Structure of Union Budget

Session 6

Ranjan Kumar Mohanty

Economics Area
Xavier Institute of Management, Bhubaneswar (XIMB)
 Evolution of Budget
• Derived from the French word “Bougette” which means a small leather bag or
pouch.
• The phrase was first used in 1773 in England for the bag of proposals the
chancellor carried to the parliament for approval.
• Long history of struggle for parliamentary control over the purse; was a struggle
for control over taxation.
• The control over expenditure came much later. Concern for the protection of
tax payers and expanding activities or functions of the government.
• Budget originating from Englishman’s age old determination “not to be taxed
without his consent”. Now widely used in all modern governments as the entire
financial process: estimation of revenue and expenditure.

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 What is Budget?
 A budget is a financial plan for a defined period, often one year.
 Annual financial statement giving the estimates of revenue and expenditure of
the government for a year; detailed plan of operation, proposal to raise
resources etc.
 Budget is the document of Government Accounting and Financial Managements.
 Prepared by the Budget Division, Department of Economic Affairs of the Ministry of
Finance annually.
 Finance Minister is the head of the budget making committee.
 Until 1999, budget was announced at 5 pm on the last working day of February.
 Finance minister Yashwant Sinha changed this tradition by announcing at 11 am.
 In 2017, finance minister Arun Jaitley presented UB February 1.
 Until 2016, railway budget was presented few days before the union budget; after 2017-
along with UB.
 February 2021, first digital UB.
 Study of Budgeting: Why?
 Budget gives the indication of government’s policy decisions Government Budget
Annual Financial Statement
 Affects the economic life of people especially business class.

 Macro Scenario Reflects from Budget Estimated Receipts Estimated Expenditure

 Whom to collect receipts and how?

 Changes in tax rates
 Changes in exemptions
 Changes in loan and interest receipts

 Where to spend and how?

 Changes of spending in different sectors
 Changes in schemes to implement government policies
 Government Accounts
 The Indian government’s funds are kept in three parts:
Consolidated Fund of India
Contingency Fund of India
Public Account of India
 Consolidated Fund
 All revenues received by the Government, loans raised
by it, and also receipts from recoveries of loans granted
by it, together form the Consolidated Fund of India.

 All expenditure of the Government is incurred from

the Consolidated Fund of India and no amount can be
drawn from the Consolidated Fund without due
authorization from the Parliament.

 Consolidated fund is the main focus of any government

budget.
 The provision for this fund is given in Article 266(1) of
the Constitution of India.
 Contingency Fund
 The Contingency Fund of India to make advances to meet
urgent & unforeseen expenditure, at the disposal of the
President, where the authorization by the Parliament is
pending.
 Government is to ensure that the corpus of the
Contingency Fund remains intact (30000 cr).
 Similarly, Contingency Fund of each State Government
can be spent at the disposal of the Governor to enable
him/her to make advances to meet urgent unforeseen
expenditure, pending authorization by the State
Legislature.
 Provision for this fund is made in Article 267(1) of the Constitution of India.
 Public Account
 Money held by Government in trust are kept in the Public Account. Provident
Funds, Small Savings collections, income of Government set apart for
expenditure on specific objects such as road development, primary
education, other Reserve/Special Funds etc., are examples of money kept in
the Public Account.
 Government collect money from citizens and acts more as a banker.
 Public Account funds that do not belong to the Government and have to be
finally paid back to the persons and authorities who deposited them, do
not require Parliamentary authorisation for withdrawals.
 The approval of the parliament is obtained when amounts are withdrawn
from the Consolidated Fund and kept in the Public Account for
expenditure on specific objects.
 The actual expenditure on the specific object is again submitted for vote of the
Parliament for withdrawal from the Public Account for incurring
expenditure on the specific objects.
 This is constituted under Article 266(2) of the Constitution.
 Summarizes of the Three funds
Fund Consolidated Fund Contingency Fund Public Account of
of India of India India
Income Tax revenue, non- Fixed corpus Public money other
tax revenue etc. than those under
consolidated fund
Expenditure All expenditure Unforeseen Public money other
expenditure than those under
consolidated fund
Parliamentary Required prior to Required after the Not required
Authorisation expenditure expenditure
Articles of 266(1) 267(1) 266(2)
Constitution

Contingency fund of India: In 2005, it was raised from Rs. 50 crore to Rs 500 crore. In 2021,
it was proposed to raise the fund to Rs 30,000 crore.
 Classifications of Budget Components.
 Two types: Economical & Functional Classification
 Economical: arranging the expenditures and receipts of the Central Government by significant
economic categories distinguishing current from capital outlays, spending for goods and services from
transfers to individuals and institutions, from borrowing and inter-governmental loans and grants, etc.
 Functional: based on different services, i.e.,
 General Services (Tax Collection, Interest Payment and Servicing of Debt, Administrative Services, Pensions, Defence Service etc.),
 Social Services (Education, Health, Water Supply & Sanitation, Housing, Information & Publicity, Welfare of SCs/STs/OBCs & Minorities,

