Important Budget Documents and Process in India

Article 112 of the Indian Constitution says that every year “the President of India shall cause to be laid before both the houses of the parliament” the “Annual Financial Statement”. This is popularly known as Budget. “cause to be laid” here means that the person through whom President acts, is Finance Minister of the country, who is known as the custodian of the nation’s Finances. The Budget gives the complete picture of the estimated receipts and expenditures of the Government of India for that year. This picture is actually based upon the budget figures of the previous years. In all budget documents, generally budget figures of three years are used. For example, if we are studying the budget of 2017-18, then this set would be made up:

  • Actuals of 2015-2016
  • Budget Estimates of 2016-2017
  • Revised Estimates of 2016-2017
  • Budget Estimates of 2017-2018

Budget Documents

Apart from the speech of the Financial Minister, the budget contains total around 14 to16 documents. Among these, four documents are mandatory as per constitution of India, while four other documents are mandatory as per FRBM Act, 2003. Rest of the documents are either explanatory or as per recommendations of NITI Aayog or under some other initiatives. Thus, we can divide these documents in three parts as follows:

Documents Mandated by Constitution

  1. Annual Financial Statement (AFS) { Article 112}
  2. Demands for Grants (DG) { Article 113}
  3. Appropriation Bill {Article 114(3)}
  4. Finance Bill {Article 110(a)}

Documents mandated by FRBM Act, 2003

  1. Macro-Economic Framework Statement
  2. Fiscal Policy Strategy Statement
  3. Medium Term Fiscal Policy Statement
  4. Medium Term Expenditure Framework Statement- (to be presented in parliament in the Session after the Budget session).

Explanatory /Other Documents

  1. Memorandum Explaining the Provisions in the Finance Bill
  2. Expenditure Profile1
  3. Expenditure Budget2
  4. Receipts Budget
  5. Budget at a Glance
  6. Highlights of Budget- Key Features.
  7. Outcome Budget

Some important facts about initial eight documents are enumerated below:

Annual Financial Statement (AFS)

This document comprises the receipts and expenditures of the government of current year, previous year and budget year in three separate parts viz. Consolidated Fund of India, Contingency Fund of India and Public Account of India.

 Demands for Grants

The estimates of expenditures are presented to Lok Sabha in the form of Demands for Grants. General there is one demand for grants per ministry but there can be more than one demands for grants also for a ministry depending on the type of expenditure. Further, the government presents separate demands for grants for union territories along with the ministries’ demands for grants.

Appropriation Bill

The article 114(3) stipulates that no amount can be withdrawn from the Consolidated Fund of India without enactment of a law by parliament. So, once the demands for grants are vetted by the Lok Sabha, the Appropriation Bill is presented to withdraw amount from Consolidated Fund.

Finance Bill:

It is presented to enact a law for imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget. A Finance Bill is a Money Bill as defined in Article 110 of the Constitution.

Macro-Economic Framework Statement

This document, presented as per mandate of FRBM Act, 2003 and it contains the assessment of growth prospects of the economy; GDP growth rate; stability of domestic and external sector of economy; fiscal and external sector balance of the central government.

Fiscal Policy Strategy Statement

Fiscal Policy Strategy Statement outlines the strategic priority of the government related to taxation, expenditure, lending, investments, administered pricing; borrowings, guarantees etc.

Medium-Term Fiscal Policy Statement

This document sets out three year rolling targets for five specific fiscal indicators viz. Revenue Deficit, Fiscal Deficit, Effective Revenue Deficit; Tax to GDP ratio and Total Outstanding Central Government Liabilities

Medium-Term Expenditure Framework Statement

This document sets forth the three-year rolling target for certain expenditure indicators along with delineation of the underlying assumptions and risks. The objective of the MTEF is to provide a closer integration between the budget and the FRBM Statements. This Statement is presented separately in the session next to Budget session (generally monsoon session).

Overview of Budget Process

On a day subsequent to the presentation of the Budget, the House takes up the General Discussion of the Budget which is called the first stage followed by second stage i.e. discussion and voting on Demands for Grants.

During the General Discussion on the Budget, the house is at liberty to discuss the Budget as a whole or any question of principle. The scope of discussion at this stage is confined to the general examination of the Budget i.e. the proper distribution of the items of expenditure according to the importance of a particular subject or service, the policy of taxation as is expressed in the Budget and the speech of the Finance Minister.

After the General Discussion on Budget in both the Houses is over and Vote on Account is passed, the House is adjourned for a specified period. The Demands for Grants of each Ministry/Department will be examined by the concerned Standing Committee having jurisdiction over it during the said recess period. The Committee gives separate report for each Ministry. The Demands for Grants are discussed / considered in the House in the light of the reports of the Standing Committee. The reports of the Standing Committees which are of persuasive value are nevertheless treated as considered advice given by the Committee.

The detailed discussions are followed by Guillotine. Guillotine refers to closure imposed on the debate. On the last of the allotted days at the appointed time, the Speaker puts every question necessary to dispose of all the outstanding matters in connection with the Demands for Grants. The Guillotine concludes the discussion on Demands for Grants.

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