Government Budgeting

What the official syllabus says

Main Examination, Paper IV: General Studies III.

• Government Budgeting.

Topics in detail

Constitutional framework

• Annual Financial Statement (Article 112); charged and voted expenditure
• Demands for grants (Article 113), the Appropriation Bill (Article 114), supplementary and excess grants (Article 115)
• Vote on account, votes of credit and exceptional grants (Article 116)
• Money Bills (Article 110) and Financial Bills (Article 117); the Finance Bill
• Consolidated Fund, Public Account (Article 266) and Contingency Fund (Article 267) of India and of the states
• No tax without the authority of law (Article 265)
• Role of the Comptroller and Auditor General and the Public Accounts Committee in financial accountability

The budget process

• Stages: preparation, presentation, general discussion, scrutiny by departmentally related standing committees, voting on demands, passing of the Appropriation and Finance Bills, execution and audit
• Cut motions: policy cut, economy cut and token cut; the guillotine
• Merger of the Railway Budget with the Union Budget (from 2017-18) and the advancing of the budget date
• State budgets and their link with Union transfers

Components and deficits

• Revenue budget and capital budget; revenue and capital receipts; revenue and capital expenditure
• Tax revenue: direct taxes (income tax, corporation tax) and indirect taxes (Goods and Services Tax, customs, excise)
• Non-tax revenue: dividends, interest, fees; non-debt capital receipts such as disinvestment
• Deficits: revenue deficit, effective revenue deficit, fiscal deficit, primary deficit; their meaning and significance
• Public debt: internal and external debt, debt-to-GDP ratio, debt sustainability
• Committed expenditure: interest payments, salaries, pensions, subsidies

Fiscal policy and reforms

• Fiscal Responsibility and Budget Management Act, 2003, its targets and amendments; escape clauses
• Fiscal consolidation and its trade-off with public investment; counter-cyclical fiscal policy
• Goods and Services Tax: the 101st Amendment (2016), the GST Council (Article 279A), compensation to states, issues of rates and revenue
• Fiscal federalism: Finance Commission (Article 280), tax devolution, grants-in-aid (Article 275), centrally sponsored schemes
• Tax reforms: simplification, the tax base, tax expenditure (revenue foregone), tax administration
• Quality of expenditure: capital expenditure versus revenue expenditure, the multiplier effect of public investment
• Subsidy management: food, fertiliser and fuel subsidies in the budget
• Budget documents: the Budget at a Glance, the Receipts and Expenditure budgets, the Medium-Term Fiscal Policy Statement, the Economic Survey as a companion document
• State finances: own tax revenue, borrowing limits under Article 293, state-level fiscal responsibility laws

Types of budgeting

• Line-item budget, performance budget and outcome budget
• Zero-based budgeting
• Gender budgeting and the gender budget statement
• Green budgeting and the idea of climate-tagged expenditure
• Participatory budgeting at the local level
• Off-budget borrowings and transparency in public finance

Overlaps

Parliament's financial procedures and the Finance Commission are also in General Studies II (functioning of Parliament, fiscal federalism and constitutional bodies).