Labour & Employment, Social Security & Welfare, Nutrition etc.),

 Economic Services (Agriculture and Allied Activities, Rural Development, Irrigation and Flood Control, Energy, Industry and
Minerals, Transport, Communications, Science Technology and Environment etc.),

 Grants-in-Aid and Contributions (Grants-in-aid to State Governments, UT, Technical and Economic Cooperation with Other
Countries, Aid Materials and Equipment)
 Budget Structure in India : Union Government
 Budget Speech (Major Policy Statement, broad priorities).
 Budget Highlights (Key Features)
 It is broadly a summary of the announcements made in the Budget Speech. (e.g., govt reforms, energy, social sector,
MSME & Industry, Migrant workers, agriculture and allied sectors etc.)

 It also explains, in brief, the budget proposals for allocation of funds to be made in important areas. (health,
industry, infrastructure, urban development, housing etc.)

 The summary of tax proposals is also delineated in the document.

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 Budget Structure in India : Union Government
 Budget At Glance: Details in brief about receipts and disbursements, highlights the major deficit
indicators of the Central Government.

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Sources of Revenue and Expenditure
 Sources of Revenue and Expenditure

(-4)

(+2)

(2) (-1)
 Budget Structure in India: Union Government
 Annual Finance Statement: The receipts and disbursements (BE & RE) are shown under
three parts in which Government Accounts are kept viz.,(i) The Consolidated Fund of India,
(ii) The Contingency Fund of India and (iii) The Public Account of India.
 Finance Bill: At the time of presentation of the Annual Financial Statement before the
Parliament, a Finance Bill is also presented in fulfilment of the requirement of Article 110 (1)(a)
of the Constitution, detailing the imposition, abolition, suspension, alteration or regulation
of taxes proposed in the Budget. Legal and procedural requirement needed for
implementation of budget procedures.
 Receipts Budget: Details of tax and non-tax revenue receipts and capital receipts, NSSF,
liabilities, assets and external assistance and explains variations in the estimates
 Expenditure Budget (Profile): expenditure data across all Departments/Ministries,
scheme or programme wise expenditure.
 Detailed Demand For Grants: Shows further details expenditure of actual
expenditure during the year. Usually there is at least one demand for each ministry
or one for each department.

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 Budget Structure in India: Union Government..
➢ Macro-Economic Framework Statement: presented to Parliament under Section 3(5) of the FRBM Act,
2003. It contains an assessment regarding the GDP growth rate, prices, the domestic economy, stability of
the external sector, banking and non-banking sector, fiscal balance of the Central Government and the
external sector balance of the economy along with the statement of specific underlying assumptions.

➢ Medium-Term Fiscal Policy Statement cum Fiscal Policy Strategy Statement: Section 3(2) of the FRBM
Act, 2003. It sets out the three-year rolling targets for five specific fiscal indicators in relation to GDP at
market prices, namely (i) Revenue Deficit, (ii) Fiscal Deficit, (iii) Primary Deficit (iv) Tax & Non-tax
Revenue and (v) Total outstanding Central Government Liabilities. The Statement includes the underlying
assumptions, explains how the current fiscal policies are in conformity with sound fiscal management
principles and gives the rationale for any major deviation in key fiscal measures.

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 Budget Structure in India: Union Government
 Outcome Budget:

 With effect from Financial Year 2007-08, the Performance Budget and the Outcome Budget which were presented to
Parliament separately by Ministries/Departments, were merged and presented as a single document titled "Outcome
Budget" in respect of each Ministry/ Department.

 From Financial Year 2017-18 onwards, the Outcome Budget of all Ministries have been combined into one single
document and will be brought out by the Ministry of Finance in collaboration with the NITI Aayog.

 The Outcome Budget broadly indicates the outcomes of the financial budget of a Ministry/Department, indicating actual
deliverables linked
 Identifying Budget Heads
 There is a code number for all the major heads in the Consolidated Fund,
Contingency Fund and the Public Account. The first digit indicates whether a
major head is in the receipt section (‘0’ & ‘1’), or expenditure (‘2’ & ‘3’) on
revenue account, or expenditure on capital account (‘4’ & ‘5’) or public debt
and loans and advances (‘6’ & ‘7’) or Public Accounts sections (‘8’).

