Funds of Central Government in India

The Constitution of India provides for the following three kinds of funds of Central government: Consolidated Fund of India; Public Account of India; Contingency Fund of India. The Central Government of India operates three main funds: The Consolidated Fund, the Contingency Fund, and the Public Account. The Consolidated Fund is where all revenues are collected and payments are debited, while the Contingency Fund is used for unforeseen expenses. The Public Account houses funds not allocated to the Consolidated Fund. In this article, you will know about all Funds of Central Government of India, including Consolidated Fund, Public Account, and Contingency Fund. To explore more interesting UPSC Indian Polity topics of GS Paper – 2 like Funds of central government in India, check out other articles and IAS Notes of IASToppers.   

Table of Contents

• 3 Types of Funds of Central government
• Consolidated Fund of India
• Contingency Fund of India
• Public Account of India
• Controller General of Accounts
• Frequently Asked Questions on Funds of Central government
• Conclusion

3 Types of Funds of Central government

The Constitution of India provides for the following three kinds of funds of Central government:

1. Consolidated Fund of India
2. Public Account of India
3. Contingency Fund of India

Consolidated Fund of India

• It is a fund to which all receipts are credited and all payments are debited.
• Every legally sanctioned payment on behalf of the Indian Government is disbursed from this fund.
• Charged expenditures on the Consolidated Funds do not require parliamentary approval, and thus are non-votable.
• Funds from this account cannot be allocated (dispensed or withdrawn) unless it is in compliance with a law established by the Parliament.

As per Article 266(1) of the Indian Constitution, the Consolidated Fund of India comprises:

• All revenues collected by Union government.
  • This includes tax revenues (e.g., income tax, corporate tax, customs, and excise duties) and non-tax revenues (e.g., licensing fees, dividends, and profits from public sector enterprises).
• All loans raised through issue of treasury bills, loans or ways and means of advances; and
• All funds received by the Union Government as loan repayments.

Each state also has its own Consolidated Fund, established under Article 266(1), which consists of:

• All state government tax revenues (e.g., GST, stamp duty) and non-tax revenues (e.g., user fees).
• Any loans raised through the issuance of treasury bills, both internal and external, and all funds received by the state government as loan repayments.

The Comptroller and Auditor General of India, along with the Public Accounts Committee, audits these funds and reports to the Parliament when proper accounting procedures are not followed.

The Consolidated Fund of India is divided into five sections:

1. Disbursements charged on consolidated funds
2. Revenue account – receipts
3. Revenue account – disbursements
4. Capital account – receipts
5. Capital account – disbursements

Charged Expenditures on Consolidated Funds

The types of expenditure that are charged on the Consolidated Fund of India, as enumerated in Article 112(3) of the Constitution of India,include

• Emoluments and allowances of the President and the expenditure relating to his office.
• Salaries and allowances for Speaker and Deputy Speaker of the Lok Sabha
• Salaries and allowances for Chairman and Deputy Chairman of Rajya Sabha
• Salaries, allowances and pension of judges of the Supreme Court and Comptroller and Auditor General of India
• Debt Charges for which the Government of India is liable including interest, sinking fund charges and redemption charges etc.
• Any sums required to satisfy any judgment, decree or award of any court or arbitral tribunal.

Contingency Fund of India

• The Constitution grants the Parliament the authority to create a ‘Contingency Fund of India’ under Article 267(1) of the Indian Constitution.
• In response, the Parliament passed the Contingency Fund of India Act in 1950.
• The president has control over this fund and can utilize it to cover unexpected expenses while awaiting Parliament’s approval.
• The Finance Secretary, Department of Economic Affairs holds the fund on the president’s behalf, and like the public account of India, executive action operates it.

What is the Current Corpus of the Contingency Fund?

• The current corpus of the Contingency Fund was increased to 30,000 crores in the Union Budget 2023.
• While increasing the corpus, the government also gave more powers to the Expenditure Secretary.
  • 40% of the corpus has now been placed at the disposal of the Expenditure Secretary.
  • All further releases will also require the approval of Economic Affairs Secretary.
• The fund can be increased through a Finance Bill when the Parliament is in the session. OR through Ordnance if the House is not in session and situation warrants.

Public Account of India

• The Public Accounts of India is established under Article 266(2) of the Constitution.
• It consists of all other public funds received by or on behalf of the Government of India that are not credited to the Consolidated Fund of India.
• The Public Accounts of India include:
  • National Savings and Investment Corporation (money earned from disinvestment)
  • National Defense Fund and National Small Savings Fund
  • National Calamity and Contingency Fund
  • Savings accounts for various ministries/departments
  • Provident funds, postal insurance, judicial deposits, departmental deposits, remittances, etc.
• Auditing of all expenditures from the Public Accounts of India is responsibility of Comptroller and Auditor General (CAG).
• The government does not require permission to withdraw funds from the Public Accounts of India.
• Each state may have its own set of similar accounts.

Controller General of Accounts

• As the primary accounting authority for the Indian Government, the Controller General of Accounts (CGA) holds a vital role.
• The CGA functions within the Department of Expenditure, which is part of the Ministry of Finance.
• The CGA’s responsibilities include developing and sustaining a robust accounting management system.
• He is also responsible for compiling the Central Government’s accounts, managing financial resources, and supervising internal audits.

Conclusion for Funds of central government

Different funds established by the Constitution of India is crucial for the effective management of the India’s economy. The Central Government should ensure transparency, accountability, and proper utilization of these funds, which are essential for India’s financial stability and growth. Strengthening the roles of the Comptroller and Auditor General and the Controller General of Accounts, coupled with timely audits and close monitoring, can pave the way for a more responsible allocation and use of public resources.

Ref: Source-1

FAQs (Frequently Asked Questions)