Stages in Enactment of the Budget — 6 stages

13 Budget in Parliament
Stage 1 — Presentation of Budget: conventionally, the budget is
This explains how the country's finances get legislative approval each year presented to Lok Sabha by the Finance Minister on the last working day of
— a multi-stage process with its own special terminology (charged vs voted February. Since 2017, the presentation date has been advanced to 1
expenditure, cut motions, types of grants, and three central funds). February. The budget can also be presented in two or more parts, and each
part is then dealt with as if it were the whole budget. There shall be no
What the Budget is discussion of the budget on the day it is presented to the House.
The Constitution refers to the budget as the 'annual financial statement' — Stage 2 — General Discussion: begins a few days after the budget's
in other words, the term 'budget' itself nowhere appears in the Constitution; presentation, and takes place in both Houses, usually lasting 3 to 4 days.
it's the popular name people use for this statement, which is dealt with under The Lok Sabha can discuss the budget as a whole, or on any question of
Article 112. principle involved in it, but no cut motion can be moved, and the budget
The budget is a statement of the estimated receipts and expenditure of cannot be put to a vote at this stage. The Finance Minister has a general
the government for a financial year, which runs from 1 April to 31 March of right of reply at the end of the discussion.
the following year. Stage 3 — Scrutiny by Departmental Committees: after general
Apart from estimates of receipts and expenditure, the budget also contains: discussion is over, the House is adjourned for about 3 to 4 weeks. During
estimates of revenue and capital receipts; ways and means to raise the this gap, the 24 departmental standing committees of Parliament
revenue; estimates of expenditure; details of the actual receipts/expenditure examine and discuss in detail the demands for grants of the concerned
of the closing financial year and reasons for any deficit/surplus in that year; ministries, and prepare reports on them. These reports are submitted to both
and the economic and financial policy of the coming year (taxation Houses for consideration. This standing committee system was established
proposals, spending programmes, new schemes). in 1993 (and expanded in 2004), and it makes parliamentary financial
Historical note: till 2017, India had two separate budgets — the Railway control over ministries much more detailed, close, and comprehensive.
Budget (covering the Ministry of Railways alone) and the General Budget Stage 4 — Voting on Demands for Grants: in light of the standing
(covering all other ministries). The Railway Budget had been separated from committees' reports, Lok Sabha takes up voting of demands for grants. The
the General Budget back in 1924, based on the recommendations of the demands are presented ministry-wise. A demand becomes a 'grant' after it
Acworth Committee Report (1921) — primarily to give the railways has been duly voted. Two key points: first, voting on demands for grants is
flexibility in their finances, allow them to plan for stable annual revenue the exclusive privilege of Lok Sabha — Rajya Sabha has no power to
contributions, and let them keep profits for development after paying a fixed vote on demands at all. Second, the voting is confined only to the votable
contribution to general revenues. In 2017, the Central Government merged part of the budget — the expenditure 'charged' on the Consolidated Fund of
the Railway Budget back into the General Budget — so now there's just one India is not submitted to vote (it can only be discussed). Members can move
Union Budget. motions to reduce any demand for grant — such motions are called 'cut
Constitutional Provisions on the Budget motions', of which there are 3 kinds: Policy Cut Motion — represents
disapproval of the policy underlying the demand; states that the amount be
The President must, in respect of every financial year, cause to be laid
reduced to Re. 1; members can also advocate an alternative policy.
before both Houses a statement of estimated receipts and expenditure for
Economy Cut Motion — represents the economy that can be effected in
that year.
