With
the emergence of Welfare State, Governments have come to look after virtually
every sphere of human life. They have to perform manifold functions from
maintaining law and order, protecting their territories to implementation
of plans for economic and social betterment. Besides, they provide a variety
of social services like education, health, employment and housing to the
people. Needless to say, Government require adequate resources to discharge
these functions effectively.
Where
is this money to come from and who is to sanction the funds? The necessary
funds are mobilised from out of the country's resources by way of taxes
both direct and indirect, loans both long-term and short-term, to meet
the Governmental expenditure. In India, the principal sources of revenue
are customs and excise duties and Income-tax on individual and companies.
Need
for Budget
It
is not as if the Government can tax, borrow and spend money the way it
likes. Since there is a limit to the resources, the need for proper budgeting
arises to allocate scarce resources to various Governmental activities.
Every item of expenditure has to be well thought out and total outlay worked
out for a specific period. Prudent spending is essential for the stability
of a Government and proper earnings are a pre-requisite to wise spending.
Hence, planned expenditure and accurate foresight of earnings are sine-qua-non
of sound Governmental finance.
Parliamentary
Control over Finance
Ours
is a Parliamentary system of Government based on Westminster model. The
Constitution has, therefore, vested the power over the purse in the hands
of chosen representatives of the people thus sanctifying the principle
'no taxation without representation'.
Preparation
of Budget for the approval of the Legislature is a Constitutional obligation
of the Government both at the Centre and the States. Legislative prerogative
over taxation, legislative control over expenditure and executive initiative
in financial matters are some of the fundamental principles of the system
of Parliamentary financial control. There are specific provisions in the
Constitution of India incorporating these tenets. For example, article
265 provides that 'no tax shall be levied or collected except by authority
of law'; no expenditure can be incurred except with the authorisation of
the Legislature (article 266); and President shall, in respect of every
financial year, cause to be laid before Parliament, Annual Financial Statement
(article 112). These provisions of our Constitution make the Government
accountable to Parliament.
The
Budget
The
'Annual Financial Statement', laid before both the Houses of Parliament
constitutes the Budget of the Union Government. This statement takes into
account a period of one financial year. The financial year commences in
India on the 1 st April each year. The statement embodies the estimated
receipts and expenditure of the Government of India for the financial year.
Demands
for Grants
The
estimates of expenditure included in the Budget and required to be voted
by Lok Sabha are in the form of Demands for Grants. These Demands are arranged
Ministry-wise and a separate Demand for each of the major services is presented.
Each Demand contains first a statement of the total grant and then a statement
of the detailed estimate divided into items.
Railway
Budget
The
Budget of the Indian Railways is presented separately to Parliament and
dealt with separately, although the receipts and expenditure of the Railways
form part of the Consolidated Fund of India and the figures relating to
them are included in the 'Annual Financial Statement'.
Presentation
In
India, the Budget is presented to Parliament on such date as is fixed by
the President. The Budget speech of the Finance Minister is in two parts. Part A deals with general economic
survey of the country while Part B relates to taxation proposals. The General
Budget is usually presented at 5 p.m. on the last working day of February
i.e. about a month before the commencement of the financial year except
in the year when General Elections to Lok Sabha are held. In an election
year, Budget may be presented twice--first to secure Vote on Account for
a few months and later in full.
The
General Budget is presented in Lok Sabha by the Minister of Finance. He
makes a speech introducing the Budget and it is only in the concluding
part of his speech that the proposals for fresh taxation or for variations
in the existing taxes are disclosed by him. The 'Annual Financial Statement'
is laid on the Table of Rajya Sabha at the conclusion of the speech of
the Finance Minister in Lok Sabha.
Budget
Documents
Alongwith
the 'Annual Financial Statement' Government presents the following documents:
an Explanatory Memorandum briefly explaining the nature of receipts and
expenditure during the current year and the next year and the reasons for
variations in the estimates for the two years, the Books of Demands showing
the provisions Ministry-wise and a separate Demand for each Department
and service of the Ministry. The Finance Bill which deals with the taxation
measures proposed by Government is introduced immediately after the presentation
of Budget. It is accompanied by a memorandum explaining the provisions
of the Bill and their effect on the finances of the country.
Vote
on Account
The
discussion on the Budget begins a few days after its presentation. In a
democratic set-up, Government is anxious to give Parliament full opportunity
to discuss the budgetary provisions and the various proposals for taxation.
