Union Budget :- Economics ! Lets Focus On History of Union Budget ! केंद्रीय बजट
Budget
The word budget is derived from the French word 'Bougette' or 'Buje' which means a 'Sack' or a 'small leather bag' that contain financial proposals.
Definition
A Government budget is basically as an annual statement for all the estimated income and estimated expenditure of the government in a fiscal year from 1st April to 31st March.
Budget usually contain financial data for previous year , estimated figures for the current year and recommended figures for the coming year for both expenditures and Revenues.
Historical Preview
In the constitution of India,the term 'Budget' is now where used. It is rather mention as annual financial statement. Under article 112 comprising the Revenue Budget,capital Budget and also estimates for the next fiscal year is called budgeted estimation.
Economic Affairs Department of Finance Ministry is responsible for Budget.
Preparation of Budget
The Budget is prepared by the Budget division in the ministry of finance [ MoF] after Consulting with other Ministries and Planning Commission .
Budget formation process generally start in September October and traditionally it will introduce in February March in Parliament.
The Budget goes through the following six stages in Parliament
1. Budget will be introduced by finance minister on pre-Recommendation of president.
2. Budget will be introduced in Lok Sabha.
3. Finance Minister will introduce Budget speech.
4. Every Ministry demand for grant.
5. Voting on demand for Grants will be held in Lok Sabha only [ 26 days ].
6. Passing of appropriation Bill [ Artical 114 of the Constitution of India ] and passing of Finance Bill [ Under Rule 219 of the Lok Sabha ].
Vote on Account
Usually the appropriation Bill [ Expenditure part of Budget ] is passed by end of April but government needs money from beginning of financial year.
So government use vote on account to remove money from consolidated fund of India.
Main Objectives of the Government Budget
1. Reallocation of Resources : it means managed and proper distribution of resources.
2. To reduce inequalities in income and wealth.
3. To achieve economic stability.
4. Management of public Enterprises.
5. To achieve economic growth.
Money Bill
A bill is said to be money bill which exclusively deals with matters prescribed in article 110 of the constitution.
Finance Bill
All the bills which deals with the provisions concerning revenue and expenditure.
Tax can be levied only by parliament.
Key Difference Between Money Bill and Finance Bill
The following points describe the fundamental differences between money bill and Finance bill.
Money Bill
1. A bill is considered as a money bill , which soley deals with the matters prescribed in Article 110 clause 1 of the constitution .
2. A money bill is more like a government bill.
3. A money bill can be introduced in Loksabha only.
4. Before the introduction of the bill , a money bill is to be presented before president or central govt. for approval.
5. Only those finance bills which carry speakers certification is termed as a money bill.
6. The power of Rajya Sabha is restricted , as the money bill can be passed with or without the recommendation of Rajya Sabha.
7. In a money bill , there is no provision regarding joint setting.
Finance Bill
1. A finance bill is a bill proposed in the parliament that contains provisions relating to revenue and expenses.
2. Finance bill is a form of ordinary bill.
3. A finance bill of
category A - can be originated in Lok Sabha.
Category B - can be introduced in either house of parliament.
4. The recommendation of president is mandatory , in case of finance bill.
5. The rest are finance bills.
6. In case of finance bill , both Lok Sabha and Rajya Sabha has equal powers , as the bill can not be enacted without their recommendation.
7. Finance bill , there are certain provisions concerning joint sitting of Lok Sabha and Rajya Sabha .
1. Consolidated Fund of India : [ Article 266 part - 1st ]
This fund is filled by :-
1. All the cash from direct and indirect taxes.
2. All the loans taken by the government of India.
3. Whenever someone returns principal / interest of loans given by govt. of India.
4. Only Parliament can withdraw money from this fund.
5. This is the largest fund of all other fund and govt. needs Parliament approval to spend money from this fund because Article 266 says so.
6. The income and expenditure of consolidated fund of India and different states are audited by comptroller and Auditor General of India [ CAG ].
