is an important facet of public administration, It Operates through the ing ‘Budget’ and encompasses the entire ‘budgetary cycle’, that is, formulation of the budget, ena tion of the budget, accounting and auditing. ““ premises to C.P. Bhambhri, “the term ‘budget’ was used in its present sense for the first time iy I a satire entitled ‘Opening the Budget’ directed against Walpole’s financial plan for that year”. N Significance The popular statements made on the im are mentioned below. /LD. White: “Every administrative act has its financial implications; either creating a charge ot treasury or making a contribution to it’. \portance of financial administration to the government adminis of arithmetic but in a thousand ways go to the root of prospei the strength of kingdoms”. tudget is a process in which the instru, se of economy”, of individuals, the relations of classes and Plowden Committee: “B; used to influence the cout FA. Nigro: “Financial administration is of Special importance today for the simple reason that, wilt there seems to be no limit to what we may ask of government, there is always a limit to the funds available.” ments of taxation and the expenditure * et is the life blood of the government”, 7 Kautilya:*p) undertaking. * depend upon finance. Hence, foremost attention shall be Paid to the treasuty-” s Fitter Common: Finance stsnsraion “al the core of modem government » i Pensable tool of administration,” Fy, |. The ) ance of the (yi di ible He also observed: affairs of povernmen” Et *YStEM lies in providing for dhe orderly administration or the financial Dimock: “Of ai FlteS the tocpene number ofty Financia. Aoministrarion 349] as universally involved in administration 8 oxygen is in the almosphere. ougett” which means a sack or pouch, It was a ed his papers to present to the Parliament year. From that association, it came to mean 1 proposals, ae en's financial programme for o pers themselVes; especially those containing finan | ae Fe definitions of budget ae: SE some 7 . worlod R. Bruce: “A budget is a financial statement, prepared in advance of the opening of a fiscal year, ofthe estimatt | qilne: “Budget is a detail of estimated revenues and expenditures—a comparative chart of revenues and sxpenditures—and over and. aDOVE this, it is an authority and direction of the competent authority given forthe collection of revenues and expenditure of public money.” ed revenues and proposed expenditures of a given organisation for the ensuing fiscal yé ts and pene Gaze: “The budget, in a modem state, is a forecast and an estimate of all public ree expenses, and for certain expenses and receipts an authorisation to incur them and collect ther Dimock: “A budget is a financial plan summarizing the financial experience ofthe past, stating a current plan and projecting it over a specified period of time in future.” Munro: “Budget is a plan of financing for the incoming fiscal year. This involves an itemised estimate of all revenues on the one hand and all expenditures on the other.” Taylor: “Budget is a financial plan of government for a definite period”. Rene Stourm: “Budget is a document containing a preliminary approved plan of public revenue and expenditure.” Wildasky: “A budget is a series of goals with price tags attached”. Thomas D. Lynch: “The one common subject in any budget discussion is money. Other subjects are important, but they are mentioned in relationship to money or are translated into money”. all the public receipts and expenses and, for certain sm and to collect them”. penditure during a fixed period: ‘zed and of the expenses to be G Jeze: “Budget is a forecast and an estimate of expenses and receipts, an authorization to incur the a Beaulieu: “A budget is a statement of the estimated r 8 a comparative table giving the amounts of the receipt incurred”, ted receipts and ex} is to be reali : Tt piety: “The Budget is something much more than a mete estimate of revenues and expenditure ia shouldbe, at once a report, an estimate, and a proposal” sncome) and expenditure of the WS, the budget is a statement of the estimated receipts (reventt oF income it of the government aS government in respect to a financial year. In other words, it is a financial document Pr : i ®cened tothe legislature and as sanctioned by the legislateFunctions he functions oF purposes of budget. untability of the Cxecutive (0 the egy, nates to superiors in the adninistaive policy to serve the functions of alg ig vints highlight! " : ihe financial and legal acc ccountability of subord f social and economic ‘The following 1. Hensures 2. [ensures the a 3, Itisan instrument 0! stabilisation. : E 4, Teacilitates the efficient execution 0” 5, [i facilitates ‘administrative managem