Budget documents are essential instruments that outline a government's financial structure, priorities, and allocations for a particular fiscal year. They function as a roadmap, directing the economic path of the nation, and are submitted annually to the Parliament. Grasping these documents is vital for citizens, policymakers, and financial analysts to understand the allocation of public resources, the generation of revenue, and the formation of fiscal policies. Below is an in-depth examination of the primary elements of budget documents, including the comprehensive list presented to the Parliament, along with the Finance Minister's Budget Speech.
1. Annual Financial Statement (AFS)
The Annual Financial Statement (AFS), as per Article 112, provides an overview of the Government of India's estimated receipts and expenditures for 2024-25, including estimates for 2023-24 and actuals for 2022-23. The AFS categorizes receipts and disbursements into three parts: (i) The Consolidated Fund of India, (ii) The Contingency Fund of India, and (iii) The Public Account of India. It distinguishes revenue account expenditures from other accounts, following constitutional mandates.
The Consolidated Fund of India (CFI), outlined in Article 266, encompasses all government revenues, loans, and loan recoveries. Expenditures are exclusively drawn from the CFI with parliamentary authorization.
The Contingency Fund of India, authorized by Article 267, provides a fund for urgent unforeseen expenditures pending parliamentary approval. The corpus presently authorized by Parliament is 30,000 crores.
The Public Account, deriving from Article 266, holds government funds in trust, such as Provident Funds and Small Savings collections, earmarked for specific purposes. Withdrawals from the Public Account for specific purposes require parliamentary approval.
The Union Budget comprises the Revenue Budget (revenue receipts and expenditures) and the Capital Budget (capital receipts and payments). Revenue expenditures cover routine government operations and services, while capital expenditures include asset acquisition and investments.
The Revenue Budget includes tax and non-tax revenues, considering the impact of taxation proposals. Non-tax revenues encompass interest, dividends, and fees. Revenue expenditures cover government operations, interest payments, subsidies, and grants.
The Capital Budget includes capital receipts (loans, borrowings, disinvestment receipts) and capital payments (capital expenditures, loans to various entities). Capital expenditures involve asset acquisition and investments.
Accounting classification, as mandated by Article 150, organizes estimates in the AFS and Demands for Grants. Certain expenditures, like emoluments of the President and salaries of specific officials, are charged on the Consolidated Fund without requiring a parliamentary vote.
2. Demands for Grants (DG)
Demands for Grants, as mandated by Article 113 of the Constitution, are a crucial aspect of the budgetary process in India. These demands are presented alongside the Annual Financial Statement and are subject to approval by the Lok Sabha. Typically, each ministry or department is associated with one Demand for Grant, though exceptions may occur based on the nature of expenditure. Union Territories are allocated a separate Demand for each. In the Budget for 2024-25, there are a total of 102 Demands for Grants.
Each Demand for Grant outlines the 'voted' and 'charged' expenditure totals, along with 'revenue' and 'capital' expenditure distinctions. The gross amount of expenditure for the presented Demand is provided, including estimates under various major heads of account. Recoveries are accounted for, and the net expenditure, obtained by subtracting recoveries from the gross amount, is also detailed. A summary of Demands for Grants is presented at the beginning of the document, while specifics about 'New Service' or 'New Instrument of Service,' such as the formation of a new company or scheme, are indicated at the document's end.
Each Demand encompasses the total provisions needed for a service, covering revenue and capital expenditures, grants to State and Union Territory Governments, as well as loans and advances related to the service. In cases where the provision is solely for expenditure charged on the Consolidated Fund of India (e.g., Interest Payments - Demand for Grant No. 39), a separate Appropriation, distinct from a Demand, is presented for that specific expenditure and does not require a Lok Sabha vote. However, if a service's expenditure includes both 'voted' and 'charged' items, the Demand for that service incorporates both, with separate delineation of 'voted' and 'charged' provisions.
3. Finance Bill
The Finance Bill is an integral component of the budgetary process and is presented concurrently with the Annual Financial Statement in adherence to Article 110 (1)(a) of the Constitution. This bill specifically outlines proposals for the imposition, abolition, remission, alteration, or regulation of taxes as articulated in the Budget. Furthermore, the Finance Bill incorporates additional provisions related to the budget that meet the criteria of a Money Bill.
In accordance with Article 110 of the Constitution, a Finance Bill is categorized as a Money Bill. This designation signifies its association with matters related to taxation and public revenue, emphasizing the critical role it plays in the financial framework of the country. The Finance Bill, by detailing tax-related proposals and encompassing other provisions integral to the budget, serves as a legislative instrument that undergoes parliamentary scrutiny and approval during the budgetary proceedings.
