Under Article 112, the constitution provides for an Annual Financial Statement to be laid down in the parliament. It includes the estimated receipts and expenditure of the government of India. This statement is popularly known as budget. This statement is caused to be laid down by the president for a financial year. The Budget is presented to Lok Sabha in two parts. The Railway Budget deals only with the Railway Finance. The General Budget gives an overall picture of the financial position of the Government of India, excluding the Railways. The Railway Budget was separated from the General Budget in 1921 on the recommendations of the Acworth Committee.
The estimates of expenditure embodied in the annual financial statement shall show separately
(A) The sums required to meet expenditure charged upon the Consolidated Fund of India.
(B) The sums required to meet other expenditure proposed to be made from the Consolidated Fund of India.
The following expenditure shall be expenditure charged upon the Consolidated Fund of India
1. Emoluments and allowances of the President and other expenditure relating to his office
2. Salaries and allowances of the Chairman and the Deputy Chairman of the Rajya Sabha and the Speaker and the Deputy Speaker of the Lok Sabha
3. The debt charges for which the Government of India is liable including interest, sinking fund charges and redemption charges, and other expenditure relating to the raising of loans and the service and redemption of debt
4. Salaries, allowances and pensions of the Judges of the Supreme Court
5. Pensions of the Judges of any High Court
6. Salary, allowances and pension of the Comptroller and Auditor General of India
7. Salary, allowances and pension of the chairman and members of the Union Public Service Commission
8. Administrative expenses of the Supreme Court, the office of the Comptroller and Auditor General of India and the Union Public Service Commission
9. Any sums required to satisfy any judgment, decree or award of any court or arbitral tribunal
10. Any other expenditure declared by this Constitution or by Parliament by law to be so charged
Enactment of budget
Below mentioned are the stages through which budget goes through in the parliament.
1. Presentation of budget
2. General discussion
3. Scrutiny by departmental committees
4. Voting on demands of grants
5. Passing of the appropriation bill
6. Passing of finance bill
1. Presentation of Budget
Both the Railway Budget and the General Budget are presented in the Lok Sabha. Both these budgets follow the same procedure. The railway budget is presented before the general budget in the Lok Sabha. Usually, the former is presented in the third week and latter on the last day of February. In an election year, the budgets may be presented twice—first to secure a vote on account for a few months and later in full. The railway minister presents the railway budget and the finance minister presents the general budget.
After the budget speech by the finance minister, the budget is laid before the Rajya Sabha, which can discuss it but has no power to vote on the demands for grants. Immediately after the presentation of the Budget, the following three statements under the Fiscal Responsibility and Budget Management Act, 2003 are also laid on the Table of Lok Sabha:-
(i) The Medium Term Fiscal Policy Statement;
(ii) The Fiscal Policy Strategy Statement; and
(iii) The Macro Economic Framework Statement
2. General Discussion
After few days of budget presentation, general discussion starts which usually, lasts for three to four days. The House can discuss the budget as a whole or any question of principles involved but no motion can be moved at this stage. The scope of discussion is confined to an examination of the general scheme and structure of the budget. The finance minister or the railway minister (as the case may be) has the general right of reply at the end of the discussion.
3. Scrutiny by Departmental Committees
After the general discussion on the budget is over, the House is adjourned for a fixed period. During this period, the demands for grants of the ministries/ departments are examined and discussed by the 24 departmental standing committees. These committees prepare their reports and submit to both the Houses of the parliament. These committees prepare separate report on the demands for grants of each ministry.
4. Voting on Demands of Grants
After the reports of the Standing Committees are presented to the House, the House proceeds to the discussion and voting on demands for grants. The demands for grants are presented to the Lok Sabha ministry-wise and are voted upon, after which they become grants. Only the members of Lok Sabha vote on demands for grants. However, the budget is discussed in both the Houses. Voting is not done on those matters which are related to the expenditure charged upon the Consolidated Fund of India. The members, at this stage, can discuss the budget in details and also move motions to reduce any demand of grant. This motion is called cut motion. Cut motions are of three types:
(i) Disapproval of Policy Cut Motion: The motion states that the amount of the demand be reduced to Re. 1 which means that the mover disapproves of the policy underlying the demand. The member giving notice of such a Cut Motion has to indicate in precise terms the particulars of the policy which he proposes to discuss. Discussion is confined to the specific point or points mentioned in the notice. The mover can advocate for an alternative policy.
(ii) Economy Cut Motion: The motion states that the amount of the demand be reduced by a particular amount. The motion represents the effect of proposed expenditure on the economy. The amount suggested for reduction may be either a lump-sum reduction in the demand or omission or reduction of an item in the demand.
(iii) Token Cut Motion: The objective of the motion is to ventilate a specific grievance within the sphere of responsibility of the government. It states that the amount of the demand be reduced by Rs. 100. Discussion on such a cut motion is confined to the particular grievance specified in the motion which is within the sphere of responsibility of the government of India.
A cut motion to be admissible should satisfy the following conditions:
i. It should relate to one demand only.
ii. It should be clearly expressed and should not contain arguments, inferences, ironical expressions, imputations, epithets and defamatory statements
iii. It should be confined to one specific matter which should be stated in precise terms.
iv. It should not make suggestions for the amendment or repeal of existing laws.
v. It should not relate to a State subject or to matters which are not primarily the concern of the Government of India.
vi. It should not relate to expenditure ‘Charged’ on the Consolidated Fund of India.
vii. It should not relate to a matter which is under adjudication by a court of law having jurisdiction in any part of India.
viii. It should not raise a question of privilege.
ix. It should not revive discussion on a matter which has been discussed in the same session and on which decision has been taken.
x. It should not relate to a trivial matter.
As the government enjoys majority in the Lok Sabha, so they are rarely passed. If such a motion is passed in the Lok Sabha, it may lead to the resignation of the government for want of majority.
On the last of the allotted days for the discussion and voting on demands for grants, the Speaker puts every question necessary to dispose of all the outstanding matters in connection with the demands for grants. This is known as guillotine. The guillotine concludes the discussion on demands for grants.
5. Appropriation Bill
After the demands for grants have been passed by the House, an appropriation bill is introduced to provide for the appropriation out of the Consolidated Fund of India, all moneys required:
(i) To meet the grants passed by the Lok Sabha
(ii) The expenditure charged on the Consolidated Fund of India
No amendment can be proposed to an Appropriation Bill which will have the effect of varying the amount or altering the destination of any grant so made or of varying the amount of any expenditure charged on the Consolidated Fund of India. The decision of the Speaker as to whether such an amendment is admissible is final.
The appropriation bill becomes an act after it receives assent from the president. Until that time, the government cannot take out money from the Consolidated Fund of India. As the process takes some time, usually till the end of April, the constitution provides for a provision called the ‘vote on account’. The constitution allows the government to take any grant in advance according to the estimated expenditure for that part of the year. Usually, it is granted for two months which is equivalent to one-sixth of the total expenditure.
6. Passing of the Finance Bill
Finance bill is introduced every year to give effect to the financial proposals of the Government of India for the next following financial year. The procedure in respect of finance bill is the same as in the case of other money bills.
The finance bill is introduced immediately after the presentation of the budget. The introduction of the bill cannot be opposed. According to the Provisional Collection of Taxes Act, 1931, the finance bill has to be passed by parliament and assented to by the president before the expiry of the seventy-fifth day after the day on which it was introduced.
As the finance bill contains taxation proposals, it is considered and passed by the Lok Sabha only after the demands for grants have been voted and the total expenditure is known. The Finance Act completes the process of the enactment of the budget.