the proposed expenditure; states that the amount be reduced by a
No demand for a grant can be made except on the recommendation of the specified amount (either a lumpsum reduction, or a reduction in or
President. omission of an item in the demand). Token Cut Motion — ventilates a
No money can be withdrawn from the Consolidated Fund of India except specific grievance that's within the responsibility of the Government of India;
under an appropriation made by law. states that the amount of the demand be reduced by ₹100. For a cut motion
No money bill imposing a tax can be introduced in Parliament except on to be admissible, it must satisfy a long list of conditions (e.g., relate to only
the President's recommendation, and such a bill shall not be introduced in one demand, not raise a matter under court adjudication, not seek to amend
Rajya Sabha (only Lok Sabha). existing law, etc.) — in practice, due to lack of time, cut motions are mostly
No tax can be levied or collected except by authority of law. only moved and discussed, but not actually passed; their real value lies in
Parliament can reduce or abolish a tax, but cannot increase it. expressing parliamentary control over the government, sometimes even
leading to its resignation if passed. On the last allotted day for
The Constitution also defines the relative roles of both Houses regarding
discussion/voting, the Speaker puts ALL remaining demands to vote at once
budget enactment: a money/finance bill dealing with taxation cannot be
and disposes them, whether they've been discussed by members or not —
introduced in Rajya Sabha — it must be introduced only in Lok Sabha; and
this practice is known as 'guillotine'.
Rajya Sabha has no power to vote on demands for grants — that is the
Stage 5 — Passing of the Appropriation Bill: the Constitution states that
exclusive privilege of Lok Sabha. Rajya Sabha should return the
Money/Finance bill to Lok Sabha within 14 days, and Lok Sabha can either 'no money shall be withdrawn from the Consolidated Fund of India except
accept or reject the recommendations made by Rajya Sabha in this regard. under appropriation made by law'. Accordingly, an appropriation bill is
introduced to provide for the appropriation, out of the Consolidated Fund of
The estimates of expenditure embodied in the budget shall show separately
India, of all the money required to meet (a) the grants voted by Lok Sabha,
the expenditure 'charged' on the Consolidated Fund of India, and the
and (b) the expenditure charged on the Consolidated Fund of India. No
expenditure 'made' from the Consolidated Fund of India.
amendment can be proposed to an appropriation bill in either House that
The budget shall distinguish expenditure on revenue account from other would have the effect of varying the amount, altering the destination, or
expenditure. varying the amount of any expenditure charged on the Fund. The
Expenditure 'charged' on the Consolidated Fund of India shall not be Appropriation Bill becomes the Appropriation Act once assented to by the
submitted to the vote of Parliament — though it CAN be discussed by President — this act authorises (legalises) the government's withdrawal of
Parliament. money from the Consolidated Fund. Since this whole process takes time
Charged Expenditure vs Voted Expenditure and usually goes on till the end of April, but the government needs money to
carry on its normal activities even before that, the Constitution authorises
The budget consists of two types of expenditure: expenditure 'charged'
Lok Sabha to make a grant in advance in respect of the estimated
upon the Consolidated Fund of India, and expenditure 'made' from the
expenditure for a part of the year, pending the full budget process — this
Consolidated Fund of India.
provision is known as the 'vote on account'. It's passed/granted after the
Charged expenditure is non-votable by Parliament — meaning it can only general discussion on the budget is over, generally for two months, and is
be discussed by Parliament, members cannot vote to approve or reject it. for an amount equivalent to one-sixth of the total estimation.
The other type — voted expenditure — has to be voted by Parliament.
Stage 6 — Passing of the Finance Bill: the Finance Bill is introduced to
The list of charged expenditure includes: emoluments and allowances of the give effect to the financial proposals of the Government of India for the
President, and other expenditure relating to his office; salaries and following year. It is subjected to all the conditions applicable to a Money Bill
allowances of the Chairman and Deputy Chairman of Rajya Sabha, and the — but unlike the Appropriation Bill, amendments seeking to reject or reduce
Speaker and Deputy Speaker of Lok Sabha; salaries, allowances, and a tax CAN be moved in the case of the Finance Bill. As per the Provisional
pensions of the judges of the Supreme Court; pensions of the judges of Collection of Taxes Act, 1931, the Finance Bill must be enacted (i.e.,
High Courts; salary, allowances, and pension of the Comptroller and Auditor passed by Parliament and assented to by the President) within 75 days.