4. Fiscal Policy Statements under FRBM Act
i. Macro-Economic Framework Statement:
The Macro-Economic Framework Statement, presented to Parliament as per Section 3 of the FRBM Act, 2003, provides an evaluation of the economic growth prospects. It includes specific underlying assumptions and assessments related to the GDP growth rate, the domestic economy, and the stability of the external sector. Additionally, it addresses the fiscal balance of the Central Government and the external sector balance of the economy.
ii. Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement:
The Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement, also presented under Section 3 of the FRBM Act, 2003, outlines three-year rolling targets for various fiscal indicators concerning GDP at market prices. These indicators include Fiscal Deficit, Revenue Deficit, Primary Deficit, Tax Revenue, Non-tax Revenue, and Central Government Debt. The Statement incorporates underlying assumptions, assesses the balance between revenue receipts and expenditure, and outlines the use of capital receipts, including market borrowings, for creating productive assets. Furthermore, it delineates strategic priorities for the upcoming financial year regarding taxation, expenditure, borrowings, guarantees, etc. The Statement elucidates how current fiscal policies align with sound fiscal management principles and provides rationale for any significant deviations in key fiscal measures.
5. Explanatory Documents
To facilitate a more comprehensive understanding of the major features of the Budget, certain other explanatory documents are presented. These are briefly summarized below:
I. Expenditure Budget:
The Expenditure Budget consolidates estimates for schemes and programs from various Major Heads in the Revenue and Capital sections of Demands for Grants. It categorizes expenditures into Centers’ Expenditures and Transfers to States/Union Territories. Under Centers’ Expenditure, it includes classifications like Establishment expenditure, Central Sector Schemes, and Other Central Expenditure. Transfers to States/UTs encompass Centrally Sponsored Schemes, Finance Commission Transfers, and Other Transfers to States. Explanatory notes in this document shed light on the objectives behind proposed expenditures.
II. Receipt Budget:
The Receipt Budget delves into the details of estimates presented in the Annual Financial Statement, providing insights into tax and non-tax revenue receipts, capital receipts, and their rationale. It includes statements on arrears of tax and non-tax revenues, National Small Savings Fund, liabilities, guarantees, assets, external assistance, and the revenue impact of tax incentives under the Central Tax System.
III. Expenditure Profile:
Aggregation of Expenditure: This document aggregates various types of expenditures and items across demands.
Refinements in Budgetary Procedures: It refines estimates, including netting expenditure of related receipts, and avoids overstatement of figures. Major variations between budget estimates are explained.
Scheme Expenditure: Highlights total provisions for Ministries under Centrally Sponsored Schemes, Central Sector Schemes, and more. Externally aided projects are also detailed.
Commercial Departments: Focuses on Railways, other departmental undertakings, Ministry of Defence, grants to non-Government bodies, and Statements on ‘Resources of Public Enterprises’ and ‘Extra Budgetary Resources.’
IV. Budget at a Glance:
This document provides a concise overview of receipts, disbursements, tax revenues, and other key details. It includes information on resources transferred to State and Union Territory Governments, revenue deficit, gross primary deficit, and gross fiscal deficit.
V. Key Features of Budget 2024-25:
This document offers a snapshot summary of the government's economic vision, major policy initiatives, and key budget proposals for growth and welfare. It outlines milestones in fiscal consolidation and financial management.
VI. Implementation of Budget Announcements 2023-24:
Summarizing the status of the announcements made in the Budget Speech 2023-24 by the Hon’ble Finance Minister, this document provides an insight into the progress of the implementation of various budgetary measures.
Conclusion
Understanding budget documents is essential for informed citizenship and effective policy analysis. These documents offer a comprehensive insight into the government's financial plans, priorities, and strategies. By delving into the nuances of each document, stakeholders can gain a holistic understanding of the economic vision, fiscal health, and resource allocation of the government, thereby contributing to informed decision-making and public accountability. The inclusion of relevant articles and acts, such as the Constitution and the FRBM Act, further emphasizes the legal and statutory foundations underlying the budgetary process.
Source: Union Budget
Note for UPSC Aspirants: For UPSC aspirants interested in exploring further, here are some keywords to guide your research: FRBM Act, Fiscal Policy, Monetary Policy, Financial Bills, Finance Commission, Contingency Fund, Gross Domestic Product, Tax Revenue, GST, Reserve Bank of India.
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