Indian Polity 24-Vocabulary flashcards
Role and significance of financial administration
Financial administration is essential because all needs for the state’s functions require money (unity, sovereignty, development, law and order, welfare).
At the union level, the primary tool for financial administration is the Union Budget.
A financial year runs from ext{April 1} to ext{March 31}.
Budget considerations involve two main questions: what is the expenditure (how much will be spent) and where will the money come from (revenue). This is reflected in the budget as expenditure and revenue plans.
The Union Budget comprises two key bills: the Appropriation Bill (expenditure) and the Finance Bill (revenue). Both are money bills.
A money bill is defined by its focus on expenditure and revenue, especially taxation proposals; any bill that deals with imposition, alteration, abolition, or remission of tax is a money bill. Hence the Finance Bill primarily handles revenue through taxation proposals.
The Finance Ministry houses the Department of Economic Affairs, which includes the Budget Division; this division is responsible for budget preparation at the union level.
The Budget preparation process involves forms sent to all central ministries/departments (e.g., Railways, Home, Defence, Agriculture, Environment, Space, Atomic Energy, etc.).
Forms request:
Last year’s expenditure and current spend-to-date
Proposed expenditures for the next financial year
Details on “run rate” of ongoing items (standing items) vs. new items (new schemes or policies)
Standing items (ongoing expenses from last year) are typically approved; new items require justification and scrutiny from the Finance Ministry.
Scrutiny by the Department of Economic Affairs focuses on new items and policies to ensure budget discipline and alignment with overall fiscal targets. If a ministry seeks funds for a new scheme, the department scrutinizes the need, purpose, and affordability; unresolved disputes may be escalated to the Cabinet.
About five to six months before the budget presentation (generally around February), the Economic Affairs Department issues forms and collects data; existing ongoing schemes require less scrutiny than new schemes.
After gathering data, the Finance Ministry coordinates with tax authorities (Central Board of Direct Taxes and Central Board of Indirect Taxes) to formulate taxation proposals for the Finance Bill.
The Cabinet approves the budget before it is sent to the President and Parliament.
The Budget is a secret document until it is presented in Parliament; cabinet decisions are taken in private before disclosure.
The Budget (Annual Financial Statement) is not technically in the Constitution but is treated as the annual financial statement; the Constitution assigns the duty of presenting it to the President, who then entrusts the Finance Minister to present it in Parliament.
In practice, the Finance Minister presents the budget speech on the President’s behalf on the floor of the Lok Sabha.
History and terminology:
The term budget is sometimes linked to the French word bougie (leather bag) that carried proposals.
In Britain, the Chancellor of the Exchequer carried a leather bag containing budget proposals; in India, the analog is the budget being presented in Parliament (now digitally via iPad, not leather bag).
The traditional timing for presenting the budget was February at 5:30 PM, mirroring Britain’s schedule; under Modi’s government, presentation shifted to February 1 and to a morning slot (11:00 AM) from 2017 onward.
Railway Budget integration: In 2017, the government merged the railway budget with the general union budget.
The budget lifecycle in brief:
Form/data collection by Department of Economic Affairs from ministries
Scrutiny and consolidation to prepare expenditure estimates and revenue proposals
Preparation of the Appropriation Bill (expenditure) and Finance Bill (revenue)
Cabinet approval
President’s presentation of the Annual Financial Statement (Budget) on the floor of the Parliament by the Finance Minister
First Lok Sabha consideration (money bill path), followed by Rajya Sabha consideration; general discussion occurs in both houses
Post-budget scrutiny by Departmentally Related Standing Committees (DRSCs)
Voting on Demands for Grants; appropriation follows after these votes
If all passes, the Finance Bill is enacted and the budget becomes operative
The Constitution’s role and Articles (as discussed):
Joint sitting for deadlock resolution on ordinary bills: Article 108
Money bills: Article 109 (introduction in Lok Sabha; Rajya Sabha’s role is limited; no final veto) and Article 110 (definition of money bill)
President’s assent: Article 111; President can assent or withhold assent; President can return a bill (except money bills) for reconsideration
The Annual Financial Statement is presented under Article 112
The process for money bills and their passage is distinct from ordinary bills
Budget secrecy and executive Parliament interaction:
The President presents the annual financial statement; the Finance Minister delivers the budget in Parliament
The President’s role is ceremonial and constitutional; the real budget decisions are made by the Cabinet and Parliament
The Parliament exercises control over the executive through questions, discussions, motions, and resolutions
Budget year, expenditure, and revenue
Financial year definition and framing:
ext{Financial Year} = [ ext{April }1, ext{ to } ext{March }31]
Key financial questions in budgeting:
Expenditure: What is the amount the union government will spend in the year?
