Budget: What, When, Why and How [UPSC]

Budget means keeping in mind the coming time, estimating how to manage your available resources in such a way that a good life can be lived.

In this article, we will discuss the Union Budget of India in a simple and easy way, and try to understand its various important aspects; So do read the article till the end.

And to understand parliament very well, read all articles written on parliament, use this link to access all articles – 🏢 Parliament

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What is budget?

Simply put, budget is the way to organize your expenses. In other words, budget is such a system in which we learn from our past financial experiences and prepare a financial plan for the coming days. It can range from individual level to national level and can range from days to months to years.

Talking in the context of India, the basis of budget is annual, that is why it is called Annual Financial Account. Talking about the constitution, it is called ‘Annual Financial Statement‘ in Article 112. Overall, the budget is a statement of the estimated receipts and expenditure of the Government of India during a financial year. Here a financial year means from 1st April to 31st March.

Why is a budget made?

In order to make the best use of the available financial resources, we should have a better plan in advance that how much money is to be spent during the coming year and how much of that money will come from which source. Apart from this, how can the revenue be increased in the coming financial year and what will be the economic and financial law, tax system and new schemes for the coming years, etc. 

It is based on experience and estimation so it is not necessary that things go according to plan. As in the budget of 2020-21 Covid 19 would get so much worse, there was no provision for it, that’s why the entire budget of that financial year got spoiled.

How is the budget passed in the Parliament?

The budget passes through the following 6 levels in the Parliament, then the whole process of budgeting ends.

1. Presentation of budget

2. General debate 

3. Investigation by departmental committees 

4. Voting on demand for grant

5. Passing of Appropriation Bill Passing of Appropriation Bill

6. Passing of Finance Bill.

Lok Sabha: Role, Structure, Functions	Hindi	English
Rajya Sabha: Constitution, Powers	Hindi	English
Parliamentary Motion	Hindi	English

1. Presentation of Budget – The Finance Minister does the work of presenting the budget in the House, during which the speech he gives is called budget speech. When the speech is over, the budget is placed before the House. It is then introduced in the Rajya Sabha. The Rajya Sabha has no right to deduct on those demands for grants, as demanded by the government in that budget.

2. General Debate – A few days after the presentation of the budget, the general debate on that budget continues. Both the houses debate it for three to four days. Many questions are also raised during the debate on this, at the end of the debate, the Finance Minister has the right to answer it.

3. Scrutiny by Departmental Committees – After the general debate on the budget is over, the House is adjourned for three or four weeks. During this interval, the Standing Committees of Parliament examine the Demands for Grants etc. in detail and prepare a report. Later this report is placed in both the houses for consideration. The Standing Committee system was introduced in 1993 so that the financial control of Parliament could be established over the ministries.

4. Voting on Demands for Grants – After considering the reports of the Departmental Standing Committees, voting for the Demands for Grants is held in the Lok Sabha. Demands are presented ministry wise and there is a full vote on it, after this the demands become grants.

Remember here that – voting for grants is a special power of the Lok Sabha, which is not with the Rajya Sabha. The voting power of the Rajya Sabha is only on the voting part of the budget and does not include expenditure charged on the Consolidated Fund of India.

There are usually around 140 demands, with each demand being voted on separately in the Lok Sabha. During this, the Parliament debates on it and if the members want, they can also bring proposals for reduction on demands for grants. This type of motion is called cut motion, which are of three types:-

(1). policy cut motion :- This demand expresses the disagreement against the policy. In this proposal the amount demanded is asked to be taxed by Re 1. It simply means that we do not approve your demand policy. If the member wishes, an alternative policy can also be introduced.

(2). Economic cut motion: – It is also called economy deduction proposal. Where the above proposal was related to policy, this proposal is related to reducing the amount of demand. In this it is mentioned that the proposed expenditure can have an impact on the economy, so the amount of demand should be reduced to a certain limit. How much this fixed limit will be, it is decided by those who bring the proposal.

(3). Token reduction motion: – This proposal is related to any obligation of the Government of India. It is said that the demand should be reduced by Rs 100. The mover of the motion expresses his specific grievance towards the government with the help of it.

When can a cut motion be approved?

