Budgeting Process in Parliament

The executive and legislative branches work together during the budgeting process in parliament to create a comprehensive package of tax and spending policies. The Government of India’s annual financial statement, budget, or statement of the estimated receipts and expenses for each fiscal year are all acceptable terms. The finance minister makes the presentation. The constitution’s Article 112 provides information on the annual financial statement.

Budgeting Process in Parliament will be helpful for UPSC IAS Exam preparation. GS Paper-2 Indian Polity.

Table of Content

• Budget
• Railway Budget
• Constitutional Provisions on Budget Enactment
• Charged Expenditure in the Budget
• Stages of Budgeting Process
• Other Grants in Budgeting Process
• Conclusion
• Frequently Asked Questions (FAQs)

Budget

• According to the Constitution, the ‘annual financial statement’ is referred to as the budget.
• Interestingly, the term ‘budget’ itself does not appear in the Constitution.
• Instead, it is commonly used to describe the ‘annual financial statement’ outlined in Article 112 of the Constitution.
• The budget presents an overview of the Government of India’s projected income and spending for a financial year.
• This fiscal year commences on 1st April and concludes on 31st March of the subsequent year.
• Aside from the projected income and spending, the budget includes the following elements:
  • Projections of revenue and capital receipts.
  • Strategies and methods to generate revenue.
  • Forecasts of expenditure.
  • Elaboration on the actual receipts and expenditures from the previous financial year, along with explanations for any deficit or surplus during that period.
  • The economic and financial policies for the upcoming year, including taxation proposals, revenue prospects, expenditure plans, and the introduction of fresh initiatives.

Railway Budget

• Before 2017, the Government of India operated with two distinct budgets: the Railway Budget and the General Budget.
• The Railway Budget focused solely on the Ministry of Railways’ estimated income and expenses, while the General Budget encompassed the estimated receipts and expenditures of all other government ministries, excluding the railways.
• The separate on of the Railway Budget from the General Budget originated in 1924, following the recommendations outlined in the Acworth Committee Report of 1921.
• The objectives behind this separation were as follows:
  • Introducing flexibility in railway finance.
  • Facilitating a business-oriented approach to railway policies.
  • Ensuring stability of general revenues by establishing an assured annual contribution from railway revenues.
  • Enabling the railways to retain their profits for internal development, after making a fixed annual contribution to the general revenues.
• However, in 2017, the Central Government merged the railway budget into the general budget.
• The Government of India now operates with a single unified budget known as the Union Budget.
• This integration eliminated the distinction between the Railway Budget and the General Budget.

Constitutional Provisions on Budget Enactment

• Budget Presentation: The President is required to present a statement of estimated receipts and expenditures for each financial year to both Houses of Parliament.
• Grant Recommendations: No demand for a grant can be made without the President’s recommendation.
• Fund Withdrawal: Money cannot be withdrawn from the Consolidated Fund of India without legal appropriation.
• Tax Bills: Tax bills imposing taxes can only be introduced in Parliament with the President’s recommendation and cannot be introduced in the Rajya Sabha.
• Tax Levy: Taxes can only be levied and collected through the authority of law.
• Tax Modification: Parliament has the power to reduce or abolish taxes but cannot increase them.
• Roles of Parliament:
  • Money Bills: Only the Lok Sabha can introduce money bills related to taxation.
  • Demand for Grants: The Rajya Sabha cannot vote on a demand for grants; it is the exclusive privilege of the Lok Sabha.
  • Money Bill Review: The Rajya Sabha must return money bills to the Lok Sabha within fourteen days, and the Lok Sabha can accept or reject its recommendations.
• Expenditure Classification: The budget estimates must distinguish expenditure charged on the Consolidated Fund of India from other expenditures.
• Revenue Expenditure: The budget should differentiate revenue account expenditure from other types of expenditure.
• Expenditure Approval: Expenditure charged on the Consolidated Fund of India does not require a vote in Parliament but can be discussed.

