President causes to be laid before both houses the Annual Financial Statement.

This contains the estimated revenues or expenditures of the government for a financial year.

There are two budgets General or Railways.

Expenditure on revenue account should be separated from other expenditure. Also expenditure charged on the consolidated fund should be separated from the expense made from the fund.

Parliament can reduce or abolish a tax but can’t increase it.

Demand for grants can be made only on recommendation of the president.

Expenditures are of two types charged upon the Consolidated Fund of India or made from the C.F.I. Charged expense is non votable but can only be discussed by parliament.

Expense charged upon the Consolidated Fund of India:

It includes salaries, pensions or expenses of President, UPSC, CAG, SC judge, Pensions of HC judges, Presiding or deputy presiding officer of LS and RS. Debt of the Govt of India, Amounts to satisfy any judgments, expense declared by parliament to be charged on the fund.

Stages of Enactment of Budget:

A) Presentation of budget: Railway budget is presented in third week of Feb. and general budget in last working day of Feb. Finance minister gives a budget speech and at the end of it; the budget is laid before both houses.

B) General discussions: Only the general principles of budget or the budget as a whole can be discussed. No motions of reduction of grants or votes can be made. Finance minister has the right of reply at end of discussion. This happens in both houses.

C) Scrutiny by dept committees: An in-depth scrutiny of demand for grants by department is made by each departmental standing committee of parliament. Three to four weeks are given for this and the house remains in recess. The standing committees make a report to the house at the end.

D) Voting on the demand for grants: The MP's of Lok Sabha study and vote on each demand for grant. The Lok Sabha only can vote on demand for grants and no voting is allowed on the expenditure charged on the consolidated fund of India. MP's can move motion for reduction of a grant called CUT Motions;

E) Appropriation bill and Finance bills: The appropriation bill contains voted demand for grants and also expense charged on the consolidated fund of India. No amendments can be made on these in any house. After the bill receives assent of the president it becomes appropriation act. This allows expense from the consolidated fund.
Finance bill is also presented containing provisions for taxation. It is like a money bill however amendment can be moved seeking to reduce or remove a tax. This allows taxes to be levied.

Cut Motion

1.      Policy cut: Reduces allocation of grant to Re. 1 to indicate disapproval to a policy.

2.      Token cut: Reduce amount by Rs.100 to ventilate specific grievance

3.      Economy cut: Reduction by specific amount to suggest economic use of funds.

26 days are allotted for discussions and voting of the demand for grants at the last day all remaining demands are put to vote and disposed. This is referred to as “Guillotine”.

Other Grants:

1.      Supplementary grant: Amount authorised by parliament is found insufficient

2.      Additional grant: extra amount is needed that wasn’t dealt with earlier

3.      Excess grant: Amount is spent in excess of the authorised amount; this has to be approved by the Public accounts committee.

4.      Vote of credit: for meeting an unexpected demand

5.      Exceptional grant: sanctioned for a special purpose

6.      Token grant: funds to meet a new expenditure can be met by transferred from one head to another.

Funds of India:

1.   Consolidated fund of India: All revenues credited to the government; all loans received; all payment received as repayment of loans given; are credited to this fund. No money can be issued or withdrawn except by law.

2.   Contingency fund of India: To meet unforeseen circumstances parliament created this fund. It is at the disposal of the president. Money can be issued pending authorization of parliament. However the finance secretary handles it; it is operated by executive action.

3.   Public account of India: Payment usually of the nature of banking transactions are made from this account; It is operated by executive action so parliaments authorization not needed; Provident fund deposits, judicial deposits, savings bank deposits,  departmental deposits or remittances are credited here.


Important Committees of Parliament:

They are two types standing [permanent, constituted every year and continuous work] or adhoc [temporary and cease to exist when work assigned is completed]. Below committees are standing committees. Members are elected by proportional representation. All committees are advisory in nature with non binding recommendations.

1.   Public accounts committee:

  1. 22 members [15 LS + 7 RS]; No minister; chairman chosen by speaker
  2. Term-1 year;
  3. Examines CAG audit reports on appropriation accounts and finance accounts , audits of autonomous bodies, demand for excess grants etc
  4. Examines if wastage, inefficiency or corruption has occurred.
  5. CAG is the friend, philosopher and guide.

2.   Estimates committee

·         30 members of LS; no minister; chairman chosen by the speaker

·         term of 1 year

·         Examine estimates included in the budget and suggest economies.

 3.   Public undertakings committee

·         22 members [15 LS +7 RS]; no minister; chairman chosen by the speaker

·         term – 1year

·         Examine CAG reports on public undertakings; examines reports and affairs of public undertakings.

4.   Departmental standing committees: 31 members [21 LS + 10 RS]; no minister; chairman chosen by the speaker and term of 1 year; examines demand for grants of various ministries;

5.   Committee on welfare of SC and ST’s: 30 members [20 LS + 10 RS]; no minister; chairman chosen by the speaker and term of 1 year; examines report of the national commissions of SC and ST; Examines safeguards for welfare of SC/ST’s;

6.   Committee on empowerment of women: 30 members [20 LS + 10 RS]; no minister; chairman chosen by the speaker and term of 1 year; examines report of the national commissions of women; Examines safeguards for welfare of women;

Adhoc committees are advisory or inquiry. Inquiry committees are constituted by house or by speaker or chairman to inquire or report on specific subjects. Advisory committees are select or joint committees to report on particular bills.

A Minister is not eligible for election or nomination to the Financial Committees, Departmental Standing Committees, and Committees on Empowerment of Women, Government Assurances, Petitions, Subordinate Legislation and Welfare of Scheduled Castes and Scheduled Tribes.

Question Hour and the Types of Questions

  1. Starred - Oral answers given and supplementary questions allowed.
  2. Unstarred - Written answers but no supplementary questions allowed.
  3. Short notice questions - Same as starred. Do not require a long notice to be given
  4. Questions to private members.

Q.With reference to the Union Government consider the following statements.
1. The Department of Revenue is responsible for the preparation of Union Budget that is presented to the parliament
2. No amount can be withdrawn from the Consolidated Fund of India without the authorization of Parliament of India.
3. All the disbursements made from Public Account also need the Authorization from the Parliament of India
Which of the following statements given above is/are correct? (UPSC CSAT 2015)

  • 1 and 2 only

  • 2 and 3 only

  • 2 only

  • 1, 2 and 3

Ans . C

  1. The Budget division is a part of the Department of Economic Affairs. The Finance Secretary coordinates the overall Budget-making process

  2. Prior authorization is required for withdrawing from Consolidated Fund of India. For Contingency fund of India, withdrawal can be authorized by the Parliament afterwards too. For Public Account, no such authorization is needed.


Score more than 80% marks and move ahead else stay back and read again!