General of India; salaries, allowances, and pension of the chairman and The Finance Act legalises the income side of the budget and completes the
members of the Union Public Service Commission; administrative expenses process of enacting the budget.
of the Supreme Court, the office of the Comptroller and Auditor General, and
the UPSC (including salaries, allowances, and pensions of their staff); debt
charges for which the Government of India is liable, including interest,
sinking fund charges, redemption charges, and other expenditure related to
raising loans and servicing debt; any sum required to satisfy a judgement,
decree, or award of any court or arbitral tribunal; and any other expenditure
declared by Parliament to be so charged.
Simple logic to remember why: all these are deliberately kept outside
annual political bargaining — judges, the President, constitutional
auditors, etc., shouldn't have their pay threatened every year by a
parliamentary vote, since that would compromise their independence.
Other types of Grants
14 Multifunctional Role of Parliament
In addition to the budget itself, various other grants are made by Parliament
for special or extraordinary circumstances: Supplementary Grant — Parliament doesn't just make laws — it performs a wide range of roles across
granted when the amount authorised through the appropriation act for the the political system. This section organises all of Parliament's powers under
current financial year is found insufficient for that year. Additional Grant — 7 broad categories.
granted when a need has arisen during the current year for additional
expenditure upon some new service not contemplated in the original budget. 1. Legislative Powers and Functions
Excess Grant — granted when money has already been spent on a service The primary function of Parliament is to make laws for the governance of the
during a financial year, in excess of the amount granted for it in the budget country. It has exclusive power to make laws on subjects enumerated in
for that year; this is voted by Lok Sabha after the financial year is over, and the Union List (which currently has 98 subjects, originally 97), and on
before the demands for excess grants are submitted, they must be approved residuary subjects (subjects not enumerated in any of the three lists).
by the Public Accounts Committee of Parliament. Vote of Credit — With regard to the Concurrent List (currently 52 subjects, originally 47),
granted for meeting an unexpected demand on resources, for example Parliament has overriding power — meaning a Parliamentary law on a
because of a national emergency or war — like a 'blank cheque' given to concurrent subject prevails over a conflicting state law on the same subject.
the executive by Lok Sabha, due to the magnitude or indefinite nature of the The Constitution also empowers Parliament to make laws on subjects in the
service involved (the demand cannot be stated with the details ordinarily State List (currently 59 subjects, originally 66) under 5 abnormal
given in a budget). Exceptional Grant — granted for a special purpose, and circumstances: (a) when Rajya Sabha passes a resolution to that effect;
forms no part of the current service of any financial year. Token Grant — (b) when a proclamation of National Emergency is in operation; (c) when
granted when funds to meet proposed expenditure on a new service can be two or more states make a joint request to Parliament; (d) when necessary
made available by reappropriation (transfer of funds from one budget head to give effect to international agreements, treaties, and conventions; and (e)
to another); a demand for a token sum (of Re. 1) is submitted for the vote of when President's Rule is in operation in the state.
Lok Sabha, and if assented to, funds are made available; reappropriation
All ordinances issued by the President during the recess of Parliament
does not involve any additional expenditure, just a transfer.
must be approved by Parliament within 6 weeks after its reassembly — an
Supplementary, additional, excess, exceptional grants, and votes of credit ordinance becomes inoperative if not approved within that period.
are all regulated by the same procedure applicable to a regular budget.
Parliament also makes laws in a skeleton form and authorises the
Three Funds of the Central Government Executive to frame detailed rules and regulations within the framework of the
The Constitution provides for three kinds of funds for the Central parent law — this is known as delegated legislation (or
government: Consolidated Fund of India (Article 266), Public Account of executive/subordinate legislation). Such rules and regulations are placed
India (Article 266), and Contingency Fund of India (Article 267). before Parliament for its examination.
Consolidated Fund of India: a fund to which all receipts are credited and 2. Executive Powers and Functions
all payments are debited. This includes: all revenues received by the The Constitution has established a parliamentary form of government in
Government of India; all loans raised by the Government through treasury which the Executive is responsible to Parliament for its policies and acts.
bills, loans, or ways and means advances; and all money received by the Hence, Parliament exercises control over the Executive through devices
government in repayment of loans — together, these form the Consolidated such as question-hour, zero hour, half-an-hour discussion, and other
Fund of India. All legally authorised payments on behalf of the Government discussions including short-duration discussion, calling attention motion,
of India are made out of this fund, and no money can be appropriated adjournment motion, no-confidence motion, censure motion, and so on.