Revenue: How much money will be raised in the year?
Budget documents and money bills:
Appropriation Bill: covers expenditure
Finance Bill: covers revenue (tax proposals) and any changes to tax rates or structures
Both are Money Bills (i.e., primarily dealing with money matters)
Finance Ministry structure relevant to budgeting:
Department of Economic Affairs → Budget Division (central planning and budget preparation)
The role of taxation in the Finance Bill:
Any bill that talks about imposition, alteration, abolition, or remission of tax is a Money Bill
The claim about “Annual Financial Statement”:
Constitution refers to it as the Annual Financial Statement; it is the responsibility of the President to present it in Parliament; the Finance Minister presents it on behalf of the President
Budget preparation process and scrutiny
Forms and data collection:
The Budget Division sends forms to all central ministries/departments
Information collected includes last year’s allocation, current expenditures, and next year’s requirements
Distinction between standing and new items:
Standing items: ongoing expenditures that are continued in the next year
New items: require justification and scrutiny; may be rejected or reduced by the Finance Ministry/Cabinet
Scrutiny and run-rate analysis:
Scrutiny focuses more on new items and proposed schemes rather than established ongoing schemes
Departments must justify new schemes and policy changes and explain the need and expected outcomes
Role of the Cabinet and inter-ministerial discussions:
If departments demand funds for new or higher-level schemes, this becomes subject to Cabinet scrutiny and approval
Timeline before budget presentation:
5–6 months before February (budget day), the DEA issues forms to ministries
Interaction with tax authorities and revenue projections:
After ministry responses, the Finance Ministry consults tax boards to formulate revenue proposals for the Finance Bill
Secrecy and approval:
Budget is treated as a secret document until the Parliament is presented; cabinet decisions are taken before release
Budget presentation and the role of Parliament
Presentation and constitutional basis:
The President presents the Annual Financial Statement; the Finance Minister presents before Parliament on the President’s behalf
The Union Budget—consisting of Appropriation Bill and Finance Bill—is presented in the Lok Sabha first because it is a Money Bill
Cabinet and President sequence:
Cabinet approves the budget; President is requested to introduce the Budget in Parliament
The Finance Minister presents the Budget in Parliament on behalf of the President
History and timing:
Feb 1 is the traditional budget day in India
The budget debate includes a general discussion in both Houses and a flow of comments and questions from the opposition and treasury benches
The role of leadership and public sector interactions:
The Finance Minister’s budget speech uses phrases such as “I propose to allot X for Y” to indicate proposals that require parliamentary approval
The budget speech attempts to garner support from both ruling party and opposition, as well as stakeholders (industry groups, etc.)
Post-budget processes:
General discussion lasts 3–4 days; then both Houses are adjourned to allow the DRSCs to scrutinize the budget
DRSCs (24 in number) scrutinize departmental demands; each committee comprises MPs from both Houses (31 MPs per committee: 21 from Lok Sabha and 10 from Rajya Sabha)
Ministers normally do not sit on these committees because they are the ones seeking money; opposition MPs participate to ensure accountability
Adjourning and the role of the Speaker/Chairman:
After general discussion, the session may be adjourned; this does not necessarily prorogue the session—it delays the continuation of business
The Lok Sabha’s exclusive power on Demands for Grants:
Voting on Demands for Grants is exclusive to Lok Sabha; the grants become part of the Appropriation Bill after approval
Expenditure can be voted (expenditure voted) or charged (expenditure charged) from Consolidated Fund of India
Expenditure types:
Expenditure charged: fixed, not subject to parliamentary vote (e.g., salaries of constitutional officers)
Expenditure voted: requires parliamentary approval for withdrawal from the Consolidated Fund
Process of approvals: Appropriation, Finance, and passage timelines
Sequence of bills:
Appropriation Bill first (expenditure), followed by the Finance Bill (revenue)
The total of voted Demands for Grants forms part of the Appropriation Bill
Passage timelines and consequences:
The Finance Bill must be passed within 75 days of the budget presentation
The budget is considered passed when both houses pass the Finance Bill and Appropriation Bill by simple majority
What happens if Parliament is not functioning smoothly?