government departments into a single plan. f the functions and services of government, rent and coordination as it unifies the vario Stig Principles ‘The principles of sound budgeting are: Budget Should be on ‘Annual Basis This means that the legislature should grant moyy executive for one year only. This principle of ‘annuality of budget is considered ideal because: a)a yey optimum period for which the legislature can afford to give financial authority 0 the exeutve; ty the minimum period needed by the executive o implement the budget effectively; and (c) a yearconey with the customary measure of human estimates. Presently, the financial year in India is from I* April March. However, forms Commission of India (ARC) recommended that the fire year should be from 1* November 3I* rt mental Basis This means that the expenditure and reve Estimates Should be on Depart estimates of budget should be prepared by the department directly dealing with them, inmespectve ofthe! that such expenditure or revenue is on account of another department. The observance of this pring suggested because: a it gives a clear picture ofthe pogramanes and activities of every department ax eee inncil solvency of every department. However, to avoid any confusion in this est diture or revenue oft department preparing the estimates should give footnotes indicating the expen: department dealt by another department. Budget Should be a Balanced One This means that the estimated expenditure should notexced i sited revenue In other words, a ‘balanced budget” is one in which the estimated expenditure mats cea ev If the estimated revenue is more than the estimated expenditure, it is called a ‘sur vudget’, and ifthe estimated revenue is less than the estimated expenditure, itis called a ‘deficit budge! iene be on a Cash Basis This means that the expenditure and revenue este ae eel © Prepared ea the basis of what is expected to be actualy spent or received during eles Tecate 3 ‘ash budgeting” is called ‘revenue budgeting’, under which the budgetilé schmaesbpopars 8 jemand and liability basis that is, the revenue and expenditure accrued it + aurae Niele = the budget of that financial year regardless of whether they are actually reali Seamed in that incl year. The USA, UK and India have cash budgeting, while France and some re revenue budgeting. Cash budgeting facilitates an carly closure of public secounts than revenue bud ese lgeting. The delayed accounts lose much of their value for purposes of finan ‘One Budget for all Fi Financial Tr ie assets and expend tall ie does This means that the government should incorporat pr rh rp ae ee eo eh seein puede pt ‘ernment ole, that is, overall surplus or deficit. The UKFi ——Finavcin Aownistaarion 454 x budget, while France, Switzerland » single erland and Germa 1g) He ee budget and railway budget. “rimany have plural bud i 115 ener lgets. India has two oe We should be Gross and not Net 1 in i ‘ tener whe government should be fully and so ju“ osition. The practice of deducting recei his means that Parately shown in ve of d pls from expenditure et Pecips oF expenditure is nota sound principe of bud i ces due to inc Belin, for ol over finances due to incomplete accounts, : ve i igs a should be Close This means that the bud; tina. overestimating leads fo excessive taxation and riser Close budgeting” also means that particular i oi ld be no demand for lumpsum grant. - of Lapse The budget should be on annual basis, financial year. If the granted money is not spe; rane y spent by the end of the i oo ‘ould expire and sn be returned to the treasury. This practice is nn at the ‘Cas ieee etna yea Indi and the UK is from Ist April to 31st March, inthe USA itis from Ist July 30%, vain France it is from Ist January to 31st December, a ‘emule of lapse facilitates effective financial control by the legislature as no reserve sina tsauthorisation. However, the observance of this rule leads toheavy rush of ex sheaf financial yea. This is popularly called a’ *March Rush’ in India, geverue and Capital Portions Should be Separated This means that the current financial rasetions of the government should be distinguished from the transactions of a capital nature and the two tbe shown in two separate parts of the budget called the ‘revenue budget’ and the ‘capital budget’. This rsesitates the separation of operational expenditure from that of investment expenditure. The revenue toigtis financed out of the current revenue while the capital budget is financed out of the savings and baring. form of Estimates Should Correspond to Form of Accounts This means that the form | boigetary estimates should correspond to the form of accounts to facilitate effective financial control. For trample, the budgetary heads and accounting heads are same in India, that is, major head, minor head, i: | Sbhead and detailed head. that is, the legislature should grant money to the funds can be built up penditure towards the i forms or Systems Tefoms (ystems) of budgeting which have evolved over a period of time are explained below. Ute it it onal budgeting. This m Budgetit is i ditional budgeting or conventional budgeting. 