By now most of us are aware of the Highlights of the Interim Budget 2014-15. The purpose of this article is to bring insight into various components which get into in an Union Budget.
Under Article 112 of the Constitution of India, a statement of estimated receipts and expenditure of the Government of India has to be laid before the parliament in respect of every financial year which runs from 1st April to 31st March. This statement is titled as the ‘Annual Financial Statement’ which is commonly known as the ‘Union Budget’. The Union Budget of the Republic of India, is presented each year on the last working day of February by the Finance Minister of India in the Parliament. The Annual Financial Statement shows the receipts and payments of the Government under three parts viz.
- The Consolidated Fund of India
- The Public Accounts of India
- The Contingency Fund of India
The Consolidated Fund of India is largest pool of fund out of the above three funds. It comprises of the revenue budget and the capital budget. The revenue receipts and expenditure—generally do not lead to sale or creation of assets—come under the revenue account. Revenue deficit is the excess of revenue expenditure over revenue receipts. All expenditure on revenue account should ideally be met from receipts on revenue account i.e. the revenue deficit should be zero. In such a situation, the government borrowing will not be for consumption but for creation of assets. Similarly, Capital receipts are government loans raised from the public, government borrowings from the Reserve Bank and treasury bills, loans received from foreign bodies and governments, divestment of equity holding in public sector enterprises, securities against small savings, state provident funds, and special deposits and Capital payments are capital expenditure on acquisition of assets like land, buildings, machinery, and equipment, Investments in shares, loans and advances granted by the central government to state and union territory governments, government companies, corporations and other parties. Fiscal deficit is the difference between total revenue and total expenditure. When this happens, the Government needs additional funds.
The Public Accounts of India comprises of amounts for specific function such as National Calamity and Contingency Fund, Postal Insurance, Defense Fund, National Investment Fund. For example, the National Calamity and Contingency Fund (‘NCCD’) can be used to meet expenditure for the Calamities. In the case of Uttrakhand Disaster in 2013-14, the Government of India has incurred an expenditure of Rs.250 Crores from this NCCD (Source http://mha1.nic.in/)
The Contingency Fund of India is in the nature of imprest at the disposal of the President of India for meeting of unforeseen expenditure during emergency pending the authorization from the Parliament subsequently.
Now, to withdraw amounts from the Consolidated Fund of India the Finance Minister has to put the Appropriation Bill which is intended to give authority to Government to incur expenditure from and out of the Consolidated Fund of India. This bill has to be introduced only in the Lok Sabha and once passed by the Lok Sabha it can be transmitted to the Rajya Sabha for recommendation within 14 days. It is upto he Lok Sabha to accept or not the recommendation of the Rajya Sabha. After which the bill shall be sent for the assent of the president who has to give the assent to the bill and the bill cannot be returned by him for reconsideration etc.
Interim Budget vs. Vote on Account
Interim Budget is a slim version of the budget. It is a complete set of accounts, including both expenditure and receipts. Interim budget is needed to be presented to keep the government running until a regular Budget is passed by Parliament. Interim Budget may be presented in the year of General Elections as there is uncertainty that the present Government may or may not continue so as to not burden the newly elected Government with the budget framed by the outgoing Government as a practice an ‘Interim Budget’ is presented. However, there is no legal obligation to launch interim budget in the election year.
Vote-on-account deals only with the expenditure side of the government's budget. The government gives an estimate of funds it requires to meet the expenditure that it incurs during the first three to four months of an election financial year until a new government is in place. The present government will have to obtain the sanction of the Parliament for an amount sufficient to incur expenditure on various items for a part of the year. This approval by the Lok Sabha to withdraw money from the Consolidated Fund of India is known as Vote-on-Account. The vote-on-account is normally valid for two months and is in operation till the full Budget is passed. But during an election year, it may be extended for a period more than two months if it is anticipated that the main demands and the Appropriation Bill will take longer than two months to be passed by the House.
Therefore, it can be said that Interim Budget contains Vote on account but not vice-versa.
Key Events of the Union Budget of India
1. So far, the country has seen 67 normal annual budgets, while there have been 11 interim budgets.
2. Until the year 2000, the Union Budget was announced at 5 pm on the last working day of the month of February. This practice was inherited from the Colonial Era, when the British Parliament would pass the budget in the noon followed by India in the evening of the day. It was Mr. Yashwant Sinha, the then Finance Minister of India in the NDA government (led by BJP) of Atal Bihari Vajpayee, who changed the ritual by announcing the 2001 Union Budget at 11 am.
3. Former Finance Minister Morarji Desai presented the budget ten times, the most number of times.
4. India started following the April 1- March 31 financial year from1867. Prior to 1867, the financial year would begin May 1 and end on April 30.
CA Radhika Verma, Hiregange & Associates