 The last three digits are for major heads, the same number representing the
same major head, whether it is in the revenue receipt section, revenue expenditure
section, capital expenditure section or loans and advances section.
 Major Head (4 Digit), Sub Head (2 Digit), Minor Head (3 Digit),
Sub Minor head (2/3 digit)
0000 00 000 00
For e.g. 2202-01-001-01
Annual Finance Expenditure Expenditure Detailed Demand 2202 (Major Head)-General
Sr No Statement Budget Volume 1 Budget Volume 2 For Grants education—01 (Sub Head)-
General Elementary Direction and Salaries, Wages
Elementary education—001
Education Education Administrtation and Office
(Minor Head)-Direction and
1 Expenditure
Maintenance of
administration– 01 (Sub Minor
Assets head)-Salaries--01-Pay/ 02-
Text Books Dearness Allowance/ 03- HRA
Etc etc.
Govt Schools
Private Aided
Schhols
Text Books
Etc
Secondary
Education
University or
Higher Education
Language
Development
General
20
Technical
2 Education
 Sources of Public Finance Data

• Budget Documents
• RBI (Usually late by 6 to 12 Month)
• Finance Accounts (by Controller General of Accounts
(CGA) & Comptroller and Auditor General (CAG)
respectively for Union & State Governments) late by two
years.
• Public Finance Statistics (aggregation of States,
Centre and Combined) A time series data

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Details of Ministries in India
 Details of Ministries in India

102 number of departments in 2023-24 (56)

 Budget Highlights(2024-25)
 The highest Priority of Government/prime minister: Upliftment of ‘Garib’ (Poor),
‘Mahilayen’ (Women),‘yuva’ (Youth) And ‘Annadata’(farmer)
 India’s nominal economic growth estimated at 10.5%.

 Fiscal deficit to GDP 5.1%; revised estimates for 2023-24 (5.9% of GDP).

 Revenue deficit is targeted at 2% of GDP, lower than the 2.9% budgeted in 2023-24.

 Total expenditure 47.65 lakh cr; an increase of 6% over the revised estimate of 2023-24.

 Revenue expenditure is estimated to grow at 3.2% and capital expenditure at 16.9%.

 Total receipt other than borrowings 30.80 lakh cr., 11.8% higher than the revised estimates
of 2023-24.

 The central government will transfer Rs 22.74 crore to states and union territories in 2024-
25, an increase of 8.4% over the revised estimates of 2023-24.
 Budget Highlights…..
 Main tax proposals
 Tax rates unchanged: Direct and indirect tax rates have
remained unchanged.
 Tax benefits to certain entities extended by another year:
Certain direct tax benefits to following entities have been
extended until March 2025: (i) startups, (ii) sovereign wealth
funds and pension funds, and (iii) some IFSC units.
 Railways:
 Three major economic railway corridor programs will be
implemented. These are: (i) energy, mineral and cement
corridors, (ii) port connectivity corridors and (iii) high traffic
density corridors.
 Forty thousand normal rail bogies will be upgraded to Vande
Bharat standards to ensure passenger safety and comfort.
 Budget Highlights…..
 Housing:
 An additional two crore houses will be built over the next five years under
Pradhan Mantri Awas Yojana-Grameen.
 A new scheme will be launched to help sections of the middle-class living in
rented houses, slums, and unauthorised colonies, to buy or build their own
houses.
 Health:
 Vaccination to prevent cervical cancer will be encouraged for girls between
nine and 14 years of age.
 A new platform, U-WIN, will be rolled out for managing immunisation across
the country.
 Healthcare cover under Ayushman Bharat scheme will be extended to all
ASHA workers, and Anganwadi workers and helpers.
 Budget Highlights…..
 Energy:
 Rooftop solarisation of one crore households will be taken up.
 To achieve net-zero by 2070, blending of compressed biogas in CNG and PNG will be mandated in a
phased manner.
 Coal gasification and liquefaction capacity of 100 metric tonnes will be installed by 2030.

 Environment:
 EV manufacturing and charging infrastructure will be strengthened and expanded.
 Adoption of E-buses for public transport will be encouraged.
 Blue economy 2.0 scheme will be launched to restore coastal aquaculture and mariculture.
 A new scheme will be launched to provide environment friendly alternatives such as biodegradable
polymers, bio-plastics and bio-pharmaceuticals.
 Budget Highlights…..
 Agriculture:
 Public and private investment will be promoted in post-harvest
activities including aggregation, storage, supply chain, processing
and marketing.
 Application of the Nano DAP fertiliser will be expanded in all agro-
climatic zones.
 A programme for supporting dairy farmers will be formulated.
 PM Matsya Sampada Yojana will be expanded to:
(i)enhance aquaculture productivity from three to five tonnes per
hectare, (ii) double seafood exports to one lakh crore rupees, and (iii)
generate 55 lakh employment opportunities.
 Budget Highlights…..
 Demographic changes:
A high-powered committee will be set up to address
challenges arising out of fast population growth and
demographic changes.
 Research:
 Toencourage the private sector to scale up research
and innovation, a corpus of one lakh crore rupees
will be set up. This corpus will provide long-term loans
at low or nil interest rates.
Ministry-wise expenditure

➢ Top 13 ministries in terms of allocations account for 54% of the estimated total expenditure
Major CSS expenditure
Allocations for women, children, SCs, STs and NER (Rs crore)
Some Snap shots from Budget
Budget at a Glance 2024-25 (Rs crore)
Thank you