Constitutional Provisions and Procedures Governing the Budget in India

• Definition of the Budget: The Constitution refers to it as the ‘Annual Financial Statement’ (Article 112). 
  • The term ‘budget’ has nowhere been used in the Constitution. 
  • It is a statement of the estimated receipts and expenditure of the GoI in a financial year (1 April to 31st March). 
• Overall, the budget contains the following: 
  • Estimates of revenue and capital receipts; 
  • Ways and means to raise the revenue; 
  • Estimates of expenditure; 
  • Details of the actual receipts and expenditure of the closing financial year and the reasons for any deficit or surplus in that year;
  • Economic and financial policy of the coming year (Taxation proposals, revenue prospects, expenditure programs, and the introduction of new schemes/projects.)
• Railway Budget Merged: Till 2017, the Government of India had two budgets, namely, the Railway Budget and the General Budget. 
  • The Railway Budget was separated from the General Budget in 1924 on the recommendations of the Acworth Committee Report (1921).
• The Constitution of India contains the following provisions with regard to the enactment of budget:
  • Article 112: The President lays before both Houses of Parliament, a statement of estimated receipts and expenditure of the Government of India for that year. 
  • Article 113: No demand for a grant shall be made except on the recommendation of the President.
  • Article 114: No money shall be withdrawn from Consolidated Fund of India (CFI) except under appropriation made by law.
  • Article 117: No money bill imposing tax shall be introduced in the Parliament except on the recommendation of the President, and such a bill shall not be introduced in the Rajya Sabha.
  • Article 265: No tax shall be levied or collected except by authority of law.
  • Parliament can reduce or abolish a tax but cannot increase it.
• Constitutional Clarification on Parliament’s Roles in Budget Enactment:
  • Introduction of Budget: A money bill or finance bill dealing with taxation must be introduced only in the Lok Sabha and it cannot be introduced in the Rajya Sabha.
    • Rajya Sabha has no power to vote on the demand for grants; it is the exclusive privilege of the Lok Sabha.(Art. 113)
  • Procedure for Consideration by the Rajya Sabha: The Rajya Sabha should return the Money bill (or Finance bill) to the Lok Sabha within fourteen days. 
    • The Lok Sabha can either accept or reject the recommendations made by Rajya Sabha.
  • Separation of Accounting for Expenditure: Separate accounting of  the expenditure charged on the Consolidated Fund of India and the expenditure made from the Consolidated Fund of India.(Art. 112). 
• Expenditure Charged on the Consolidated Fund of India(CFI): It shall not be voted in Parliament but it can be discussed by the Parliament.
• Lok Sabha Authority: The Lok Sabha can approve or refuse any demand or reduce the amount specified in the demand but cannot increase it (Art. 113).
• No Amendments to Appropriation Bills: No such amendment can be proposed to the appropriation bill in either House of the Parliament that will have the effect of varying  the amount or altering the destination of any grant voted, or of varying the amount of any expenditure changed on the Consolidated Fund of India ( Art. 114).
• Vote on Account: The Lok Sabha can make any grant in advance ( Vote on Account ) in respect to the estimated expenditure for a part of the financial year, pending the completion of the voting of the  demands for grants and the enactment of the appropriation bill (Art. 116).

Stages in the Enactment of Budget

• Presentation of Budget: Conventionally, the budget is presented to the Lok Sabha by the finance minister on the last working day of February. Since 2017, the presentation of the budget has been advanced to 1st of February.
  • Budget in Parts: The budget can also be presented to the House in two or more parts, and when such presentation occurs, each part shall be dealt with as if it were the entire budget. 
  • Furthermore, there shall be no discussion of the budget on the day on which it is presented to the House.
• General Discussion: The general discussion on budget begins a few days after its presentation. It takes place in both the Houses of Parliament and lasts usually for three to four days.
  • Budget Discussion Stage: During this stage, the Lok Sabha can discuss the budget as a whole or on any question of principle involved therein, but no cut motion can be moved, nor can the budget be submitted to the vote of the House. 
    • Concluding Remarks: The finance minister has a general right of reply at the end of the discussion.
• Scrutiny by Departmental Committees: 
  • Adjournment Period: After the general discussion on the budget is over, the Houses are adjourned for about three to four weeks. 
  • Role of Parliamentary Standing Committees: During this gap period, the 24 departmental standing committees of Parliament examine and discuss in detail the demands for grants of the concerned ministers and prepare reports on them. 
  • These reports are submitted to both the Houses of Parliament for consideration.

• Voting on Demands for Grants: In the light of the reports of the departmental standing committees, the Lok Sabha takes up voting of demands for grants. The demands are presented ministry wise. A demand becomes a grant after it has been duly voted.
  • Exclusive Authority of Lok Sabha: The voting of demands for grants is the exclusive privilege of the Lok Sabha.
  • Limited to Votable Expenditures: The voting is confined to the votable part of the budget. The expenditure charged on the Consolidated Fund of India is not submitted to the vote.
  • Each demand is voted separately by the Lok Sabha. During this stage, the members of Parliament can discuss the details of the budget. 
  • Cut Motions: They can also move motions to reduce any demand for grants. Such motions are called as ‘cut motion‘, which are of three kinds (Policy Cut, Economy Cut and Token Cut)

Understanding Cut Motions in the Indian Parliament: Significance, Limitations, and Procedures

