BUDGETARY PROCEDURE IN INDIA

The Constitution of every country lays down a specific budget procedure and thus the budget of
every country is framed, passed and executed in accordance with that specified procedure. The budget
procedure of almost all democratic countries including India is as follows:

(1) Preparation of the Budget.

(II) Presentation and Enactment of the Budget.

(III) Execution of the Budget.

(1) Preparation of the Budget

In India, the budget is the annual financial statement of accounts for the preceding and current year
as well as the estimates of the revenue and expenditure for the coming year. The financial year of the
Indian budget commences from 1st April of each year and ends on 31st March of the following year.
The Finance Ministry is responsible for framing the budget of the Union Government. Further, the
respective Finance Ministries are responsible for framing the budgets of the states. Since India has a
Federal Government set-up, the central and state governments prepare their budgets separately. The
Ministry of Finance is helped in this task of framing budget by Administrative Ministries and
Departments, Audit Departments, Planning Commission, Central Board of Direct Taxes and Central
Board of Excise and Customs. The general rule is that one who spends the money must also prepare
estimates in advance. Hence, preliminary estimates are prepared by the disbursing offices as per the
guidelines given to them. Administrative Ministries and heads of the respective Departments are
supplied with skeleton forms on which they are asked to prepare the estimates. The prescribed form
has four different columns: (i) actuals of the previous year, (ii) sanctioned estimates for the current
year, (iii) the revised estimates for the current year and the budget estimates for the next year. These
estimates are prepared on the prescribed form and in the prescribed manner. These estimates are then
consolidated by the head of each department. Further, these estimates are then consolidated by the
Ministries concerned and passed on to the Finance Ministry for scrutiny. Finally, the Finance Ministry
consolidates all these estimates and prepares the budget for the presentment before the Parliament..

Revenue Budget and Capital Budget. Under the Constitution, the budget in India is divided into two
parts:

(i) Revenue Budget. The revenue budget deals with the receipts from taxation, public
enterprises etc. and the expenditure is met from these revenues. Revenue expenditure is for
 the normal running of the government. The expenditure which is met out of the revenue
receipts is called revenue expenditure or expenditure on revenue account.
(ii) Capital Budget. The capital budget is the statement of all capital expenditure and the
borrowings to meet it. Capital expenditure is met out of capital receipts.

(II) Presentation and Enactment of the Budget

As soon as the budget is ready, it is placed before the Lok Sabha and Rajya Sabha in the case of a
central government budget, and before the Vidhan Sabha and Vidhan Parishad in the case of the state
budgets for necessary approval. The budget has to be passed by Vidhan Sabha only in those states
where there is no Vidhan Parishad. The taxes and expenditure proposed in the budget cannot be given
effect to until the sanction of the relevant legislative body is obtained. According to the Indian
Constitution, all money bills must be initiated in the lower house, so they are first introduced in the
Lok Sabha at the centre and the Vidhan Sabha in the states. The Central Government budget undergoes
the following stages:

(1) Presentment of Budget in Parliament. The budget is presented by the government before the
parliament in the case of central government budget and before the state legislatures in the case of state
budgets. The budget is presented by the Finance Minister in the Lok Sabha and by a Junior Minister
in the Ministry of Finance in Rajya Sabha. The Finance Minister makes a detailed budget speech at
the time of presenting the budget before the Lok Sabha. The day of the presentation of budget is called
the 'budget day'.

(2) General Discussions. After the presentment of the budget, the time and day for general discussions
is fixed by the speaker in consultation with the leader of the house. During general discussions, the
members of parliament have a right to criticise the various proposals and estimates as shown in the
budget. As soon as the general discussions are over, the Finance Minister replies to all the criticisms,
objections, doubts etc. raised against the budget. The state of general discussions is over after the reply
of the Finance Minister.

(3) Voting. As soon as the general discussions on budget are over along with reply of the Finance
Minister, the question arises of voting on the budget. From voting point of view, votable items and
non-votable items are shown separately in the budget as given below:

(a) Non-votable Items Expenses. Non-votable items are those which are not to be discussed,
reduced or revised by the parliament. Non-votable items include: (i) the salary and allowances of the
President of India and other expenditure related to his office, (ii) salaries and allowances of the
Chairman of Rajya Sabha and Speaker and Deputy Speaker of the Lok Sabha, (iii) the debt charges of
the Government of India, (iv) salaries and pensions of the Judges of the Supreme Court, (v) salaries,
allowances and pensions of the Comptroller and Auditor General of India etc. There is no need of
voting in the parliament for the approval of these non-votable expenses items.

(b) Votable Items Expenses. Votable item expenses are those which are subject to the approval of
the parliament. It refers to the demands of various ministries for grants. The demand of each ministry
is introduced by the Minister in charge of the respective ministry or by somebody else on his behalf.
A demand becomes a grant when it is voted. The parliament is empowered to accept the demands in
toto, to reject the demands or to reduce the demands. However, the parliament cannot increase the
demands. Further, it should be noted that the demands for grants are voted only in Lok Sabha in Centre
and Vidhan Sabha in a state respectively.

(4) Passing of the Appropriation Bill. In the Constitution of India, it has been laid down that no
money can be appropriated out of the Consolidated fund, except in accordance with the law. Hence,
Appropriation Bill has to be passed by the Parliament. The Appropriation Bill includes all the grants
for the year whether votable or non-votable. It is moved when the demands for grants have been voted
in the house. After passing of the Appropriation Bill, the government is empowered to withdraw from
the Consolidated Fund the amounts voted by the Parliament so as to meet both votable and non-votable
expenditure.

(5) Passing of the Finance Bill. After passing of the Appropriation Bill, Finance Bill is presented
before the Parliament. The Finance Bill when passed becomes the Act, which authorises the
government to collect the required money through taxation or the provisions that have been made in
the budget. The Bill embodies the proposals of government to collect money, levy new taxes, effect
modifications in the existing tax structure or continue the existing tax structure beyond the period
approved by the parliament.

The budget is said to be passed when Appropriation Bill and Finance Bill are passed by the Lok
Sabha. After the budget is passed in the Lok Sabha it goes to Rajya Sabha. The Rajya Sabha does not
enjoy the power of amending or rejecting the budget. The Rajya Sabha can make only
recommendations to the Lok Sabha but within a period of 14 days only. The Lok Sabha may either
accept the recommendations of Rajya Sabha or reject them. After passing the budget in both the houses,
it goes to the President for assent. Generally, the President gives his assent on account of his very
limited powers.
(III) Execution of the Budget

After passing of the budget, the question arises of its execution. The responsibility to execute the
budget lies with the central government in case of central budget and state government in case of a
state budget. It is expected that the government will execute the budget with a high degree of integrity
and efficiency. The execution of the budget has three aspects: (i) Collection of Revenue, (ii) Proper
custody of collected funds, and (iii) Distribution of Grants to different administrative ministries or
departments. Each administrative ministry or department is required to submit periodical returns to the
Finance Ministry so as to enable it to exercise full control over it throughout the whole financial year.
Almost the same procedure is adopted in states also.