For acceptance of a cut motion, it is necessary that it should have the following characteristics –

(1) It should be related to only one type of demand, that too should be related to only one case

(2) It should be clearly mentioned and It should not contain unnecessary things, such as it should not mention any matter outside the scope of the Union Government

(3) It should not contain any suggestion to amend or change the existing rule

(4) It should contain Consolidated Fund of India But there should not be any matter relating to the expenditure charged

(5) It should not refer to any court case

(6) No question of privilege can be raised by this

(7) The matter in respect of which a decision has already been taken in this session should not be the subject of further discussion.

The importance of a cut motion is that it provides an opportunity to discuss the demands for grants and examine the activities of a type of government. But since the government is in majority, then often such a proposal is not passed, so the government does not spoil anything from it.

A total of 26 days have been fixed for voting on the Demands for Grants. On the last day, the Speaker puts up for voting and disposes of all the remaining demands, whether they have been fully discussed by the members or not. It is known as Guillotine .

5. Passing of the Appropriation Bill : – It has been provided in the Constitution that there shall be no withdrawal of money from the Consolidated Fund of India except by lawful appropriation, accordingly an Appropriation Bill has been introduced for appropriation from the Fund of India. So that the money may be used to meet the expenditure requirements of grants made by vote in the Lok Sabha and charged on the Consolidated Fund of India.

No amendment, which has the effect of altering the amount of an Appropriation Bill or changing the target of grants or changing the amount of expenditure charged on the Consolidated Fund of India, can be introduced and passed in either House of Parliament.

Even if there is a need to withdraw any kind of money from the Consolidated Fund, then only after the consent of the President, such an act can be made so that the money can be withdrawn.

This means you can also understand in this way that till the time the Appropriation Bill is not implemented, the government cannot withdraw any money from the Consolidated Fund of India. It takes a lot of time and this process drags on till April. But what should the government do if the government needs money by then to do some work?

To deal with this situation, the Lok Sabha has been given the power by the Constitution to withdraw money through special efforts for such essential works, it is known as Vote on Account . It is passed after a general debate on the budget. In this, the amount of money that is estimated to be spent in the financial year, normally 1/6th of that amount, is allowed to be spent by the government for 2 months.

6. Passing of Finance Bill :- All the financial proposals of the government for the coming year are included in one bill. This bill is usually introduced in the Lok Sabha immediately after the presentation of the budget every year. On this all the conditions of Money Bill apply and amendments can be proposed in Finance Bill unlike Appropriation Bill.

The Finance Bill should become effective within 75 days. The Finance Act gives legal recognition to the income side of the budget and gives an effective shape to the budget.

Overall, this is the process of the Union Budget. Let us now look at some other aspects of the budget……

| Read from here – What is Finance Bill and Money Bill ?

Other constitutional provisions relating to the implementation of the budget

The provision of constitutional provisions related to the implementation of the budget is found from Article 112 to Article 116 – the main points of which are as follows;

1. The President will get the budget presented in both the Houses of the Parliament in every financial year
2. No grant will be demanded without the recommendation of the President
3. No money shall be withdrawn from the Consolidated Fund of India except under appropriation made by law
4. No tax assessment bill will be introduced in the Parliament without the recommendation of the President.
5. The following provision has been made in the Constitution regarding the budget of both the Houses of the Parliament:- (1) Money Bill or Finance Bill cannot be introduced in the Rajya Sabha, it can be introduced only in the Lok Sabha. (2) The Rajya Sabha does not have any power to vote on the demand for grants, this is a special privilege enjoyed by the Lok Sabha. (3) The Rajya Sabha should return the Money Bill to the Lok Sabha within 14 days. The Lok Sabha can accept or reject the recommendations made by the Rajya Sabha in this regard.
6. The expenditure estimates in the budget should show separately the expenditure charged on the Consolidated Fund of India and the expenditure incurred from the Consolidated Fund of India.

Other budget related grants

Apart from the budget which contains the general estimate of income and expenditure for a financial year, many other grants are also given by the Parliament in exceptional or special circumstances. Which is discussed in Article 115 and 116-

Supplementary grant :- It is approved by the Parliament when the amount sanctioned for a particular service is found to be insufficient for the purposes of that year.

Additional grant : – It is granted when expenditure in respect of any new service has not been envisaged in the budget for that year and the need for additional expenditure arises for the same during the current financial year.