An all-party meeting may be convened to find a way to pass the budget in the interest of public welfare
Guillotine/closure: the presiding officer may club multiple demands for grants and push for a single vote if time is short; this is controversial and generally discouraged as it limits thorough scrutiny
Interim arrangements and vote-on-account:
If budget passage is delayed, a Vote on Account can be used to provide funds for a short period to continue government operations
Vote on Account covers only expenditure; it is not a full budget and is used to bridge the gap until a full budget is enacted
If the government is in an election year, the outgoing government may present a Vote on Account and/or interim budget to cover the transition period
Interim budget vs vote on account:
Interim budget: a partial budget for the interim period when the full year budget is not yet enacted
Vote on account: a temporary arrangement to allow government expenditures for a short period until the budget is passed
Money Bill, joint sittings, and constitutional provisions
Money Bill characteristics and passage:
Money Bills are introduced in Lok Sabha; Rajya Sabha may only seek to suggest amendments and has limited veto power
The definition of Money Bill is in Article 110; the President acts on these bills as per Articles 111 and 112
No joint sitting for Money Bills; Rajya Sabha cannot block a Money Bill beyond its limited role
Joint sitting for ordinary bills:
Deadlock resolution in joint sitting under Article 108; requires simple majority; does not apply to Money Bills
Important article references quoted in lectures:
Joint sitting: Article 108
Money Bill: Article 109; Definition under Article 110
President’s assent and disallowance: Article 111
Annual Financial Statement (Budget): Article 112
Budget-related procedures and other mechanisms: Articles 113, 114, 115, and 116 (as discussed in classroom context)
Quorum and attendance:
Lok Sabha quorum: one-tenth of total membership; Rajya Sabha: one-tenth of total membership
Parliament can alter quorum ratios by law (e.g., to one-fifth, two-thirds, etc.)
Absence and vacancies:
A member cannot simultaneously be a member of both Houses; if chosen for both, the parliamentary seat is vacated in one house
If a member is absent for 60 days without permission, the house may declare his/her seat vacant
Speakers, Deputy Speakers, and panels:
Lok Sabha Speaker and Rajya Sabha Chairperson preside; in absence, Deputy Speaker or Deputy Chairperson presides as per rules
In case of vacancy, the House selects new Speaker/Deputy Speaker; if both posts are vacant, the President may decide (subject to applicable rules)
Special addresses and messages:
The President may address either one house or both; may send messages to the houses
Special addresses occur at the commencement of the first session after general elections and the start of each year
Questions, zero hour, and debate practices
Question Hour:
The first hour of parliamentary business; legislators ask questions to ministers, seeking information and accountability
Questions can be Starred (oral answer, with possible supplementary questions) or Unstarred (written answer)
Short notice questions can be asked with ten days’ notice
Zero Hour:
An Indian innovation since 1962, occurring after Question Hour and before the day’s agenda; allows raising matters without prior notice
Used for urgent public importance issues; not mentioned in constitution; governed by rules of the Lok Sabha and Rajya Sabha
Starred, Unstarred, and Short Notice questions:
Starred questions require oral answers and allow supplementary questions (up to five)
Unstarred questions require written answers; no supplementary questions
The presiding officer can convert a starred question into an unstarred one if deemed appropriate
Agenda and Business Advisory Committee (BAC):
The agenda is prepared by the BAC; question hour follows and then the main agenda
Motions and resolutions:
Substantive motions have independent existence (e.g., No Confidence Motion, Confidence Motion, Adjournment Motion, Censure Motion)
Subsidiary/substitute motions depend on a bill or another motion and may be used to refer a bill to a committee or to adjourn the house; they do not have independent existence
Resolutions reflect the house’s resolve and may be private member or government resolutions; statutory resolutions are binding under constitutional provisions (e.g., removal of a judge)
Privileges and immunity: MPs retain certain privileges; the jurisdiction of the house over its members is preserved under Article 105 and related provisions
Accountability tools: DRSCs, PAC, CAG, and parliamentary reform ideas
Departmentally Related Standing Committees (DRSCs):
