(Sample Material) UPSC IAS Mains GS Online Coaching : Paper 3 - "Government Budgeting"

Sample Material of Our IAS Mains GS Online Coaching Programme

Subject: General Studies (Paper 3 - Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management)

Topic: Government Budgeting

GOVERNMENT BUDGETING

Key To Budget Documents e.g. Budget 2013-2014

The Budget documents presented to Parliament comprise, besides the Finance Minister’s Budget Speech, the following:

1. Annual Financial Statement (AFS)

2. Demands for Grants (DG)

3. Appropriation Bill

4. Finance Bill

5. Memo randum Explaining the Provisions in the Finance Bill, 2013

6. Macro-economic framework for the relevant financial year

7. Fiscal Policy Strategy Statement for the financial year

8. Medium Term Fiscal Policy Statement

9. Medium Term Expenditure Framework Statement

10. Expenditure Budget Volume-1

11. Expenditure Budget Volume-2

12. Receipts Budget

13. Budget at a glance

14. Highlights of Budget

15. Status of Implementation of Announcements made in Finance Minister’s Budget Speech of the previous financial year.

The documents shown at Serial A, B, C and D are mandated by Art. 112,113, 114(3) and 110(a) of the Constitution of India respectively, while the documents at Serial F, G, H and I are presented as per the provisions of the Fiscal Responsibility and Budget Management Act, 2003. Other documents are in the nature of explanatory  statements  supporting  the mandated documents with narrative or other content in a user friendly format suited for quick or contextual references.

In addition to  the above , individual Departments/Ministries also prepare and present to Parliament their Detailed Demands for Grants, Outcome Budget, and their Annual Reports.

The Economic Survey which highlights the economic trends in the country and facilitates  a  better  appreciation  of   the mobilization of resources and their allocation in the Budget is brought out by the Economic Division of Department of Economic Affairs, Ministry of Finance. The Economic Survey is presented to Parliament in advance of the Union Budget.

To monitor the performance management of various Ministries/Departments, Result Framework Document (RFD) system has been adopted by the Government. The RFD system is  being  implemented  in  the  various Ministries/Departments in phased manner. RFD was implemented to 59 Ministries / Departments  for  the  year  2009- 10, 62 Ministries/Departments prepared RFD for the year 2010-11, 74 Ministries/Departments prepared  the  RFD  in  2011-12  and  70.

Ministries/Departments prepared the RFD during 2012-13. Performance Management in the Government is a new concept which determines the performance index based upon the agreed objectives, policies, programs and projects/schemes. To ensure the success in achieving the agreed objectives and implementing agreed policies, programs and projects, the RFD also includes a commitment for  required  resources  and  necessary operational autonomy.

A brief description of the Budget documents is given below.

(A) Annual Financial Statement (AFS):

the document as provided under Article 112, shows estimated receipts and expenditure of the Government of India for 2013-14 in relation to estimates for 2012-13 as also expenditure for the   ye a r   20 11-1 2.   The   receipts   and disbursements are shown under the three parts, in which Government Accounts are kept viz.

(i) Consolidated Fund,

(ii) Contingency Fund and

(iii) Public Account.

Under the Constitution, Annual Financial Statement distinguishes expenditure on revenue account from other expenditure. Government Budget, therefore, comprises Revenue Budget and Capital Budget. The estimates of receipts and expenditure included in the Annual Financial Statement are for the expenditure net of refunds and recoveries, as will be reflected in the accounts.

The significance of the Consolidated Fund, the Contingency Fund and the Public Account

(i) The existence of the Consolidated Fund of India (CFI) flows from Article 266 of the Constitution. All revenues received by Government, loans raised by it, and also its receipts from recoveries of loans granted by it form the Consolidated Fund. All expenditure of Government is incurred from the Consolidated Fund of India and no amount can be  drawn fro m the Consolidated Fund without authorization from Parliament.

(ii) Article 267 of the Constitution authorizes the Contingency Fund of India which is at present placed at the disposal of the President   o f   India   to   facilitate Government to meet urgent unforeseen expenditure pending authorization from Parliament. Parliamentary approval for such unforeseen expenditure is obtained, post-facto, and an equivalent amount is drawn from the Consolidated Fund to recoup the Contingency Fund. The corpus of the Contingency Fund as authorized by Parliament presently stands at Rs. 500 crore.

(iii) Moneys held by Government in Trust as in the case of Provident Funds, Small Savings    collections ,    income    of  Government set apart for expenditure on specific objects like road development, primary education, Reserve/Special Funds etc. are kept in the Public Account. Public Account funds do not belong to Government and have to be finally paid back to the persons and authorities who deposited  them.

Parliamentary authorization  for such payments is, therefore, not required, except where amounts  are  withdrawn  from  the Consolidated Fund with the approval of Parliament and kept in the Public Account for expenditure on specific objects, in which case, the actual expenditure on the specific object is again submitted for vote of Parliament for withdrawal from the Public Account for incurring expenditure on the specific object.

(iv) Revenue Budget consists of the revenue receipts of Government (tax revenues and other revenues) and the expenditure met fro m the se  revenues. Tax revenues comprise proceeds of taxes and other duties levied by the Union. The estimates of revenue receipts shown in the Annual Financial Statement take into account the effect of various taxation proposals made in the Finance Bill.

Other receipts of Government mainly consist of interest and dividend on investments made by Government, fees, and other receipts for services  rendered  by  Government. Revenue expenditure is for the normal running of Government departments and various services, interest payments on debt,  subsidies ,  etc.  Broadly ,  the expenditure which does not result in creation of assets for Government of India is treated as revenue expenditure.

All grants given to State Governments/ Union Territories and other parties are also treated as revenue expenditure even though some of the grants may be used for creation of assets.

(v) Capital Budget consists capital receipts and capital payments. The capital receipts are loans raised by Government from public, called market loans, borrowings by Government from Reserve Bank and other parties through sale of Treasury Bills, loans received from foreign Governments and bodies, disinvestment receipts and recoveries of loans from State and Union

Territory Governments and other parties. Capital payments consist o f capital expenditure on acquisition of assets like land, buildings, machinery, equipment, as also investments in shares, etc., and loans and advances granted by Central Government to State and Union Territory Governments, Government companies, Corporations and other parties.

(vi) Accounting Classification

•  The  estimates of receipts  and disbursements  in  the  Annual Financial   Statement   and   of  expenditure in the Demands for Grants are shown according to the accounting classification prescribed under    Article 150 o f  the Constitution, which   enables Parliament and the public to make a meaningful analysis of allocation of  resources  and  purposes  of Government expenditure.

•  The Annual Financial Statement shows     separately, certa in disbursements as charged on the Consolidated Fund of India, where the Constitution mandates such items of  expenditure,  like emoluments  of  the  President, salaries and allowances of the Chairman and the Deputy Chairman of the Rajya Sabha and the  Speaker  and  the  Deputy Speaker of the Lok Sabha, salaries, allowances and pensions of Judges of the Supreme Court, Comptroller and Auditor-General of India and the Central Vigilance Commission, interest on and repayment of loans raised by Government and payments made to satisfy decrees of courts etc. These items of expenditure are charged on the Consolidated Fund of India and are not required to be voted by the Lok Sabha.

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