• Cut Motions are widely used by the Opposition to express views on various government spending proposals in the Finance Bill in the Lok Sabha. Lok Sabha speaker has a crucial role in admitting the Cut Motions.
• Policy Cut Motion: It represents the disapproval of the policy underlying the demand. The amount of the demand to be reduced to Rs 1. The members can also advocate an alternative policy.
• Economy Cut Motion: It states that the amount of the demand be reduced by a specified amount (which may be either a lump sum reduction in the demand or omission or reduction of an item in the demand).
• Token Cut Motion: It ventilates a specific grievance that is within the sphere of responsibility of the Government of India. It states that the amount of the demand will be reduced by 100 INR.
• A cut motion, to be admissible, must satisfy the following conditions:
  • Relate to one demand/specific matter only with clear expression and without any arguments or defamatory statements;
  • No suggestions for the amendment or repeal of existing laws.
  • Not refer to a matter that is not primarily the concern of the Union government.
  • Not related to the expenditure charged on the Consolidated Fund of India.
  • No matter that is under adjudication by a court.
  • Not raise a question of privilege.
  • Not revive discussion on a matter on which a decision has been taken in the same session.
  • Not relate to a trivial matter.
  • Not reflect on the character or conduct of any person whose conduct can only be challenged on a substantive motion.
  • Not anticipate a matter which has been previously appointed for consideration in the same session.
  • Not seek to raise a discussion on a matter pending before any statutory tribunal or statutory authority performing judicial or quasi judicial functions or any commission or court of enquiry.
• The Significance of Cut Motion:
  • It facilitates the initiation of concentrated discussion on a specific demand for grants. 
  • It helps in upholding the principle of responsible government by probing the activities of the government. 
  • If the cut motion is passed by the Lok Sabha, it amounts to the expression of want of parliamentary confidence in the government and may lead to its resignation.
• Limitations of Cut Motions
  • Discussion Without Passage: Cut motions do not have much utility in practice. They are only moved and discussed in the House but not passed as the government enjoys majority support. 
  • Use of Guillotine: On the last day all the remaining demands are put to vote and disposed of them whether they have been discussed by the members or not due to lack of time ( 26 days are allotted for the voting of demands)

Understanding the Appropriation Bill and Finance Bill in India: Purpose, Procedures, and Implications

• Passing of Appropriation Bill (Article 114): According to the Constitution, No money shall be withdrawn from the Consolidated Fund of India except under appropriation made by law. 
  • Purpose of the Appropriation Bill: Accordingly, after the demands for grants are voted on and passed by the Lok Sabha, an appropriation bill is introduced to provide for the appropriation out of the Consolidated Fund of India, all money required to meet:
    • Grants voted by the Lok Sabha.
    • Expenditure charged on the Consolidated Fund of India.
  • Amendments Not Permissible: No amendment to the appropriation bill in Parliament can change the allocated grant amounts or alter expenditure charged from the Consolidated Fund of India.
  • Appropriation Act: The Appropriation Bill becomes the Appropriation Act after it is assented to by the President. 
  • This act authorizes (or legalizes) the payments from the Consolidated Fund of India.
  • Vote on Account: To overcome the functional difficulty related to passing of Appropriation Bill, the Constitution has authorized the Lok Sabha to make any grant in advance in respect to the estimated expenditure for a part of the financial year, pending the completion of the voting of the demands for grants and the enactment of the appropriation bill. This provision is known as the ‘Vote on Account.’ 
    • It is passed (or granted) after the general discussion on the budget is over and is generally granted for two months for an amount equivalent to one-sixth of the total estimation.
• Passing of Finance Bill  (Article 117): 
  • Purpose of the Finance Bill: The ‘Finance Bill’ is introduced annually to implement the financial proposals of the Government of India for the next fiscal year, including supplementary proposals for any period. 
  • Finance Bill as a Money Bill: It is treated as a Money Bill and can be subject to amendments related to taxes. 
  • Scope of Discussion: During the discussion stage, members can address issues concerning general administration, local grievances, or monetary policies. 
  • Timeframe: The Provisional Collection of Taxes Act mandates the Finance Bill’s enactment within 75 days. 
  • Amendments Permissible: Unlike an Appropriation bill, amendments can be passed such as seeking to reject or reduce a tax can be moved in the case of a finance bill.
  • The Finance Act finalizes the budget process by legalizing the income side of the budget.

Interim Budget and the Vote on Account

• Article 266: Parliamentary approval is required to draw money from the Consolidated Fund of India.
• Article 114 (3): No amount can be withdrawn from the Consolidated Fund without the enactment of a law (appropriation bill).
• Comparison Between Interim Budget and the Vote on Account

Different Types of Grants

• Apart from the annual budget, which outlines the regular estimates of income and expenditure for a financial year, Parliament also approves the following grants for exceptional or specific situations.

Constitutional Provisions for Government Accounts

• The Constitution of India provides for how the accounts of the Government have to be kept. Article of the Constitution provides for the creation of a Consolidated Fund of India, Contingency Fund, and Public Account of India.

Comparison Between Different Types of Funds

• The Constitution of India provides for how the accounts of the Government have to be kept. 
• Following article of the Constitution provides for the creation of a Consolidated Fund of India, Contingency Fund, and Public Account of India.