• Metro projects and Indian railways capital Expenditure

Documents which form basis of Budget

Prominent part of current years’ Budget → Forms Statement 1 of Next Year Annual Financial Statement

Some Basic Terms Commonly Used in Budget

Vote on Account

• Passed By Lok Sabha every year → Bill for only Expenditure permission.
• Cash required to meet the expenditure that it incurs mainly during the first two months of a financial year, until new appropriation bill is passed by the Lok Sabha, to keep the machinery running.
• Cash is given from Consolidate Fund of India
• Generally, 1/6^thof the total estimated expenditure

Interim Budget

• Passes in election year or in extreme situation.
• Not morally correct for outgoing Government to make drastic changes.
• Valid for Entire year viz. 1^st April – 31^st March; but new Government can change it
• Encloses all major portions of full-fledged budget viz.

• Annual financial statement
• Finance Bill for tax purpose
• Appropriation Bill to take out money from consolidated fund of India to run the system for given financial year
• Vote on Account to sort out cash problem for first two – four months of new financial year until new appropriation bill is passed

Caretaker Government

• Last Government continues to be in office, till new PM / CM arrives –

• After the term has expired
• After PM / CM has resigned
• No-confidence motion passed.
• Parliament / Assembly dissolved.