Since Parliament is not able to vote the entire budget before the commencement
of the new financial year, the necessity to keep enough finance at the
disposal of Government in order to allow it to run the administration of
the country remains. A special provision is, therefore, made for "Vote
on Account" by which Government obtains the Vote of Parliament for a sum
sufficient to incur expenditure on various items for a part of the year.
Normally,
the Vote on Account is taken for two months only. But during election year
or when it is anticipated that the main Demands and Appropriation Bill
will take longer time than two months, the Vote on Account may be for a
period extending two months.
Discussion
The
Budget is discussed in two stages in Lok Sabha. First, there is the General
Discussion on the Budget as a whole. This lasts for about 4 to 5 days.
Only the broad outlines of the Budget and the principles and policies underlying
it are discussed at this stage.
Consideration
of the Demands by Standing Committees of Parliament
After
the first stage of General Discussion on both Railway as well as General Budget
is over, the House is adjourned for a fixed period. During this period, the Demands for Grants
of various Ministries/Departments including Railways are considered by concerned
Standing Committees (Rule 331 G). These Committees are required to make
their reports to the House within specified period without asking for more
time. The system of consideration of Demands for Grants by the Standing Committees was introduced from the Budget for the year
1993-94. The Standing Committees consists of 45 Members, 30 from Lok Sabha
and 15 from Rajya Sabha. The report of the Standing Committees are of persuasive
nature (Rule 331 N). The report shall not suggest anything of the nature
of cut motions.
After
the reports of the Standing Committees are presented to the House, the
House proceeds to the discussion and Voting on Demands for Grants, Ministry-wise.
The time for discussion and Voting of Demands for Grants is allocated by
Speaker in consultation with the Leader of the House. On the last day of
the allotted days, the Speaker puts all the outstanding Demands to the
Vote of the House. This device is popularly known as 'guillotine'.
Lok
Sabha has the power to assent to or refuse to give assent to any Demand
or even to reduce the amount of Grant sought by Government. In Rajya Sabha
there is only a General Discussion on the Budget. It does not vote on the
Demands for Grants. Only so much of the amount is subject to the vote of
Lok Sabha as is not a "charged" expenditure on the Consolidated Fund of
India. The "charged" expenditure includes the emoluments of the President
and the salaries and allowances of the Chairman and Deputy Chairman of
Rajya Sabha and the Speaker and Deputy Speaker of Lok Sabha, Judges of
Supreme Court, Comptroller and Auditor General of India and certain other
items specified in the Constitution of India. Discussion in Lok Sabha on
'charged' expenditure is permissible but such expenditure is not voted
by the House.
Members
have full opportunity to criticise the budgetary provisions during the
course of discussion as also to make suggestions for improving the financial
position of the country.
Cut
Motions
Motions
for reduction to various Demands for Grants are made in the form of Cut
Motions seeking to reduce the sums sought by Government on grounds of economy
or difference of opinion on matters of policy or just in order to voice
a grievance.
Finance
Bill
The
Finance Bill which seeks to give effect to the Government's financial proposals,
is introduced in Lok Sabha immediately after the presentation of the General
Budget. Certain provisions in the Bill relating to levy and collection
of fresh duties or variations in the existing duties come into effect immediately
on the expiry of the day on which the Bill is introduced by virtue of a
declaration under the Provisional Collection of Taxes Act. Parliament has
to pass the Finance Bill within 75 days of its introduction.
Appropriation
Bill
After
the General Discussion on the Budget proposals and Voting on Demands for
Grants have been completed, Government introduces the Appropriation Bill.
The Appropriation Bill is intended to give authority to Government to incur
expenditure from and out of the Consolidated Fund of India. The procedure
for passing this Bill is the same as in the case of other money Bills.
Supplementary/Excess
Grants
No
expenditure in excess of the sums authorised by Parliament can be incurred
without the sanction of Parliament. Whenever a need arises to incur extra
expenditure, a Supplementary estimate is laid before Parliament. If any
money has been spent on any service during a financial year in excess of
the amounts granted for that service and for that year, the Minister of
Finance/Railways presents a Demand for Excess Grant. The procedure followed
in Parliament in regard to Supplementary/Excess Grants is more or less
the same as is adopted in the case of estimates included in the General
Budget.
Budget
of a State/Union Territory under President's Rule
Budget
of a State under President's rule is presented to Lok Sabha. The procedure
followed in regard to the Budget of the Union Government is followed in
the case of State Budget also with such variations or modifications, as
the Speaker may make.