0 geting This is also called as traditi Z rantbnetng developed in the 18th and 19th century. Itemphases onthe items (objects) of expendi | met tithighing its purpose and conceives budget in financialferms. In other words, i Prose NST | a wi of abjetwise (line-item) classification. Under this system the amount granted by the i o ae | omct® tem should be spent on that item only. The objectives ofthis budgeting are to PVE! Net Iie td misuse of money granted by the legislature to the execu This yt of bens ean’ imum control of public expenditure, In fact, the sole object of laeved ies ae eal # | Simply of fonds, thats, ensuring legality and regularity of expendi, Tot Te existing | %, "Al budgeting* as the funds are allotted on an incremental basis[952__Pusuic AownistRATION __— udgeting (Carlier ¢ Performance Budgeting ‘The system of performance b a \ in scting ied in the USA Bet” Was coined py 1 oractivity budgeting) originate adoption of performane (ee by commission recommended the This " budgeting. Accordingly, it was introduced eet agement approach (© tng in u Truman 13 ON a f ‘i cating: emphasibes ey Unlike the line-item budgeting, the performance budgeting emphasises on the purpose 9. rather than the expenditure itself. It preset Oe a ponelions, Programmes, ative, og Tresablishes a correlation between the physical (performance or output) and financial guy each programme and activity. Hence, it necessitates @ functional classification of the budge, i) n j of performance budget was recommended first by U stim ‘a Parliament in Se Gavemment invited Prank W. Krause, an American ey ie ayatemn of budgeting in India Finally the Cental Govermeg’ say ability and feasibility of thi i ‘in performance budgeting in 19680n the recommendation ofthe Administrative Reforms Comin TheneliiSTODFECTIVEST OF The performance budgeting are as fy" to this commission, the advantages a jectives for which the funds are sou 18H bY the exe + (i) Itpresents more clearly, the purposes and obj from the parliament. : (i) It brings out the programmes and accomplishments in financial and physical terms, (iii) It facilitates a better understanding and better review of the budget by the Parliament, (iv) It improves the formulation of the budget. (v) It facilitates the process of decision-making at all levels of government. (vi) It increases the accountability of the management. (vii) It provides an extra tool of management control of financial operations. (viii) It renders performance audit more purposeful and effective. In 1968, the performance budgeting was introduced in four ministries of the Government of India Lie in 1977-78, it was extended to about 32 developmental departments. Programme Budgeting Like performance budgeting, programme budgeting (also known asp. programming-budgeting system—PPBS) also originated in the USA. It was introduced in 1965 by Presiet Johnson. However, it was abandoned in 1971. This system of budgeting integrates the planning, programmitg and budgeting functions. It incorporates a scheme of planning in the budgeting process. In the words of Handa, “*:ogramme budgeting or PPBS emphasises the planning aspect of budgeting for selecting best out of a number of available programmes and for optimising the choice in economic terms while alte funds in the budget.... It treats budgeting as an allocative process among competing claims (0 be cond by using the relevant planning techniqu A was re Paaoeeenoe Budgeting (ZBB) |The ZBB also originated and developed in the USA. Ievas rr Cone fier le manager of a private industry. It was introduced in the USA by President J i 5 a bis Labia budgeting or PPBS, the ZBB is also a rational system of budgeting: Unit retell ia ee ng be reviewed eitically and rejutified totaly from zero (or seratch) be inclodd in he budge Thus, the ZBB involves atta reexamination of all schemes afresh (50 bl expenditure. Inthe words of et aeProach to budgeting which begins with the estimation of te while pejaing tee a ee Handa, “The basic feature of a zero-based budget is that the def ad lgets, should not take anything for granted and, therefore, should start 0° at! slate. The budget making for the ensui e budget as the base or the starting pats year should be started from zero instead of treating lea FINANcia Abnnusination — 963 xd ZBB as “an