Charged Expenditure in the Budget

The budget includes two types of expenditure – “charged” expenditure from the Consolidated Fund of India and expenditure “made” from it.

The Parliament can only discuss charged expenditure, while the other type requires a vote. The charged expenditure list includes:

• President’s emoluments, allowances, and related office expenses.
• Salaries and allowances of Rajya Sabha Chairman, Deputy Chairman, Lok Sabha Speaker, and Deputy Speaker.
• Supreme Court judges’ salaries, allowances, and pensions.
• High Court judges’ pensions.
• Comptroller and Auditor General of India’s salary, allowances, and pension.
• Union Public Service Commission Chairman and members’ salaries, allowances, and pension.
• Administrative expenses of the Supreme Court, Comptroller and Auditor General of India’s office, and Union Public Service Commission, including salaries, allowances, and pensions of their staff.
• Debt charges, including interest, sinking fund charges, redemption charges, and expenses related to loans and debt servicing.
• Amounts required to comply with court or arbitral tribunal judgments, decrees, or awards.
• Any other expenditure designated as charged by Parliament.

Steps of Budgeting Process

1. Budget Presentation

• Traditionally, the budget is presented to the Lok Sabha on the final working day of February. However, since 2017, it has been moved to the 1st of February.
• The budget can be presented in multiple parts, with each part treated as a separate budget.
• No budget discussion takes place on the day of its presentation to the House.
• The finance minister delivers the budget speech in the Lok Sabha, after which the budget is laid before the Rajya Sabha.
• The Rajya Sabha can only discuss the budget and does not have the power to vote on demands for grants.

Contents of the General Budget

• Budget Speech
• Annual Financial Statement
• Demands for Grants
• Appropriation Bill
• Finance Bill
• Statements mandated under the FRBM Act:
  • Macro-Economic Framework Statement
  • Fiscal Policy Strategy Statement
  • Medium Term Fiscal Policy Statement
• Expenditure Budget
• Receipts Budget
• Expenditure Profile
• Memorandum Explaining the Provisions in the Finance Bill
• Budget at a Glance
• Outcome Budget

Economic Survey

• Previously, the Economic Survey was presented to the Parliament along with the budget.
  • However, it is now presented one day or a few days before the budget.
• The Economic Survey, prepared by the finance ministry, provides an overview of the national economy’s status.

2. General Discussion

• The budget’s general discussion starts a few days after it is presented.
• It occurs in both Houses of Parliament and typically lasts for three to four days.
• During this stage, the Lok Sabha can discuss the entire budgetor any principle-related questions.
  • However, no cut motion can be proposed, and the budget cannot be voted upon.
• The finance minister has the right to provide a general response after the discussion.

3. Scrutinization by Departmental Committees

• Once the general budget discussion concludes, there is a break of approximately three to four weeks.
• During this interval, the Parliament’s 24 departmental standing committees scrutinize and thoroughly discuss the grants requested by the relevant ministers.
• These committees then prepare reports on the examined grants.
• The reports are submitted to both Houses of Parliament for further consideration.
• The standing committee system, established in 1993 and expanded in 2004, enhances parliamentary financial control over ministries by providing detailed, close, in-depth, and comprehensive oversight.

4. Voting on Demands for Grants

• Following the reports from departmental standing committees, the Lok Sabha proceeds to vote on demands for grants, which are presented ministry-wise.
• A demand becomes a grant only after it has been duly voted upon.
• It is important to note that voting on demands for grants is exclusive to the Lok Sabha, and the Rajya Sabha does not possess the power to vote on these demands.
• The voting process is limited to the votable portion of the budget, while the expenditure charged on the Consolidated Fund of India is not subject to a vote but can be discussed.
• Each demand is voted on separately by the Lok Sabha, allowing members of Parliament to discuss budget details.

