Article 202

Article 202 of the Constitution of India establishes the framework for the presentation of the annual financial statement, commonly known as the State Budget, before the Legislature of a state. It ensures fiscal transparency, legislative accountability, and systematic financial planning in the governance of every Indian state. This provision parallels Article 112, which governs the presentation of the Union Budget in Parliament.

Constitutional Objective and Scope

The purpose of Article 202 is to guarantee that each state operates under a clear, accountable, and constitutionally mandated financial process. It ensures that the Governor, as the constitutional head of the state, presents an annual financial statement before the State Legislature, providing an estimate of the receipts and expenditures for the ensuing financial year.
By requiring legislative scrutiny of government finances, Article 202 strengthens democratic control over public expenditure and promotes financial discipline within the state administration.

Provisions of Article 202

The Article consists of three main subsections, each addressing specific aspects of the financial statement.

Subsection (1): Presentation of the Annual Financial Statement

Under Article 202(1), the Governor of the State is mandated to lay before the Legislature a statement showing the estimated receipts and expenditure for that financial year.
This presentation must take place at the commencement of each financial year and applies to all states, whether they have unicameral or bicameral legislatures. The statement forms the foundation for the state’s budgetary process, reflecting fiscal policy, development priorities, and expenditure commitments.

Subsection (2): Structure and Classification of Expenditure

Article 202(2) distinguishes between two categories of expenditure drawn from the Consolidated Fund of the State:

• Clause (a): Expenditure charged upon the Consolidated Fund of the State, which is not subject to the vote of the Legislature.
• Clause (b): Other expenditures that are proposed to be made from the Consolidated Fund and are subject to legislative approval.

Furthermore, expenditure is classified into:

• Revenue Expenditure: Covering the day-to-day functioning of government departments and maintenance of public services.
• Capital Expenditure: Relating to the creation of assets, infrastructure, and long-term investments.

This dual classification enables effective financial planning and control, ensuring a clear distinction between operational expenses and developmental outlays.

Subsection (3): Expenditure Charged on the Consolidated Fund of the State

Article 202(3) lists the specific items of expenditure that are charged upon the Consolidated Fund of the State. Such expenses are non-votable, meaning they do not require approval through legislative voting, although they can be discussed in the House.
The major categories of expenditure charged on the Consolidated Fund include:

• Emoluments and allowances of the Governor and the related office expenses.
• Salaries and allowances of the Speaker and Deputy Speaker of the Legislative Assembly and, in bicameral states, those of the Chairman and Deputy Chairman of the Legislative Council.
• Salaries, allowances, and pensions of the judges of the High Court of the State.
• Administrative expenses of the Public Service Commission, including the salaries of its members.
• Debt charges for which the State is liable, including interest payments and redemption of loans.
• Any other expenditure that the Constitution or the Legislature may declare to be charged upon the Consolidated Fund.

This provision safeguards the independence and autonomy of key constitutional offices, ensuring that their functioning is not influenced by legislative approval or political considerations.

Legislative Procedure and Budgetary Control

Following the Governor’s presentation of the financial statement, the document is referred to the State Legislature for discussion, scrutiny, and approval.
The legislative procedure involves:

1. General Discussion: Members of the Legislature debate the overall budgetary policy, highlighting priorities and concerns.
2. Voting on Demands for Grants: Each department’s estimated expenditure (except charged items) is put to vote.
3. Passing of the Appropriation Bill: Once demands for grants are approved, the Legislature authorises the withdrawal of funds from the Consolidated Fund of the State.
4. Finance Bill: Introduced to give effect to taxation proposals included in the Budget.

This structured process ensures financial accountability and allows legislators to review the executive’s fiscal policies.

Significance of the Annual Financial Statement

The annual financial statement is a cornerstone of constitutional financial governance. Its significance lies in:

• Transparency: It provides a comprehensive picture of the State’s financial health, enabling the public and legislators to assess revenue and expenditure patterns.
• Accountability: It subjects government finances to legislative approval, ensuring that no expenditure is made without the sanction of the Legislature.
• Fiscal Responsibility: It promotes prudent management of state resources, aligning spending with developmental priorities.
• Democratic Oversight: It empowers elected representatives to question, modify, and monitor government spending.

Judicial Interpretations and Key Case Laws

Judicial pronouncements have reinforced the constitutional importance of Article 202 and its role in financial governance:

• State of West Bengal v. Union of India (1963): The Supreme Court affirmed the financial autonomy of states, while recognising the central framework within which fiscal policies operate.
• Keshavananda Bharati v. State of Kerala (1973): The basic structure doctrine evolved in this case indirectly strengthens Article 202 by ensuring that state financial procedures conform to the principles of constitutional governance.
• Indira Gandhi v. Raj Narain (1975): Though primarily concerning electoral law, the case underscored the importance of financial integrity and lawful administration in maintaining democratic accountability.

These rulings collectively emphasise that budgetary procedures form part of the Constitution’s basic democratic framework, ensuring legality, transparency, and fairness in public finance.

Implications of Non-Compliance

Failure to present or properly approve the annual financial statement can have serious constitutional and administrative consequences.

• The executive cannot withdraw or spend funds from the Consolidated Fund without legislative approval.
• Persistent failure may invite judicial intervention, as it constitutes a breach of constitutional obligation.
• Non-compliance undermines public trust and disrupts financial governance, potentially paralysing essential state functions.

Relationship with Other Constitutional Articles

Article 202 functions in close conjunction with other financial provisions:

• Article 203: Specifies the procedure in the Legislature with respect to the discussion and voting on estimates.
• Article 204: Deals with Appropriation Bills authorising withdrawals from the Consolidated Fund.
• Article 205: Provides for supplementary, additional, and excess grants.
• Article 207: Governs the introduction of Financial and Money Bills.

Together, these provisions constitute the constitutional framework for state financial management, ensuring that expenditure and taxation remain subject to legislative authority.

Constitutional and Democratic Significance

Article 202 exemplifies the principle of financial accountability within a parliamentary democracy. It ensures that public funds are used only in accordance with legislative sanction and that fiscal policy reflects the priorities of the people’s representatives.