operating, planning an define Ns Mg and budgeting a sist entre budget request in detail from scratch ones ting prea which requives each cl f 2 ¢ term zer0-bi e ot ach manael> to justify why he should spend any money at ae his sd shifts th ol atall, as how the job can th pel zfs of ZBB technique are: wi bl” aes/beneli we “io tes OF minimises the low priority programmes, imi mme effectiveness dramatically, cia ; el the progr’ i) wes: ‘i J pe high impae a the tax incr Gi ese view of sche erms of i eat aleve of scheme in ems other eosteetvens ‘ot lat uc badge adjstment rng the yar cliveness and cost benefits, wi Is the scarce resources rationally. in ticipation of the line personnel in the preparation of budget (iE eases the Pal : wae was first introduced in the Department of Science and Technology in 1943 and in all a programmes to obtain more finances, i vi ing 1986-87 fiscal year oe islation It is a formal process of policy review for eliminating the undesired, outdated, Sasa ieevant programmes. In the words of K.L, Handa, “It embodies the concept of self-retiring ho nt programmes DY providing for the termination of statutory authorisation of programmes. This is si by placing time limits on government programmes in the legislative enactments themselves and si jriatomatic etmination on the prescribed dates unless, affirmatively recreated by legislature go pacing a detaled review.” ep tvntges oF benefits ofthe sunset legislation are as follows: jp lexsures economy in government expenditure, {i Itavoids unnecessary expansion of government activities. al resources available for new programmes, Gi) ltmakes the finan fy) lteasures administra bass coming the resistance met within the executive fo eliminating an ongoing (i Itheps in overc by sifting the major responsibility for its evaluation tothe legislature roduced in the USA in 1981 during judgeting: The system of Top-Down Budgeting was int ‘eReaynera tis also known as “Target Base Budgeting. thas the elements of earlier systems of budgeting, tits, performance budgeting, PPBS, Management by Objectives (MBO), ZZB and Sunset Legislation. Nicholas Henry has defined Top-Down Budgeting as “ a method of ‘allocating public revenues to the the chief executive officer fea ‘ihich agency spending limits (ard, often, agency goals, 00) are set by ioe while agency heads are permitted to attain their goals in the manner that they deem 0 be eatin win these centrally set spending Timits" He further observed, “Top-Down Budgeting clear the central administration to set expenditure and programmatic goals; therefore, it is @ complete ofthe traditional budgetary process in government, whichis bottom-up. ‘The real system of budgeting tow ‘fom the top downward.” tive rationality by facilitating the reallocation of limited funds on a continuous programme mu Fon M 1 LATION OF BUDGET ring the statement Tem i : Alesina Of the budget” means i budget estimates, that is, prept the preparation of the buds es, Teatofexpenditure and receipt (income) ofthe Government of India In eSPESL ofeach financial Yea" ial Year in India is from Ist April to 31st March. -A- Suds agate eater eu, “ta | es ENACTMENT OF BUDGET . I of the budget (i.¢. the annual fj 4 f budget’ means the passage or approval nancial tay eal OG estimated receipts and expenditure of the Government of India in Tespect of 2 ae the Parliament and ratification by the President. This legalises the receipts and ex ov" s ov neither collect money nor g it i ith He 01 lg government. This means that the government can y pa enactment of the budget. nd money yj Constitutional Provisions ie Constitution of India contains the following provisions with regard to the enactment Of budget, (i) The President shall in Tespect of ever ty financial year cause to be laid before both the hows Parliament a statement of the estimated receipts and expenditure of the Gov year, ernment of lif al Financial Statement’ (Article 112), (i) No demand for a grant shall be made except on the recomme (ii) No money shall be withdrawn from the Consolidated Fund of. ) ndation of the President (Aricle 1B, India except under appropriation us {\') by law | i ill imposing tax shall be introduced in the Parliament except on the recommenda and such a bill shall not be by authority of law (Article 265), | ') Parliament can reduce or abolish a tax bu i ith (it) The Constitution has also defined the Tela amen uit tive roles or position of both the houses of Params regard to the Bin nett Of the budget (i. the Annual Financisl Statement) in the followits {®) A Money Bill or Finance Bill dealt must be bhi | : With taxation cannot be introduced in the Rajya St | ©) Introduced only in the Lok Sabha. vise | has no . + it is the exclusive priv! e Lok