Transcript 1. Introduction to Budget

INTRODUCTION TO
BUDGET
LEARNING OBJECTIVES
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Constitutional mandate
Process of Budgetary Control
Budget Documents
FRBM Act
Constitutional Mandate
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(i) Article 112
(ii) Article 113
(iii) Article 114
(iv) Article 115
(v) Article 116
Article 112
Annual Financial Statement
-President
-Every financial year (1st April to 31st March)
-Both Houses of Parliament
-Statement of estimated receipts and Expenditure of GOI
What estimate of expenditure consists of:--
-Charged and Voted Expenditure
- Revenue and Capital Expenditure
Article 112 (contd.)
What are Charged Expenditure?
-Emoluments and allowances of President and his office
-Salaries and allowances of Chairman/Deputy Chairman,
Speaker/Deputy Speaker
-Interest payment
-Salaries, allowances and pensions of Judges of Supreme
Court
-Pensions payable to Judges of High Court
-Administrative expenses of the office of CAG, including
salaries,Allowances and pension payable to CAG
Revenue Expenditure
-Expenditure for normal running of Government
dept. and various services
-Interest Charges on Debt, Subsidies
-Does not result in creation of asset
-All grants given to State Governments even though
some of which may be for asset creation
Capital Expenditure
-Expenditure on acquisition of assets like land,
buildings, machinery, equipment, investment in
shares
-Loans and advances granted by Central
Government to State and Union Territory
-Expenditure on concrete asset of a material and
permanent character
Article 113
Procedure in Parliament with respect to
Estimates
Charged Expenditures:--Shall not be submitted to vote of Parliament
-Nothing prevents discussion of estimates in either House
Voted Expenditures:--Submitted in the form of Demands for Grants to Lok
Sabha
-LS have power to assent, refuse, reduce the amount
- No demand except on recommendation of President
Article 114
Appropriation Bills
-Bill for appropriation out of CFI moneys required to meet
voted grants and expenditure charged on CFI
-No amendment either varying the amount or altering
destination once the bill is passed.
-No money shall be drawn from CFI except appropriation
made by law passed in accordance with provisions of this
article
Article 115
Supplementary, additional, excess grants
-If the amount for a particular service is
insufficient
-Additional expenditure on a new service not
contemplated
-Money spent in excess of amount granted for that
service
Article 116
Votes on account, votes of credit and exceptional grant
Votes on account:--
-An advance in respect of estimated expenditure
-For a part of any financial year
-Pending the completion of procedure prescribed in Article
113 and 114.
Votes of credit:--
-Meet unexpected demand on account of magnitude or
indefinite character which cannot be given in AFS.
Exceptional grant:--
-Exceptional grant which forms no part of the current
service of any financial year.
Process of Budgetary Control
(i) Preparation
(ii) Enactment
(iii) Execution
(iv) Parliamentary Control
Exercise No. 1
Preparation
Submission of estimates by estimating auth.
Scrutiny of estimates of HOD
Consolidation of grants for all Min. by FD
Budget Documents
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(i) Budget speech – Finance Minister
(ii) Annual Financial Statement
(iii) Receipt Budget
(iv) Expenditure Budget
(v) Demands for Grants
(vi) Detailed Demands for Grant
(vii) Finance Bill
(viii) Appropriation Bill
(ix) Budget at a Glance
Annual Financial Statement
AFS
Statements
CFI
Rev
Rec.
CoFI
Cap
Dis.
Voted
Charged
PA
Rec.
Dis.
AFS (Contd.)
What the Statements consist of? Amount (in crore
Rupees)
Major
Head
Parliament
Elections
Audit
Actuals BE
2009- 2010-11
10
RE
2010-11
BE
2011-12
Receipt Budget
• Details of Revenue and Capital receipts with
explanations
• Trend of receipts over years
• Details of external assistance
• Eg. :-- Corporation Tax:-–
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(a) Ordinary collection
(b) Advance tax collection
(c) Surcharge
(d) Miscellaneous receipts
Expenditure Budget
Expenditure Budget Volume-I:--Revenue and Capital disbursement of Ministries
-Gives break up of Plan and Non-Plan exp.
-Analysis of various types of expenditure
Expenditure Budget Volume-II:--Provisions for a scheme or programme
- Break up of Plan and Non Plan exp.
Demands for Grants
• In pursuance of article 113
• One demand for grant in respect of each
Ministry or Department. Large Min. more
than one demand
• Provisions on account of Revenue and
Capital, Charged and Voted, Plan and Non
Plan
Detailed Demands for Grants
• Tabled after presentation of budget before
discussion of demands for grants
commences
• Details of provisions
• Break up of estimates of programmes under
number of objects of expenditure like
salaries, wages, etc.
Finance Bill
Proposal for levy of :-• New taxes
• Modification of existing tax structure
• Continuance of the existing tax structure
Appropriation Bill
• In pursuance of Article 114
• Withdrawal from Consolidated Fund
amounts voted and amounts required to
meet charged expenditure
Budget at a Glance
In brief:-Receipts and Disbursements
Broad break up of Plan and Non Plan
allocations
Revenue Deficit, Fiscal Deficit, Primary
Deficit
Fiscal Responsibility and Budget
Management Act
• What is FRBM Act?
– FRBM Act was enacted by Parliament in 2003 to bring
fiscal discipline.
– FRBM rules framed in July 2004
• How will it help in redeeming the fiscal situation?
– FRBM rules impose limits on Fiscal and revenue deficit
– Revenue Deficit should be reduced to nil in five years
beginning 2004-05. Each year reduce by 0.5% of GDP.
– Fiscal Deficit to be reduced to 3% of GDP by 2008-09.
Reduction of fiscal deficit by 0.3% of GDP every year.
Fiscal Responsibility and Budget
Management Act
• How are these targets monitored?
– Rules have mid-year targets for fiscal and
revenue deficits
– Govt. to restrict fiscal and revenue deficit to
45% of budget estimates at the end of
September.
– In case of breach FM will be required to
explain to Parliament the reasons for the same.