(issued or drawn) out of this fund except in accordance with a
Parliament also supervises the activities of the Executive with the help of its
parliamentary law — this is why we need the Appropriation Act and
committees, like the Committee on Government Assurances, Committee
Finance Act every year.
on Subordinate Legislation, Committee on Petitions, etc.
Public Account of India: all other public money (other than those credited
Ministers are collectively responsible to Parliament in general, and to Lok
to the Consolidated Fund) received by or on behalf of the Government of
Sabha in particular. As part of collective responsibility, there's also
India — this includes provident fund deposits, judicial deposits, savings
individual responsibility — each minister is individually responsible for the
bank deposits, departmental deposits, remittances, and so on. This account
efficient administration of his ministry's affairs. They continue in office only
is operated by executive action — meaning payments from this account
so long as they enjoy the confidence of the majority in Lok Sabha; the
can be made without needing parliamentary appropriation, since such
council of ministers can be removed from office by Lok Sabha passing a no-
payments are mostly in the nature of banking transactions (the
confidence motion.
government is just holding/returning money that belongs to someone else,
not spending its own revenue). Lok Sabha can also express its lack of confidence in the government in
other ways: by not passing a motion of thanks on the President's inaugural
Contingency Fund of India: the Constitution authorised Parliament to
address; by rejecting a money bill; by passing a censure motion or an
establish this fund, into which amounts determined by law are paid from time
adjournment motion; by defeating the government on a vital issue; or by
to time. Accordingly, Parliament enacted the Contingency Fund of India
passing a cut motion.
Act, 1950. This fund is placed at the disposal of the President, who can
make advances out of it to meet unforeseen expenditure pending its 3. Financial Powers and Functions
authorisation by Parliament. The fund is held by the Finance Secretary on No tax can be levied or collected, and no expenditure can be incurred by
behalf of the President. Like the Public Account, it is also operated by the Executive, except under the authority and approval of Parliament. The
executive action. budget is placed before Parliament for its approval — its enactment
legalises the receipts and expenditure of the government for the ensuing
financial year.
Parliament also scrutinises government spending and financial
performance with the help of its financial committees — the Public
Accounts Committee, Estimates Committee, and Committee on Public
Undertakings. These bring out cases of illegal, irregular, unauthorised,
improper usage, and wastage and extravagance in public expenditure.
Therefore, parliamentary control over the Executive in financial matters
operates in two stages: (a) Budgetary control — i.e., control BEFORE the
appropriation of grants, through the budget enactment process; and (b)
Post-budgetary control — i.e., control AFTER the appropriation of grants,
through the three financial committees mentioned above.
The budget is based on the principle of annuality — meaning Parliament
grants money to the government for one financial year only. If the granted
money isn't spent by the end of that year, the unspent balance simply
expires and returns to the Consolidated Fund of India. This is known as the
'rule of lapse'. It facilitates effective financial control by Parliament, since no
reserve funds can be built up without fresh authorisation each year —
though, ironically, it also causes a heavy rush of expenditure towards the
close of the financial year, popularly called the 'March Rush' (departments
scramble to use up their full sanctioned budgets before the deadline).
4. Constituent Powers and Functions
15 Ineffectiveness of Parliamentary Control
Parliament is vested with the power to amend the Constitution by way of
addition, variation, or repeal of any provision. The major part of the This explains the gap between theory and practice — why Parliament's
Constitution can be amended by a special majority — a majority of the control over government, though strong on paper, often doesn't work as
total membership of each House, AND a majority of not less than two-thirds effectively as it should in reality.
of the members present and voting in each House.
