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The Two Problems: But Here Is The First Problem

The document discusses why budgets are needed in India. It explains that according to the Indian Constitution, the government cannot collect taxes or spend money without permission from Parliament. This creates two problems that the annual budget addresses. Specifically, the Finance Minister prepares two files - the Finance Bill detailing proposed tax collection, and the Appropriation Bill outlining proposed spending - to seek Parliament's approval. Together these bills become the annual budget Acts that allow the government to earn and use funds, ensuring executive accountability to the legislature and people of India.

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36 views3 pages

The Two Problems: But Here Is The First Problem

The document discusses why budgets are needed in India. It explains that according to the Indian Constitution, the government cannot collect taxes or spend money without permission from Parliament. This creates two problems that the annual budget addresses. Specifically, the Finance Minister prepares two files - the Finance Bill detailing proposed tax collection, and the Appropriation Bill outlining proposed spending - to seek Parliament's approval. Together these bills become the annual budget Acts that allow the government to earn and use funds, ensuring executive accountability to the legislature and people of India.

Uploaded by

DesperadoSatos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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[Economy] Why do we need budget?

The Two problems


Ask yourself a question : How does government earn the money?
Obviously, by collecting taxes from us : income tax , sales tax , customs duty and so on

but here is the first problem:


Constitution of India says
The government cannot put any tax on us without the passing a Law in Parliament.....
(Problem #1)

Anyways, All this tax money goes in the "Consolidated fund of India."

When government wants to pay salaries to bureaucrats, create new (bogus) schemes
like MNREGA etc., wants to purchase new missiles and fighter planes, it will take out
money from this Consolidated fund of India.

But here is the second problem:


Constitution of India says,
The government cannot take out even a single penny from this fund without authorization
from the Parliament.....(Problem #2)

So, What do we conclude from Problem #1


& #2?
Government will need the permission of Parliament for to earn money and to spend money.
Hence each year, the Finance Minister prepares two files: they have the details of

1. How government wants to earn money from citizens

2. How government wants to spend the money.

Photo:Pranab brandishing his bougette for the media!

He puts these files in a leather suitcase. French word for this bag /Purse: "bougette".
That's how we got the word Budget.

You must have seen the Finance Minister holding a brown colored leather bag and
getting photographs outside the Parliament on the day of budget.

The Two files

The first file (how government wants to earn money by taxing us)

it is called "Finance bill".

The second file (how government wants to spend the money)

it is called "Appropriation bill"

We call them "Bills" because they are only proposed by government and not yet
passed by the Parliament. (Just like Lokpal "Bill")

When they passed by the Parliament, and President of India signs on these files, they
become "Acts".

Choice of Words

The Finance Minister does not lay down a budget in the Parliament.

He lays down the "Annual financial statement". (There is no word "Budget" in the

whole Constitution of India: Article 112)

Same way, Parliament does not pass the budget. It passes the Appropriation bill and
the Finance Bill.

Million Dollar Question


Still remains: why do we need budget? Why did Constitution of India impose these
"problems" on the government?

To ensure the financial accountability of executive (Government) towards the


legislature (parliament) and by extension towards the people of India. <--- This brings
in the CAG and Public Accounts Committee (PAC) etc into picture

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