Cut motions

• Members can also propose motions to reduce demand for the grant, known as “cut motion,” which falls into three categories:
  • Policy Cut Motion: Expresses disapproval of the policy underlying the demand and suggests reducing the amount to Re 1, while alternative policies can be advocated.
  • Economy Cut Motion: Highlights potential economic impact resulting from proposed expenditure and proposes reducing the demand by a specified amount or eliminating/reducing a particular item in the demand.
  • Token Cut Motion: Raises a specific grievance within the responsibility of the Government of India and suggests reducing the demand by ₹100.
• Cut motions serve to initiate concentrated discussion on a specific demandfor a grant and uphold the principle of responsible government by scrutinizing government activities.
  • However, in practice, cut motions hold a limited utility as they are often moved and discussed in the House but not passed due to the government’s majority support.
• The passage of cut motions by the Lok Sabha indicates a lack of parliamentary confidence in the government and may lead to its resignation.

Guillotine

• Guillotine refers to the process where, on the final day designated for discussing and voting on demands for grants, the Speaker proceeds to directly put all the remaining demandsto a vote.
  • This occurs regardless of whether these demands have been previously discussed by the members.

5. Passing of Appropriation Bill and Vote on Account

• The Constitution mandates that money can only be withdrawn from the Consolidated Fund of India through an appropriation made by law.
• An appropriation bill is introduced to authorize the withdrawal of funds from the Consolidated Fund of India for:
  • Grants approved by the Lok Sabha.
  • Expenditure charged on the Consolidated Fund of India.
• Amendments to the appropriation bill that alter the amount or destination of voted grants or change the amount of expenditure charged on the Consolidated Fund of India are not permitted.
• Once assented to by the President, the Appropriation Bill becomes the Appropriation Act, enabling payments from the Consolidated Fund of India.
• The government cannot access funds from the Consolidated Fund of India until the appropriation bill is enacted, which typically takes until the end of April.

Vote on Account

• To address the need for funds after the financial year ends on March 31, the Lok Sabha is authorized to grant advance funds through a provision known as the “vote on account.”
• The vote on account is granted after the general budget discussion and provides funds for a specific period, usually two months, equivalent to one-sixth of the total estimation.

6. Passing of Finance Bill

• The Finance Bill is introduced to implement the financial proposals of the Government of India for the upcoming year.
• It is subjected to the conditions applicable to a Money Bill.
• Unlike the Appropriation Bill, amendments related to rejecting or reducing a tax can be proposed for the Finance Bill.
• As per the Provisional Collection of Taxes Act of 1931, the Finance Bill must be enacted within 75 days (passed by Parliament and assented to by the President).
• The Finance Act serves to legalize the income side of the budget and concludes the budgeting process

Other Grants in Budgeting Process

• Supplementary Grant: Granted when the amount authorized for a particular service in the current financial year is insufficient as per the appropriation act.
• Additional Grant: Granted for unforeseen expenditure on a new service not included in the budget for the current financial year.
• Excess Grant: Granted when expenditure on a service exceeds the allocated budget for that year. It requires approval from the Public Accounts Committee before being voted on by the Lok Sabha.
• Vote of Credit: Granted to meet unexpected demands on India’s resources when the details cannot be specified in a regular budget. It provides flexibility to the Executive.
• Exceptional Grant: Granted for a specific purpose outside the regular services of the financial year.
• Token Grant: Granted when funds for a new service can be made available through reappropriation. A nominal amount of Re 1 is requested and approved by the Lok Sabha.
• Reappropriation: Involves transferring funds from one head to another without additional expenditure.

Supplementary, additional, excess, exceptional grants and vote of credit follow the same procedure as the regular budget.

Conclusion

The budget should be commended for bringing about significant paradigm shifts. Although, the effectiveness of the policy and its coordination will now be crucial to India’s long-term survival. The yearly fiscal statement known as the government budget, which shows the revenue and outlays for a fiscal year, is typically suggested by the legislature, approved by the president or chief executive, and then delivered to the nation by the finance minister. The annual financial statement of the country is another name for the budget.

Ref: Source-1

FAQs (Frequently Asked Questions)