Excess grant : This type of demand is placed when the amount spent for that service in the budget of that year exceeds the amount. After taking approval from the Public Accounts Committee after the financial year, it is voted on in the Lok Sabha.

Vote of credit : – In such a situation, a demand for grants is placed in such a situation when there is an emergency need for excessive and immediate assistance of money for any service or item. It can be said that it is a blank check given by the Lok Sabha to the executive.

Exception grant : – It is sanctioned for a specific purpose and is not related to the current financial year or service.

How many types of expenditure are included in the budget?

According to Article 112, two types of expenditure are included in the budget – (1) expenditure charged on the Consolidated Fund of India and (2) expenditure incurred from the Consolidated Fund of India.

(1) Expenditure charged on the Consolidated Fund of India means such expenditure which has to be done compulsorily, that is why charged expenditure can be discussed in the House but not voted (Article 113) . Article 112(3) states that what will be considered charged on the Consolidated Fund, which can be seen below-

(I) the salaries and allowances of the President, the Vice-President, the Speaker of the Lok Sabha, the Deputy Speaker of the Rajya Sabha, and other expenses of his office,

(II) the salaries, allowances and pensions of the Chairman of the UPSC, the CAG, the Judges of the Supreme Court (including the administrative functions of their offices). Expenses are also included)

(III) Pension (not salary) of High Court Judges 

(IV) Debt burdens on which the Government of India is liable, such as interest, deposits, loans and debt servicing other expenditure,

(v) any other expenditure declared by Parliament to be deemed to be charged

(2) Expenditure incurred from the Consolidated Fund of India refers to such expenditure which keeps on changing and it is not necessary that every year the expenditure is as much as it was before, such as expenditure related to any scheme etc. That’s why there is voting on this in the house. It is up to the Lok Sabha to allow that demand or not. Under Article 114, it is presented as an Appropriation Bill, which we have discussed above in the budget process.

Note – It is necessary to know here that three types of funds have been provided in the Constitution (1) Consolidated Fund, (2) Public Account and, (3) Contingency Fund . Here Consolidated Funds means that fund which is commonly called Treasury. [ Click here to understand the three funds in detail]

some important facts

Now let’s know some facts about annual financial statement or budget…;

When is the budget announced?

Till the year 1999, the Union Budget was announced at 5 pm on the last working day of the month of February. This practice was going on since the time of the British. Another reason was that until the 1990s, all budgets seem to increase, a presentation in the evening gave producers and tax collecting agencies the night to track changes in prices. This practice was changed under the leadership of Prime Minister Atal Bihari Vajpayee. 

From 2001 it started being offered at 11 am. Again in 2016, the NDA government of Narendra Modi changed this practice and now the practice of presenting the budget on 1 February has started. Along with this, the Railway Budget, which was presented separately for the last 92 years, was also merged with the main budget. Now only one budget is presented and that too on 1st February.

What is the Halwa Ceremony?

The printing of budget documents begins roughly a week before they are presented in Parliament, the joy of which is the ‘halwa Ceremony’. This ceremony is based on the belief that something sweet should happen before doing important work. A large quantity of halwa is prepared in this ceremony and served to the officers and support staff involved. These officers and employees have to remain in isolation till the budget is presented so that the confidentiality of the budget can be maintained. Halwa is served by the Finance Minister.

Although the budget of 2021 was completely paperless, that is, the tradition of earlier printing has been abolished and a new practice has been started.

Important Links

English Articles	Hindi Articles
Parliament: Powers and Functions Parliamentary Motion : Types, Features parliamentary resolution process of making laws in Parliament Money Bill and Finance Bill Voting process in Parliament joint sitting of both the houses Parliamentary Committees Consolidated Fund,	भारतीय संसद: शक्तियाँ एवं कार्य संसदीय प्रस्ताव : प्रकार, विशेषताएँ संसदीय संकल्प संसद में कानून बनाने की पूरी प्रक्रिया धन विधेयक और वित्त विधेयक भारतीय संसद में मतदान की प्रक्रिया दोनों सदनों की संयुक्त बैठक संसदीय समितियां संचित निधि, लोक लेखा एवं आकस्मिक निधि

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Original Constitution
Our Parliament – Subhash Kashyap
Union budget of India
https://www.indiabudget.gov.in/indexhindi.php
Consolidated Fund, Public Account and Contingency Fund; brief discussion