2. Contingency Fund of India :- [ Article 267 ]
1. Held By the president of India.
2. This fund is operated by finance secretary
3. President can spend cash from this fund for-Emergency| unforeseen circumstances.
4. This fund is without the authorisation of parliament.
5. Total current amount-500 crore.
3. Public Account of India :- [Article 266 , Part - 2]
1. This is made up of :-
1. Bank saving account of the department| ministries [for day to day transaction]
2. National investment fund [money earned from disinvestment goes hear
3. National calamity and contingency fund [NCCF] for disaster management
4. National small shaving fund , defence fund
5. Prarambhik shiksha kosh , MNREGA fund.
6. Provident fund and postal insurance.
# Does govt. need Parliament's permission to spend money from here ?
No
4. Appropriation Bill :-
This bill is used to withdraw money from consolidated fund of india.
This bill should be passed by Parliament.
Overall finance minister must put three files on table of parliament :-
1. Appropriation Bill :-
To get permission of parliament , to take out cash from consolidated fund of india .
[Article -266]
2. Finance Bill :-
To get permission of parliament to collect taxes from' janta ' / public . [Article -265]
3. Annual financial statement :-
To show the Parliament data about incoming and outgoing money. [Article -112]
The receipts and disbursement are shown under three parts in which govt. accounts are kept. Viz.
1. The consolidated fund
2. The contingency fund
3. The public account
The annual financial statement distinguishes the expenditure on revenue account from the expenditure on another accounts , as is mandated in the constitution of India.
Facts :-
1. John Mathai proposed the first budget of republic of india in 1950 and also involved in creation of planning Commission.
2. Finance Minister 'Morarji Desai' has given the budget for the maximum number of times [10] followed by P. Chidambram who has given 8 budgets.
3. 'C. D. Deshmukh' was the first indian governor of RBI to have presented the Interim Budget for the year [1951-52].
4. 'Mrs Indira Gandhi' is the only women to hold the post of finance Minister and to have presented the Budget in her capacity as the prime minister of india in 1978.
5. The first such 'Mini Budget' was presented by TT Krishnamachari on 30th Nov 1956 in form of fresh taxation proposals through finance bills.
Contents of Budget :-
Budget :-
1. Revenue Budget
2. Capital Budget
1. Revenue Budget :-
1. Revenue Income
2. Revenue Expenditure
2. Capital Budget :-
1. Capital Income
2. Capital Expenditure
1. Revenue Income :-
1. Income from Tax
2. Income from without Tax
Budget :-
It is an Annual financial statement of the estimated income and estimated expenditure of the govt. during a Fiscal year.
1. Revenue Budget :-
It consists of the revenue income of the govt. and the expenditure met from such resources [revenues].
1. Revenue Budget included income and expenditure for the one year and those that will be incurred regularly in the running of business.
2. Revenue Budget cover those items which are of recurring nature and are non redeemable.
3. Revenue Budget is prepared for the revenue items , income and expenditure on the current Assets.
In shorts :
4. Revenue Budget has Revenue Income and Revenue Expenditure.
Capital Budget :-
It consists of capital Income and payments of govt.
1. A capital Budget estimates inflows and outflows on account of capital expenses.
Capital expenses means those expenses which will not be incurred regularly.
Ex - Buying new plant and machinery.
2. Capital Budget forecasts fixed asset addition and deletion.
3. Capital Budget is prepared for the capital items , income and expenditure on the capital assets.
4. It is for fixed assets.
Revenue Budget has two types :
1. Revenue Income.
2. Revenue Expenditure.
1. Revenue Income :-
Revenue Income is an income which 'Neither creates liability nor reduces Assets' is called Revenue Income.
Revenue Income is Recurring [ occur again periodically] in nature.
It is for short term and received in exchange of income.
Revenue Income has two types :-
1. Income from Tax
2. Income from without Tax
2. Revenue Expenditure :-
The expenses incurred in regulating day to day activities of the business.
Revenue Expenditure is an expenditure which 'neither creates assets nor reduces liability' is called Revenue Expenditure.
1. Revenue Expenditure id recurring in nature.
2. It is for short term.
Ex. Of Revenue Expenditure :-
1. Subsidy
2. Defence
3. Expenditure
4. Salary
5. Payments
Capital Budget has two types :-
1. Capital Income
2. Capital Expenditure
1. Capital Income :-
It is defined as the income generated from investment and financing activities of the business.
Capital Income is an income which 'Either creates liability or reduces assets' is called Capital Income.
Capital Income is Non-Recurring in nature.
It is for long term.
