The Explainer: Understanding the Budget - Part II

Two days back, I wrote the first part in the 'Understanding the Budget' Series under The Explainer Series.



(Read: The Explainer: Understanding the Budget - Part I)



In today's article, I am going to address some very important aspects of the Union Budget.



What does the Budget
consist of?

Source: indiabudget.nic.in

Take a look at the table graphic on the right. This document titled, Budget at a Glance, is the best document to understand the components of the various types of figures in the Budget. 



The Union Budget 2013-14 consists of the following:

(a)   Actuals
for 2011-12

(b)   Budget
Estimates for 2012-13

(c)   Revised
Estimates for 2012-13

(d)   Budget
Estimates for 2013-14

The Actuals for 2011-12 may be represented as such but they
STILL would be PROVISIONAL only (see notes below the table in the above graphic). This means that these figures are NOT the
final figures for 2011-12 but are subject to further revision. In fact, the final figures
for 2011-12 will only be available toward the end of Financial Year 2013-14 (or
Fiscal Year ’14).

Budget Estimates (BE) relate to the figures which the
Finance Minister set out in his Budget Speech last year (i.e., on 28 February
2013) for the Financial Year 2012-13.

However, all figures – related to revenue collection,
expenditure, other allocations – are subject to change. These numbers are mere ESTIMATES and not actuals. As the year progresses, such figures may sometimes need
to be revised. For example, if there is low industrial and agricultural activity
(meaning lower economic output), tax collections may dip. This, in turn, will reduce
the government’s Revenue Receipts.

In such case, the Government may revise the Budget
Estimates (made in the Budget). Such altered figures are
labeled Revised Estimates (RE). These RE are listed in the third column.

In the fourth and last column, you will find Budget
Estimates for the coming Financial Year 2013-14. These figures reflect the various
estimates made by the Government in terms of Receipts (including tax
collections) and Expenditures (including interest payments and salary payments
to government employees).

What are the
different types of accounts listed in the Budget?

There are three types of accounts listed in the Budget. They
are:

(a)   Consolidated
Fund of India;

(b)   Contingency
Fund of India, and

(c)   Public
Accounts.

What is the Consolidated
Fund of India?

This is the most important account maintained by the
Government of India. The Consolidated Fund of India contains all the revenues
(tax and non-tax revenues) earned and all the expenditures incurred by the
Government of India.

No money from the Consolidated Fund of India can be spent by the Government without approval of the Parliament of India.

What is the Contingency
Fund of India?

Contingency means ‘unforeseen’ or ‘emergency’. As mentioned
above, all withdrawals  from the Consolidated Fund of India
require prior approval of the Parliament. 



However, sometimes there are
emergency expenses for which the Government may not wait for the Parliament’s
approval; like, expenses incurred to tackle a devastating flood/earthquake.

In such cases, the Government of India will withdraw funds
from the Contingency Fund of India. Once the expense is met, the Government may
seek approval of the Parliament for such withdrawal. In short, the Parliament’s
approval comes post-facto (i.e., after the expense has been made).

However, after the Parliament approves such expense, an equal amount is withdrawn from the Consolidated Fund of India to be put back into the Contingency Fund of India.

What are Public
Accounts?

Public Accounts hold money that does not belong to the
Government of India. Such accounts include the Employees Provident Fund and Small
Savings Scheme. This money belongs to the general public but is held in
Government’s trust.

Whenever withdrawals are made from such accounts, the
Government pays out the amounts without the Parliament’s approval.

(To be continued)