24 DRSCs; each committee includes 21 Lok Sabha MPs and 10 Rajya Sabha MPs; ministers do not sit on these committees (to avoid conflicts of interest)
Committees scrutinize budgetary demands for their respective departments; reports inform the Lok Sabha’s approval of expenditures
Public Accounts Committee (PAC):
22 members: 15 Lok Sabha MPs, 7 Rajya Sabha MPs; chairperson is typically from the opposition
CAG supports PAC by providing technical data on expenditures and receipts; PAC examines whether funds were spent properly and will recommend action on any excess grants
Excess Grants and Vote of Credit:
Supplementary grants: requested when actual expenditures exceed budgeted funds during the year and additional authorization is required
Excess grants: parliamentary approval required for spending beyond the approved grants
Vote of Credit: a blanket authorization to the executive to spend more money for new policies or urgent needs; requires parliamentary scrutiny and caution to prevent misuse
Receipts and accountability: ministries must provide receipts and justification to PAC and CAG if they have spent more than allocated
Pre-legislative consultation and modern reforms:
2014 policy emphasized pre-legislative consultations and published consultation records with stakeholders; later Lok Sabha sessions saw a decline in pre-legislative consultation practice
Calls for mandatory inclusion of consultation summaries with bills; demands for more robust pre-legislative scrutiny by DRSCs and joint constitutional committees
Improving parliamentary productivity (as discussed in the lecture):
Establish a parliamentary calendar with a minimum number of days (e.g., 100 days/year) for sessions
Ensure a deputy speaker from the opposition to foster balanced leadership in both Houses
Strengthen pre-legislative consultation and require publishing consultations with bills and objects/ reasons
Emphasize joint constitutional committees to review constitutional amendments before introduction to avoid judicial scrutiny and constitutional invalidity
Public accountability and transparency challenges:
Concerns about declining sittings and rapid passage of bills without adequate debate (e.g., farm laws passed in 2020 without full discussion)
Calls for more rigorous committee scrutiny and a better balance between executive and legislative oversight
Optional reforms touched upon in the lecture:
Prime Minister’s Question Time (as in the UK) to improve direct accountability of the Prime Minister
Strengthening the role of the Deputy Speaker and ensuring more opportunities for cross-party debate
Recalling importance of the budget’s link to rule of law and the need to curb excessive delegation of legislative power to the executive (delegated legislation)
Key takeaways and exam-oriented pointers
The Union Budget is the primary instrument of financial administration at the center, consisting of the Appropriation Bill and Finance Bill, both money bills.
The budget process involves: data gathering from ministries, scrutiny by the Budget Division, cabinet approval, presidential presentation, parliamentary passage, and post-budget scrutiny by DRSCs and PAC/CAG.
The Budget cycle emphasizes accountability: Parliament votes on Demands for Grants; expenditure is either voted or charged; the distinction is essential for controlling public funds.
Important timelines and thresholds:
Budget presentation: February 1 (historically); now often in February with changes in timing
Finance Bill: to be passed within 75 days of budget presentation
Appropriation Bill and Finance Bill passage by both houses (simple majority)
Special provisions: interim arrangements (Vote on Account) and interim budgets in election years; contingency arrangements for supplementary/excess grants; and the role of the Public Accounts Committee in ensuring proper expenditure.
Constitutional framework and practical governance: money bill dynamics, joint sittings for ordinary bills, and the overarching need for a robust parliamentary calendar, pre-legislative consultation, and strong DRSCs to enhance the Parliament’s role as a custodian of public funds and a check on the executive.
Ongoing debates about the balance of power between the executive and the legislature highlight the need for reforms to make Parliament more productive and its processes more transparent and deliberative.
Note: The figures, article numbers, and procedural details provided reflect the lecture content and should be cross-checked with current constitutional provisions and updated parliamentary rules for accuracy in exams. For a precise constitutional reference, consult the Constitution of India and the latest Lok Sabha/Rajya Sabha Rules of Procedure.