Capital Income decreases the value of assets or increases the value of liability. For Ex. Loan taken from govt. , Disinvestment , sale of land.
2. Capital Expenditure :-
It is defined as the expenditure incurred in acquiring a capital asset or improving the capacity of an existing one , resulting in the extension of its life years.
Capital Expenditure is an expenditure which 'either creates assets or reduces liability'.
Capital Expenditure is non-recurring in nature.
It is for long term.
Ex. Of Capital expenditure :-
1. Payment of loan
2. Purchase of land
3. Infrastructure Development
Table :
1.
Budget - Revenue Income
Liability - Not Created
Assets - Not Reduced
2.
Budget - Revenue Expenditure
Liability - Not Reduced
Assets - Not Created
3.
Budget - Capital Income
Liability - Created
Assets - Reduced
4.
Budget - Capital Expenditure
Liability - Reduced
Assets - Created
Difference between :
1. Revenue Income & Capital Income
2. Revenue Expenditure & Capital Expenditure
There are 3 situations of Budget :-
1. Deficit Budget
2. Surplus Budget
3. Balance Budget
1. Deficit Budget :- [Expenditure>Income]
It is an indicator of financial health in which expenditure exceed income.
It is helpful to short out the problem of recession.
2. Surplus Budget :- [Income > Expenditure]
It is a period when income exceed expenditure.
It refers to the financial states of Government.
A surplus is an indication that the govt. effectively managed.
It is helpful to Control Inflation.
3. Balance Budget :- [Income = Expenditure]
It is a situation in a financial planning or the budgeting process where income is equal to expenditure.
This is an ideal situation of Budget.
Deficit :-
An Excess of Expenditure or liabilities over income or assets in a given period.
Deficit =
Expenditure - Income ................[1]
Budget Deficit =
Revenue Deficit + Capital Deficit ..............[2]
Budget Deficit =
Budget Expenditure - Budget Income
Revenue Deficit =
Revenue Expenditure - Revenue Income....[3]
Capital Deficit =
Capital Expenditure - Capital Income.........[4]
On putting the value of eq. (3) and eq (4) in eq (2) , we get
Budget Deficit =
Revenue - Revenue + Capital - Capital
Expenditure Income Expenditure Income
Budget Deficit =
(Revenue Expenditure+Capital Expenditure)
- ( Revenue Income + Capital Income )
[ Budget Deficit =
Total Expenditure - Total Income ]
Budget Deficit :-
It is defined as the difference between total estimated expenditure and estimated Income.
It is a liability of govt. against RBI in a Financial year budget.
Fiscal Deficit :-
The difference between total expenditure and total income but excluding loan and other liabilities.
Fiscal Deficit =
Total Expenditure - Total Income
( excluding loan )
= Total Expenditure Total Income
( excluding liabilities )
Fiscal Deficit =
Total expenditure - ( Tax + Interest + Disinvestment )
Fiscal Deficit is the total liability of a govt. in a financial year.
Fiscal Deficit =
Budget Deficit + other liabilities
It means fiscal deficit is more comprehensive than budget deficit.
If fiscal deficit will increase , the liability of a govt. will increase which is an indication of less economic growth.
It will also demotivate foreign investors.
Primary Deficit :-
It refers to difference between fiscal deficit of the current year and interest payments on the previous borrowings.
Primary Deficit =
Fiscal Deficit - Interest payment
Primary Deficit is indication of present govt. Policies while fiscal deficit indicates performance of whole economy.
Fiscal Policy :-
It is the policy relating to govt. income from taxes and expenditure on various projects.
This policy is related to tax , subsidy , Interest payment , defense expenditure etc.
It is a strategy used by the govt. to maintain equilibrium between govt. Income and expenditure.
The fiscal policy of a country is announced by the finance Minister through Budget every year.
Fiscal Surplus :-
If the income exceeds expenditure , then this situation is known as fiscal surplus.
Fiscal Deficit :-
If the expenditure is greater than income , it is known as fiscal deficit.
The main objective of fiscal policy :-
1. To bring stability in the economy.
2. Better allocation of resources.
3. To reduce unemployment.
4. To increase growth of the economy.
There are two types of fiscal policy :-
1. Expansionary fiscal policy
2. Contractionary fiscal policy
1. Expansionary fiscal policy :-
The policy in which the govt. minimises taxes and increase public spending.
