Funds and Budget in the Parliament

 Funds and Budget in the Parliament, Budget Documents, Demands for Grants, Finance Bill, Appropriation Bill

Funds and Budget in the Parliament

Indian Polity

The Indian Constitution provides three kinds of funds for the central Government

  • Consolidated Funds of India
  • Public Accounts of India
  • Contingency Funds of India

Consolidated Funds of India

Article 66 provides the Parliament to have ‘Consolidated funds of India’. It is a fund to which all receipts are credited and all payments are debited. In other words,

  • All revenues received by the Government of India.
  • All loans raised by the Government by the issue of Treasury Bills, loans or ways and means of advances.
  • All money received by the Government in repayment of loans from the Consolidated Funds of India.

All the legally authorised payments on behalf of the government are made out of this fund. No money out of this fund can be appropriated (issued or drawn) except in accordance with a Parliamentary Law.

Public Accounts of India

All other public money received by the Government of India on or on behalf of it shall be credited to the Public Accounts of India. It includes departmental deposits, remittances, judicial deposits, provident fund deposits etc. Payments from this account can be made without parliamentary appropriation as these payments are mostly in the nature of banking transactions. It is covered in article 266(1).

Contingency Funds of India

The constitution authorised the Parliament to establish a Contingency Fund of India (Under article 267), into which amounts determined by law are paid from time to time. Accordingly, the Parliament enacted the Contingency Fund of India Act in 1950.

The Fund is placed at the disposal of the President and he can make advances out of it to meet unforeseen expenditures pending its authorization by the parliament. In 2005, the amount of money in the Contingency Fund of India increased from Rs. 50 crore to 500 crores.

Budget in the Parliament

The Budget is a statement of the estimated receipts and expenditure of the Government of India in a financial year, which begins on 1st April and ends on 31st March of the following year.  The Government of India has two budgets, namely, The Railway Budget and Te General Budget. While the former consists of the estimate of receipts and expenditures of only the ministry of Railways, the latter consists of the estimate of Receipts and expenditure of all the Ministers of the Government of India (except the railways).

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The Annual Financial Statement (Under article112), laid before both the Houses of Parliament constitutes the Budget of the Union Government. In total, 26 days are allotted for the voting of demands. On the last Day, the speaker Puts all the remaining demands to vote and disposes of them whether they have been discussed by the members or not. This is known as Guillotine. The budget goes through the following stages in the Parliament.


The General Budget is presented in the Lok Sabha by the Ministers of Finance. He makes a speech introducing the budget and it’s only in the concluding part of his speech that the proposals for fresh taxation or for variations in the existing taxes are disclosed by him. The Annual Financial Statement is laid on the Table of Rajya Sabha at the conclusion of the speech of the Finance Minister in the Lok Sabha.

Budget Documents

Along with the annual financial statement, Government presents the following documents.
•    An explanatory memorandum briefly explaining the nature of receipts and expenditure during the current year and the next year and the reasons for variations in the estimates for the 2 years

  • The Books of demands show the provisions Ministry-wise and,
  • A separate demand for each department and service of the Ministry
  • The Financial Bill, which deals with the taxation measures proposed by the government, is introduced immediately after the presentation of the budget. It is accompanied by a memorandum explaining the provisions of the bill and their effect on the finances of the country.
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Vote On Account

Since, the Parliament is not able to vote on the entire budget before the commencement of the new financial year, the necessity to keep enough finance at the disposal of the Government in order to allow it to run the administration of the country remains.

A special Provision is, therefore, made for Vote On Account by which the Government obtains the vote of Parliament for a sum sufficient to incur expenditure on various items for a part of the year. Normally, the Vote on Account is taken for 2 months only. But during the election year or when it is anticipated that the main demands and Appropriation Bill will take a longer time than 2 months, the vote on Account may be for a period exceeding 2 months.

General Discussion

The General Discussion on Budget begins a few days after its presentations. It takes place in both of the Houses of Parliament (the Lok Sabha and the Rajya Sabha) and lasts usually for 3 to 4 days. During this stage, the Lok Sabha can discuss the budget as a whole or on any question of principle involved therein but neither a Cut Motion can be moved nor can the Budget be submitted to the vote of the House. At the end of the discussion, the Finance Minister has to reply on the discussion.

Scrutiny by Departmental Committees

After the General Discussion on the Budget is over, the houses are adjourned for about three to four weeks. During this gap period, the 24 departmental standing Committees of the Parliament examine and discuss in detail the demands for grants of the concerned ministries and prepare reports on them. These reports are submitted to both the Houses of Parliament for consideration. The Standing Committee System established is 1993 (and expanded in 2004) makes parliamentary financial control over ministries much more detailed, close, in-depth and comprehensive.

Demands for Grants

The estimates of expenditure included in the budget and required to be voted by the Lok Sabha are in the form of Demands for Grants Each Demand contains first a statement of the total grant and then a statement of the detailed estimate divided into items. Members of Parliament can move motions to reduce any demand for grants. Such motions are called Cut Motions which are of three types.

  • Token Cut: It means that the amount of the demand is reduced by Rs. 100 in order to ventilate a specific grievance which is within the sphere of the responsibility of the Government of India.
  • Policy Cut: It means that the amount of the demand to be reduced to Rs. 1 represents disapproval of the Policy underlying the demand.
  • Economy Cut: It means that the amount of the demand is reduced by a specified amount representing the economy that can be affected. Such a Specified amount may be either a lump-sum reduction in the demand or omission or reduction of an item in the demand.
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Appropriation Bill

After the General Discussion on the budget Proposals and Voting on Demands for Grants have been completed, Government introduces the Appropriation, Bill. The Appropriation Bill is intended to give authority to the government to incur expenditure from and out of the Consolidated Fund of India. The Procedure for passing this bill is the same as in the case of other Money Bills.

Finance Bill

The Finance Bill seeks to give effect to the government’s taxation proposals which are introduced in Lok Sabha immediately after the presentation of the General Budget is taken up for consideration and passing after the Appropriation Bill is passed.

However, certain provisions in the bill relating to levy and collection of fresh duties or variations in the existing duties come into effect immediately on the expiry of the day on which the bill is introduced by virtue of a declaration under the Provisional Collection of Taxes Act. The Parliament has to pass the Finance Bill within 75 days of its Introduction.   

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