Sabha, Power to vote on the demand for grants; it is . (©) The Raj hin fo \ ae me en Teturn the Bill (or Finance Bill) to the Lok Sabha wit iv | dl ya Sit . __ this regard, Teject the recommendations made by Rai Aili) The estimates of ex Pe on the Consolidated fy (tile 112, ” te ohare catesah ©XPenditure on Tevenue account from other expenditur po Parliament. However {onsolidated Fund of Indig shall not be submitted cussed by the Parliament (Article 113). © Money Can either accept or enditure emby odied in the by Fund of ige®d in the bugs a? ture cl "i Iget shall show separately the expendilu™ iy a and th i Fund o! © expenditure made from the Consolidated ; eh it can be__ enactment n_ 357] i eee oh the following six stages ji wo a dee 8 SYS stages in the Partiament: Ww ontation ia s giscussion i ‘ cnet py departmental committees i satin demands for grants aM 2 of ppropriation Bill ‘ 7 “on of Budget Rule 213 of the Lok Sabha pro wns hain to oF MOTE parts, and when such presentation ta Lh iit were the budget. Accordingly, the budget is pre ante #81" oth are governed by the same procedure, ; ilway Budget precedes that of |B jueon of Ra Budget p iat of the General Bi fh en ty the Railway Minister in the third week of February th un Smiter onthe lst working day of February it ae inister presents the General Budget ant Minister Iget with a speech knows e' ‘ get speech in the Lok Sabha, the budget is laid before the aly ata me cea gro vote on the demand for grants, dala cea hat are also presented to the Lok Sabha along with the bude jorandum on the budget eee ides ies 7 the presentation of the budget to sean ts 2h par shal be deal with in ed in two parts—Railway Budget and nee While the former is presented to latter is presented to the Lok Sabha _jecite BU jis n0 POW" gocuments t ip an explanatory mem tn Appropriation Bill aA Finance Bill containing the taxation proposals taal reports of the ministries 1 Economic classification of the budget vs the economic survey report prepared by the Finance Ministry also used to be presented to the Lok soe withthe budget. Now, itis presented a few days before the presentation ofthe budget General Discussion The general discussion on budget begins a few days after its presentation, I ‘ae in both the houses of Parliament and lasts‘usually for three 16 four days. Iti a British legacy Dans this stage, the Lok Sabha can discuss the budget 2S whole or on any question of principle sdtheein but no cut motion shall be moved nor shall the budget be submitted to the vote of the House < Faunce Minister shall have a general right of reply at the end of the discussion. Sentiny by Departmental Committees After the general discussion on the bul “flat ate adjourned for about three to four weeks. During this gap periods the 17 departmental ane get is over, “ait ofthe Parliament examine and discus in detail the demands for grants ofthe concer mn “pear eportson them. These reports are submitted to both the House of Parliament for consideration _Thesunding committee system established is 1993 makes parliamentary financial control aver the “lis much more detailed, close, in-depth and comprehensive. tug cnDemands for Grants Inthe light ofthe repors® caus up voting of demands for grams ‘The demands yh after it has been duly voted. ng committees, the departmental standin : A demand are presented minis for grants is the exclusive privilege . he Teste noted Fr pr ont On, the voting deans oS pe voting i i, that i avi a as or of voting, the demands: » Ne at, the Ralya Sabha a recharged on he Cosel Fund of India is not r Sai abe part of the budget—the expen Vote (it can only be discussed).cece 1358 _ Pusuic ADMINISTRATION a -ivil expenditure and 6 for tally 109 demands (103 for civi or defen aa ‘Each demand is voted separately by the Lok Sabha, Dunn 5 i Pei . They can also mov: is ss the details of the budget. 1 © motions 4 ~ \s’ which are of three kinds: 0 Fede 5 While the General Budget has the Railway Budget has 32 deman the members of Parliament can disc demand for grant. Such motions are called as “cut motion Itrepresents the disapproval of the policy underlying the ig a ; icy Cut Motion ons of Policy ced to Re 1, The members can also advocate an alten pe iy, states that the amount of the demand be red! cents the economy that can be affected in the proposed capeigs Economy Cut Motion It repre: t [ states eke amount of the demand be reduced by a specified amount (which may be cither a ima I reduction in the demand or omission or reduction of an item in the demand). in Token Cut Motion It ventilates a specific grievance which is within the sphere of responsibility ofthe Government of India. It states that the amount of the demand be reduced by Rs 100. ‘A