2. Contractionary fiscal policy :-
This policy in which the govt. increases taxes and reduce public expenditure.
Effective Revenue Deficit =
Revenue Deficit - Grant for Asset Creation
This concept was started in 2011 - 12 in India.
Important Questions : UNION BUDGET
1. Interest on public debt is a part of :
1. Transfer payments by the enterprises
2. Transfer payments by the Govt.
3. National income
4. Interest payments by house holds
Ans : 2
2. Which authority recommends the principles governing consolidated fund of India ?
1. Public Accounts Committee
2. Union Ministry of Finance
3. Finance Commission
4. Inter-state Council
Ans : 3
3. The 'break-even point' is where :
1. Marginal revenue equal to marginal cost
2. Average revenue equal to average cost
3. Total revenue equal to total cost
4. None of these
Ans : 1
4. Fiscal policy is related to
1. Money supply in the economy
2. Regulation of the banking system
3. Planning for economic development
4. Government's revenue and expenditure
Ans : 4
5. Finance Commission is constituted :
1. Every year
2. One in two years
3. Once in four years
4. Once in five years
Ans : 4
6. The budgetary deficit in the Union Budget of India is equal to
1. Revenue deficit plus Capital deficit
2. Revenue deficit minus Capital deficit
3. Revenue deficit plus Capital deficit
4. Fiscal deficit minus Capital deficit
Ans : 4
7. As we all know Ministry of Finance every year prepared Union Budget and present it to the Parliament. Which of the following is elements of the Union Budget ?
1. Estimates of revenue and capital receipts
2. Ways and means to raise the revenue
3. Estimates of Expenditure
1. Only 1
2. Only 2
3. Only 3
4. All 1 , 2 & 3
5. None of these
Ans : 4
8. Fiscal deficit is
1. Total income less government borrowing
2. Total payment less than receipts
3. Total payments less total receipts excluding borrowing
4. None of these
Ans : 4
9. Which of the following is NOT the part of the structure of the Financial System of India ?
1. Industrial Finance
2. Government Finance
3. Development Finance
4. Personal Finance
5. Agriculture Finance
Ans : 4
10. In the budget figures of the Govt. of India the difference between total expenditure and total receipts is called -
1. Fiscal Deficit
2. Budget Deficit
3. Revenue Deficit
4. Current Deficit
Ans : 1
11. In the Budget figures of the Government of India , interest payments , subsidies , pensions , social services and the like are parts of the -
