Budget

Budget (Annual Financial Statement)

"Put not your trust in money but put your money in trust"

Terms to know before proceeding for Budget 

Financial Year - It starts from April 1 to March 31 of the next year.

Budget - Presents 3 Financial Statements of -

1. Ongoing Financial Year 
2. Coming Financial Year
3. Previous Financial Year

For Previous financial year - Full data is available → Actual Receipt & Actual Expenditure

For Ongoing financial year - Full data is not available, only estimates can be made → Estimated Receipt & Estimated Expenditure

For Coming financial year - Proposal is made → Proposed Receipt & Proposed Expenditure

Question:  Is budget a money bill?

• Yes

Budget is introduced in the Lok Sabha and are presented to both the houses. It is caused to be laid by the President

Question:  Is Finance bill and Appropriation bill a money bill?

• Yes

Budget - President causes to lay before both the houses of the parliament, annual financial statement or the Budget which is a statement of -

• The actual receipt and expenditure of the previous financial year.
• Review of financial position of the government of India about ongoing financial year, i.e., estimated receipt and expenditure.
• Proposal to meet the expenditure of the government in the form of taxation and proposal of many expenditures in the form of proposed expenditure and receipt of government of India for the following financial year.

The word 'Budget' is not mentioned in the Constitution of India. Article 112 mentioned 'Annual Financial Statement'.

Budget is a money bill introduced in the Lok Sabha by practice by the Finance Minister generally on the last working day of February.

Budget proposal consists of two parts - 

1. Expenditure part
2. Revenue part

The revenue part is known as Finance Bill and the expenditure part is known as Appropriation Bill. Both are money bill.

Finance bill proposed taxes for the following year and the appropriation bill includes demand for grant of various ministries and charged expenditure.

Approval of the Budget 

It usually takes 2 months, i.e., one-sixth of a year. Therefore money allotted for Vote on Account = One-Sixth of money demanded.

Vote on Account - As the whole process of budget beginning with its presentation and ending with passing of Appropriation and Finance bill and this exercise which can go beyond the current financial year also.

Thus, a provision has been made in the Constitution empowering the Lok Sabha to make a grant in advance through an instrument called Vote on Account which allows the government to carry on with expenditures until the complete budget is clear which normally goes upto 2 months in the new financial year.

Thus, by passing Vote on Account, Lok Sabha generally approves 1/6th of the Account demanded in demand for grant for the following financial year.

Vote on Account can be taken for longer period also, if government feels that it can take longer than 2 months to clear the budget.

Vote on Account as a convention is passed by the Lok Sabha without discussion. Every year. Vote on Account is passed by the Lok Sabha after general discussion on budget is over.

Note - Vote on Account is not introduced in Rajya Sabha.

Difference between Interim Budget and Vote on Account 

Interim Budget 

• It is a budget for a short period (For example - Suppose if the tenure of the current Lok Sabha will be over in June, then there is no need of a full budget. In that case Interim Budget is introduced in the Lok Sabha for that period)
• It includes expenditure as well as source (taxation)

Vote on Account

• It is also for a short period but it includes only expenditure (taxation is applicable as per the proposal of the previous year till the new budget is passed).

Process of Budgeting 

1. Budget is introduced in the Lok Sabha by the Finance Minister.
2. General discussion of budget in Lok Sabha and Rajya Sabha.
3. Vote on Account is passed by Lok Sabha without discussion.
4. Charged Expenditure will be passed by Lok Sabha with some discussion.
5. Lok Sabha refers the demand for grant of various ministries to be analysed by the related departmental standing parliamentary committees.
6. Departmental related standing parliamentary committee submit the report about the various demand for grant of various ministries before the Lok Sabha.
7. Detailed discussion (Second round discussion) - Various cut motion will be introduced
8. Demand for grant for individual ministries shall be discussed and voted individually (practically, it is not possible to discuss demand for grant for all ministries since they are too many. Therefore, demand for grant of important ministries are discussed).
9. About 20% demand for grant is voted and discussed individually (since they are too many)
10. Demand for grant of remaining ministries is clubbed together and passed without much discussion on individual voting (This is known as Application of Guillotine).
11. Appropriation bill (Demand for Grant & Charged Expenditure) is passed in the Lok Sabha.
12. Sent to Rajya Sabha (Rajya Sabha has to pass it in 14 days, since it is a money bill).
13. Finance bill is now passed in the Lok Sabha.
14. Sent to Rajya Sabha (Rajya Sabha has to pass it in 14 days)
15. After the approval of Rajya Sabha, Budget now stands passed.

Note - In budget, first Appropriation bill is passed then Finance bill is passed.

Various Cut Motions 

1. Policy cut motion
• If passed, the money demanded is rejected and will get only ₹1 (since, the policy proposed is rejected).
• Passing of it implies the defeat of the government and the government has to prove its majority (because of collective responsibility).
• It is introduced by the Opposition.
2. Economy cut motion
• If passed, the money demanded in the demand for grant is reduced (as suggested by the Departmental standing committee).
• It can be introduced by any Member of the parliament (ruling party or opposition party).
3. Token cut motion
• This motion is introduced to show resentment.
• If passed, the money demanded is reduced by ₹100.

Cut Motion - While discussing the demand for grant of the ministries during the Second round of discussion, Lok Sabha members can introduced various cut motions. These are the instruments to have financial control over the executive in the hand of the legislature. They seek to reduce the amount of the grant demanded.

There are three different types of cut motions to be introduced in the Lok Sabha -

1.  Policy Cut Motion -

• They are disapproval of the policy.
• The motion is in the form that the amount of demand be reduced to ₹1.
• It means that the members who support the motion disapproved the very policy of which the demand was made.
• If the policy cut motion is adopted/passed by the Lok Sabha, it amounts to the defeat of the government and the confidence of the Council of Ministers stands censored.
• This motion is moved by the opposition members and not if passed, the government shall have to prove its majority again by the Confidence motion.

2.  Economy Cut Motion 

• The purpose of this motion is to bring economy in expenditure and it aims at reducing the amount of demand under a specific demand for grant.
• If this motion is passed in the Lok Sabha, government shall not fall just that the amount under the demand for grant be reduced by a specific amount.

3.  Token Cut Motion 

• The purpose of the Token Cut Motion is to express a specific grievances with respect to a particular area of responsibility of the government.
• The mover of the motion and the supporter do not oppose the demand for grant.
• If it is passed, the amount of demand for grant shall be reduced by ₹100 and it does not imply the fall of the government.

Application of Guillotine - Due to the lack of time, Lok Sabha takes up the demand for grant of about 20% of the ministries individually, scrutinises it, then individually voted and adopted.

The demand for grant of the remaining ministries are clubbed together and adopted by the Lok Sabha without any discussion on them. This phenomenon is known as Application of Guillotine; which indicates poor financial control of the Lok Sabha over the executive.

Vote on Credit - Lok Sabha can grant Vote on Credit to the government to meet an expenditure whose amount of detail cannot be precisely stated on account of magnitude and indefinite character of an issue (like war).

Thus vote on account is like a blank cheque given by the parliament to the executive to incurred any amount of expenditure.

It is not been used till now.

Constitutional status of Vote on Account is under Article 116.

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Note - This is my Vision IAS Notes (Vision IAS Class Notes) and Ashutosh Pandey Sir's Public Administration Class notes. I've also added some of the information on my own. 

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