cut motion, to be admissible, must satisfy the following conditions: () It should relate to one demand only. ; (ii) It should be clearly expressed and should not contain arguments or defamatory statements. (iii) It should be confined to one specific matter. (iv) It should not make suggestions for the amendment or repeal of existing laws. (v) It should not refer to a matter that is not primarily the concern of Union government. (vi) It should not relate to the expenditure charged on the Consolidated Fund of India. (vii) It should not relate to a matter that is under adjudication by a court. (viii) It should not raise a question of privilege. (ix) It should not revive discussion on a matter on which a decision has been taken in the same session. (x) It should not relate to a trivial matter. The significance of a cut motion lies in two things: (a) It facilitates the initiation of concentrated discussion on a specific demand for grant; and (b) It upholds the principle of responsible government by probing the activities of the government. However, the cut motions do not have much utility in practice. They are only moved and discussed in the aaa tpased 7 the government enjoys majority support. Their passage by the Lok Sabha amounts rae oak af Priamentary confidence in the government and may lead to its resignation. then eg eee tloted i 7 voting of demands. On the last day (ie. 26th day) the Speaker puts all Tea a amas vod isposes them whether they have been discussed by the members or nol. oat raw MoI ro 7 is assented to by the eae im Get mey from the Co im the Consolidated Fund of India. This means ee ee This Act normal activities ater 3s Moe ol the end of April, Bas md ei Government overn Constitution has authorised the agen of the fin to make any i x » grantin advance in espect tothe estimargt Cully, theaise F MANCIN. ADtanUsteTION 959, the financial Yeah eta completion of th df iatio is provision is ‘ApproP’ provision is ki ie ne APPT SareneTeTT ioe mown estimation, © Voting ra of the pie the demands for a for grants and the over. Itis Vote ¢ i ve “Lis generally granted fortwo monde is passed (or mance Bill Under Rule 219 of the Lok Sabha, the“ 1S for an amount \ the ‘Finance Bill’ F i to give effect to the financial 7 iB each ¥' neial proposals ‘means the Bill ordina poet CA ar, and inclades a bill to give effect to Of the Government of Ina Bill ordinarily Supplementary fin; lia for the next p ly ot nancial 7 tig at all the conditions applicable to a M ancialprop« pois see 40 reject oF reduce a tax) Tre ean Propel fray Of Finance Bill, 0 cent and assented to by the Pr tance Bill must be enacted (i.e. alises the income side of the budget itd completes the process ofthe ' enactment of the tol ee parliam a nse ACT IEE wt ier Grants ynich contains the ordinary estimates of income and expenditure for one financial financia fin © the budget wh 0 ous other Kinds of grants are made by the Parliament under extraordinary or special circumstan: ances. a = se esiained DETOW saplementary Grant tin Act for a particu poss hal Yea. Métional Grant Itis granted when a need has arisen during the current financial year for additional cgsdre upon SOME new service not contemplated in the budget for that year. fuess Grant It is granted when money has been spent on any service during a financial year in excess 1 for that year. It is voted by the Lok Sabha after the ‘iée anount granted for that service in the budget sal year, demands gs grants are submitted to the Lok Sabha for voting, they must be Accounts Comt ‘we of Credit It is granted for meeting an unexpec' heel magnitude or the indefinite character of the service 1 ctinaly piven in a budget. Hence, itis like a blank cheque given feeptimal Grant It is granted for a special purpose and forms no Pa ‘ec year, It is granted when the amount authorised by the Parliament through the ar service for the current financial year is found to be insufficient for the ted demand upon the resources of India, when on fhe demand cannot be stated with the to the executive by the Lok Sabha. wrt of the current service of any new service can be made nditure on a ‘0 mitted to the vote of the y y agent Iti granted when funds to meet the proposed cx} cna WSite vd sppropriation. A demand for the grant of @ token sum (of Re 1) is su! Gotti assented, funds are made available. ee le hich additional, excess and exceptional grants and vote of credit are regu is applicable in the case of a regular budget. e same int by the its enactmet with he Yeu TION ol F BUDGET ation of the budget Lath dealing it of badger we ae means the enforcement or implement get at hey ag ttt words, it means the implementation of the Appropria the Finance Act (dealing with the revenue). — —_