Budget

Constitutional Provisions

1. Article 112: Constitution of India

• Article 112 of the Constitution of India provides for the preparation of the Annual Financial Statement (Budget).
• The President shall cause to be laid before both Houses of Parliament the Annual Financial Statement.
• The Annual Financial Statement includes the estimated receipts and expenditures of the Government of India for the year.
• The President may, with the approval of the Council of Ministers, make provisions for the purpose of the Annual Financial Statement.

2. Article 113: Presentation of Budget

• The President presents the Budget to the Lok Sabha.
• The President may also present the Budget to the Rajya Sabha.
• The Budget is presented in the form of a speech by the Finance Minister.

3. Article 114: Approval of Budget

• The Lok Sabha has the exclusive power to approve the Budget.
• The Rajya Sabha may recommend the Budget but cannot reject it.
• The President may return the Budget to the Lok Sabha for reconsideration, but this is rare.

4. Article 115: Appropriation of Funds

• The Parliament must appropriate the funds for the expenditure mentioned in the Budget.
• The appropriation is made by the Lok Sabha through the Appropriation Act.

5. Article 116: Supplementary Grants

• The Parliament may grant supplementary grants for unforeseen expenditures.
• Supplementary grants are subject to the approval of the Lok Sabha.

Contents of Budget

1. Estimates of Receipts

2. Estimates of Expenditure

3. Fiscal Deficit

• Fiscal Deficit is the difference between total expenditure and total receipts (excluding borrowings).
• It is a measure of the government’s overall borrowing requirement.
• Fiscal Deficit is also known as Budget Deficit.

4. Revenue Deficit

• Revenue Deficit is the difference between revenue expenditure and revenue receipts.
• It indicates inadequacy of revenue to meet day-to-day expenses.

5. Capital Expenditure

• Capital Expenditure is non-recurring and long-term.
• It is not included in the revenue account.

6. Fiscal Responsibility and Budget Management Act (FRBM Act), 2003

• FRBM Act aims to control fiscal deficit and promote fiscal discipline.
• It sets targets for fiscal deficit and revenue deficit.
• Fiscal Deficit target: 4.0% of GDP (for 2021-22).
• Revenue Deficit target: 2.5% of GDP (for 2021-22).

7. Important Dates

• Budget Presentation: Usually in February (since 2023, it has been moved to February).
• Budget Session of Parliament: Typically starts in February.
• Budget Day: February 1st is celebrated as Budget Day in India.

8. Key Terms and Definitions

• Annual Financial Statement: Also known as the Budget.
• Fiscal Deficit: Total expenditure minus total receipts (excluding borrowings).
• Revenue Deficit: Revenue expenditure minus revenue receipts.
• Capital Expenditure: Expenditure on long-term assets.
• FRBM Act: Fiscal Responsibility and Budget Management Act, 2003.

9. Differences

10. Examples

• Revenue Receipts: Income tax, corporate tax, excise duty.
• Capital Receipts: Loan from the World Bank, disinvestment of public sector enterprises.
• Revenue Expenditure: Salary of government employees, interest payments.
• Capital Expenditure: Construction of roads, purchase of machinery.

11. Important Facts for Competitive Exams

• The Budget is presented by the Finance Minister.
• The President presents the Budget to the Lok Sabha.
• The Lok Sabha has the exclusive power to approve the Budget.
• Fiscal Deficit is a key indicator of government borrowing.
• FRBM Act was passed in 2003.
• Budget Day is celebrated on February 1st.
• The Budget includes both revenue and capital accounts.
• Supplementary Grants are for unforeseen expenditures.