Some other provisions can be amended by Parliament with a simple
Why control falls short in practice
majority — a majority of the members present and voting in each House. Parliamentary control over government and administration in India is more
Only a few provisions of the Constitution require an additional step: theoretical than practical — in reality, the control is not as effective as it
amendment by a special majority but with the consent of at least half of ought to be. Several factors are responsible for this gap:
the state legislatures (by simple majority in each state legislature). (a) Parliament has neither the time nor the expertise to control the
However, the power to initiate the constitutional amendment process, in all administration, which has grown enormously in both volume and complexity.
three cases, lies exclusively in the hands of Parliament — and not the state (b) Parliament's financial control is hindered by the technical nature of the
legislature. demands for grants — parliamentarians, being laymen on most subjects,
There's only one exception to this rule: a state legislature can pass a often cannot fully understand these technical demands.
resolution requesting Parliament for the creation or abolition of a Legislative (c) The real legislative leadership lies with the Executive, which plays a
Council in that state — based on such a resolution, Parliament then makes major role in formulating policies — Parliament's role becomes more
a law to that effect. reactive than proactive.
To sum up, Parliament can amend the Constitution in three ways: (a) by (d) The very size of Parliament is too large and unmanageable for it to be
simple majority; (b) by special majority; and (c) by special majority with the truly effective in detailed scrutiny.
consent of half of all state legislatures. (e) The majority support that the Executive typically enjoys in Parliament
The constituent power of Parliament is not unlimited — it is subject to the reduces the real possibility of effective criticism (since the same party that
'basic structure' of the Constitution. In other words, Parliament cannot controls government also controls the legislative majority).
amend any provision of the Constitution in a way that destroys the basic (f) The financial committees, like the Public Accounts Committee, examine
features of the Constitution. This was ruled by the Supreme Court in the public expenditure only after it has already been incurred by the Executive
famous Kesavananda Bharati case (1973), and reaffirmed in the Minerva — thus, they only do 'post-mortem' work, rather than preventing wasteful
Mills case (1980). spending in advance.
5. Judicial Powers and Functions (g) The increased recourse to 'guillotine' (covered in the Budget section,
Parliament can impeach the President for violation of the Constitution. where undiscussed demands are all put to vote at once on the last day) has
It can remove the Vice-President from his office. reduced the scope of detailed financial control.
It can recommend the removal of judges (including the Chief Justice) of (h) The growth of 'delegated legislation' has reduced Parliament's role in
the Supreme Court and the High Courts, the Chief Election Commissioner, making detailed laws, and has correspondingly increased the powers of the
and the Comptroller and Auditor General, to the President. bureaucracy.
It can punish its own members or even outsiders for the breach of its (i) The frequent promulgation of ordinances by the President (on the
privileges or its contempt. advice of the government) dilutes Parliament's primary power of legislation.
(j) Parliament's control over administration is sporadic, general, and
6. Electoral Powers and Functions
mostly political in nature — rather than continuous, detailed, and
Parliament participates in the election of the President (along with the administrative.
state legislative assemblies), and elects the Vice-President entirely on its
(k) A lack of strong and steady opposition in Parliament, along with a
own (with the state legislatures having no role in this particular election).
general setback in parliamentary behaviour and ethics, has also contributed
Lok Sabha elects its own Speaker and Deputy Speaker, while Rajya to the ineffectiveness of legislative control over administration in India.
Sabha elects its own Deputy Chairman (recall: Rajya Sabha's Chairman is
the Vice-President ex-officio, not elected by the House).
Parliament is also authorised to make laws regulating the elections to the
offices of President and Vice-President, to both Houses of Parliament, and
to both Houses of state legislatures. Accordingly, Parliament has enacted
the Presidential and Vice-Presidential Elections Act, 1952, the
Representation of People Act, 1950, the Representation of People Act,
1951, and so on.
7. Other Powers and Functions
It serves as the highest deliberative body in the country — discussing
various issues of national and international significance.
It approves all three types of emergencies (national, state, and financial)
proclaimed by the President.
It can create or abolish State Legislative Councils, on the recommendation
of the concerned state legislative assembly.
It can increase or decrease the area, alter the boundaries, and change the
names of states of the Indian Union.
It can regulate the organisation and jurisdiction of the Supreme Court and
High Courts, and can establish a common High Court for two or more
states.