1. Plan Expenditure
2. State Government Expenditure
3. Public debt in the form of capital expenditure
4. Non-plan Expenditure
Ans : 4
12. Which of the following is not an objective of Fiscal Policy in India ?
1. Full Employment
2. Price Stability
3. Equitable distribution of wealth and incomes
4. Regulation of international trade
Ans : 4
13. Subsidies are payment by government to:
1. Consuming Units
2. Producing Units
3. Banking Units
4. Retired Units
Ans : 1
14. Disinvestments is -
1. Offloading of shares of private companies to government
2. Offloading of government shares to private companies
3. Increase in investment
4. Closing down of business concerns
Ans : 2
15. Which of the following is a development expenditure ?
1. Irrigation expenditure
2. Civil administration
3. Debt services
4. Grant-in-aid
Ans : 1
16. Disinvestment in public sector is called -
1. Liberalization
2. Globalization
3. Industrialization
4. Privatization
Ans : 4
17. Fiscal policy is related to -
1. Monetory policy
2. Banking system
3. Economic progress planning
4. Receiving and expenditure of government
Ans : 4
18. According to socialism who is the greatest enemy of society.
1. Personal property
2. Capitalist class
3. Religion
4. Cost
Ans : 1
19. From National point of view , which of the following represent micro approach.
1. Study of selling of TISCO
2. Educated unemployment in India
3. Per capital income in India
4. Money inflation in India
Ans : 1
20. From National point of view , which of the following represent macro approach.
1. Selling of Bata-shoe company
2. Inflation in India
3. Import of mangoes from USA
4. Revenue from railway
Ans : 2
21. The prominent factor responsible for division of contingency fund.
1. Death
2. Harm
3. Accident
4. Vulnerability
Ans : 4
22. For which fund can the unanticipated expenditure be met without the prior approval of the parliament ?
1. Consolidated fund of India
2. Contingency fund of India
3. Vote on account
4. From that treasury
Ans : 2
23. The Economic Survey of India is published by -
1. Statistical department
2. CSO
3. Ministry of Finance
4. Department of economic affairs
Ans : 3
24. Government takes "Ways and Means advances" from
1. RBI
2. IDBI
3. SBI
4. ICICI
Ans : 1
25. The maximum part of revenue of Indian Railway comes from.
1. Coaches
2. Transport of goods
3. Tickets
4. Other sources
Ans : 2
26. Fiscal responsibility and budget management act [FRBMA] concerns :
1. Fiscal deficit only
2. Revenue deficit only
3. Both fiscal deficit and revenue deficit
4. Neither fiscal deficit nor revenue deficit
Ans : 3
27. Expenditure taxation and loan taking policies of Government are called as -
1. Fiscal policy
2. Monetary policy
3. Bank policy
4. Tax policy
Ans : 1
28. A larger part of the fiscal deficit in the union budget is filled by :
1. Tax revenue
2. Domestic borrowing
3. Foreign borrowing
4. Printing paper currency
Ans : 2
29. With what subject is Raghuram Rajan Committee connected ?
1. Austerity In government expenditure
2. Financial sector reforms
3. Export-Import balance
4. Rising prices
Ans : 2
30. If interest payments are subtracted from gross fiscal deficit , the residuary will be :
1. Gross primary deficit
2. Budgetary deficit
3. Monetized deficit
4. Revenue deficit
Ans : 1
31. As compare to revenue deficit , fiscal deficit will always remain :
1. Higher
2. Lower
3. Same
4. All of the three
Ans : 1
32. If interest payment is added to primary deficit , it is equivalent to :
1. Budget deficit
2. Fiscal deficit
3. Revenue deficit
4. Deficit financing
Ans : 2
33. Which of the following deficit gives major contribution to total deficit of Government of India ?
1. Revenue deficit
2. Budgetary deficit
3. Fiscal deficit
4. Primary deficit
Ans : 3
34. The amount of which of the following reflects the overall budgetary position of the government of India at a given time.
1. Revenue deficit
2. Total amount of income tax collected
3. Capital deficit
4. Fiscal deficit
5. None of these
Ans : 4
35. Who is the chairman of the 12th finance commission ?
1. Professor DT lakarawala
2. Dr. C. Rangrajan
3. Shri Digvijay Sinha
4. Shri K. C. Pant
Ans : 2
36. Economic Planning is in
1. Union List
2. State List
3. Shri Digvijay Sinha
4. Not any specific list
Ans : 3
37. From the following which one is not a tool of fiscal policy ?
1. Taxation
2. Public expenditure
3. Interest rate
4. Public debt
Ans : 3
38. Fiscal deficit is
1. Total expenditure - total received
2. Revenue expenditure - revenue receipts
3. Capital expenditure - capital receipts - borrowings
4. Some of budget deficit and governments market borrowings and liabilities
Ans : 4
39. Which one of the following forms the largest share of deficit in Government of India budget :
1. Primary deficit
2. Revenue deficit
3. Budgetary deficit
4. Fiscal deficit
Ans : 4
40. The largest item of Expenditure in the current accounts of the central government budget is :
1. Defence expenditure
2. Subsidies
3. Interest payments
4. Expenditure on social services
Ans : 3
41. 13th finance commission has been constituted under the chairmanship of :
1. Y. S. P. Thorat
2. Montek Singh Ahluwalia
3. C. Rangrajan
4. Vijay L. Kelkar
Ans : 4
42. The recommendations of the sarkaria commission relate to :
1. Distribution of revenue
2. Powers and functions of the president of India
3. Membership of parliament
4. Centre state relationship
Ans : 4
43. Which one of the following is the most important item of Expenditure of the Government of India on Revenue account ?
1. Defence
2. Subsidies
3. Pension
4. Interest payments
Ans : 4
44. Recommendations to the president of India on the specific Union-State fiscal relations are made by the :
1. Finance Minister
2. RBI
3. Planning Commission
4. Finance commission
Ans : 4
45. Deficit financing is an instrument of -
1. Monetary policy
2. Credit policy
3. Fiscal policy
4. Tax policy
Ans : 3
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