-

Budget 2025
Pre-Independence :

First Budget: The first budget of India was

introduced on April 7, 1860, by the East India
Company to the British Crown.

James Wilson
Post -

Independence :
First Budget of Independent India: R.K. Shanmukham
Chetty presented the first budget of independent India
on November 26, 1947.

This budget covered the period from August 15, 1947, to

March 31, 1948, marking the beginning of India's fiscal
year adjustments.
 Presentation :
Some
changes in
Budget
Budget Timing :

Initially presented at 5:00 PM, the tradition changed

in 1999 when Yashwant Sinha, the then Finance
Minister, presented the budget at 11:00 AM to align
with the working hours of the government and
financial markets.
 Budget Date :

In 2017, the government advanced the budget

presentation date from the last day of February to
the first day of February to allow for better
expenditure planning and utilization of funds from
the beginning of the financial year.
Railway Budget Merger :

Until 2017, the Railway Budget was presented

separately from the General Budget. This practice
was discontinued, and the Railway Budget was
merged with the General Budget.
● Finance Minister Nirmala Sitharaman will present
her 8th straight budget in 2025, the highest in a row
under PM Narendra Modi.

● She nears the record of 10 budgets presented by

Morarji Desai.
Budget

● Budget is an 'annual financial statement' of the

estimated receipts and expenditure of the
government for the forthcoming financial year.

● Constitution does not mention the word 'budget'.

● As per Article 112 of the constitution, the President
shall ensure that a statement of the estimated receipts
and expenditure of the Government of India is
presented before both the houses of the Parliament
before the commencement of each financial reforms.

● Such statement is referred to as the "annual financial

statement''
● Union budget is prepared by the Budget Division of
the Dept of Economic affairs under Ministry of Finance.

● Economic Survey on the other hand is prepared by

the Economic Division of the Dept of Economic Affairs
under the overall guidance of Chief Economic Adviser.

● Budget is compulsory for states as well as per the

Article 202.

● Budget is a tool of Fiscal Policy of the government.

If the budget is not passed in Parliament, it
signifies that the government has lost the
confidence of the legislature, leading to the
resignation of the Prime Minister.
112
202
 ster
● Article 265: No tax shall be levied or collected except
by the authority of law.

● Article 266: No expenditure can be incurred without

legislative authorization.

● Government takes the approval of the parliament for

the taxes/receipts through the Finance Bill and the
approval for the expenditures through the Appropriation
Bill.
 Outcome
Outlays Output
Types of Budget (Based on Time Period)

1. Full Budget: Contains the government’s estimate

for expenditure and receipts for the entire financial
year.
2. Interim Budget: Presented during an election year,
covering both expenditure and receipts but only for a part
-

of the year.

Provides a complete financial statement similar to a full

budget.

The new government prepares the full budget after

formation.

No constitutional obligation to present an interim budget;

it is an unwritten convention.
3. Vote-on-Account: Used when the budget has not
been passed, allowing the government to meet
expenses.

Constitution authorizes Lok Sabha to grant an advance

for estimated expenditure until the budget is approved.

Deals only with the expenditure side of the budget.

Vote on account is the process where an outgoing
government seeks interim permission from the
Parliament to withdraw funds from the Consolidated
Fund of India and spend money on expenditures and
crucial government schemes for a few months until a
new government is formed after the elections.

As defined by Article 116 of the Indian Constitution,

vote on account is a grant in advance for the Central
government to meet short-term expenditure.
'Vote on Account' deals only with the expenditure
side of the government's budget.

Through ‘Vote on Account', the government obtains

the vote of the Parliament for a sum sufficient to
incur expenditure on various items for a part of the
year.
 Feb Morch April May

Earlier : t
2014-25 M
2025 26 y -

Budget Budget
introduced passed
Vota-on-account
& 3

Feb Morch April May

20-25 #
2025 26 -

Now

Vote-on-account not
Budget Budget
introduced required
passed
Budget Procedure

● Presented in Parliament on the first working day of

February at 11:00 AM.

● Introduced in Lok Sabha by the Finance Minister

through a speech.

● After the speech, it is presented in Rajya Sabha.

● No discussion on the budget takes place on the day of

presentation.
Budget Discussion Stages

● General discussion

● Detailed discussion
 House is

adjourned

General Discussion &

Budget Voting
Appropriation Finance
"Discussion
on ,
- > &

Presentation Bill
DFGs

Demand
for Grants are

DRSC
examined
by
↓
Reports are
presented
to the Lok Sabha
 a
Bud
> Article 112

> Article 113 ,

114
> Article 110
A . Annual Financial Statement :

Article 112 of the Constitution requires the

government to present to Parliament a statement of
estimated receipts and expenditure in respect of
every financial year, from April 1 to March 31. This
statement is called the annual financial statement.
The receipts and disbursements are shown under three
parts in which Government Accounts are kept viz.,

&
(i) The Consolidated Fund of India,

T
(ii) The Contingency Fund of India and
(iii) The Public Account of India.

N
RE
Consolidated Fund of India (CFI)

Existence: Draws from Article 266 of the Constitution.

Composition:
-Revenues received by the government.
-Loans raised by the government.
-Receipts from recoveries of loans granted by the
government.
Use : All government expenditure is incurred from the CFI.

Parliamentary Authorization: No amount can be withdrawn

without Parliament's approval.
Contingency Fund of India

Authorization: Article 267 of the Indian Constitution

establishes the Contingency Fund of India.

Purpose: This fund is used for urgent and unforeseen

government expenses that arise before Parliament can
authorize these expenditures.

Control: The fund is under the control of the President

of India.
Process:
• The government can immediately use funds for
emergencies.
• Parliament's approval for these expenditures is
sought after the fact (ex-post-facto).

Recoupment: Once Parliament approves the emergency

expenditures, an equivalent amount is taken from the
Consolidated Fund of India to replenish the
Contingency Fund.
Current Size: The authorized corpus of the Contingency
Fund is ₹30,000 crore.
Public Account

Basis of Existence: The Public Account is established

under Article 266 of the Constitution of India.

Purpose: It holds funds that the government manages

in trust for specific purposes or on behalf of others.
Types of Funds:
-Provident Funds.
-Small Savings collections.
-Receipts earmarked for expenditure on specific objectives
(e.g., road development, primary education).
-Other Reserve/Special Funds.

Ownership: Funds in the Public Account do not belong to

the government but to the depositors (individuals,
authorities) and are meant to be paid back to them.
B
CAMPA Fund Part of the Public Account
of India
 ①
No demand for a grant shall be made except on
the recommendation of the President.
B .
Demand For Grants :

Clause (2) of Article 113 of the Constitution requires that

“so much of the estimates of expenditure from the
Consolidated Fund of India included in the Annual
Financial Statement as are not ‘charged’ on the Fund shall
be submitted in the form of Demands for Grants for the
vote of the Lok Sabha”

editre
a As
Charged Expenditure

The budget consists of two types of expenditure–the

expenditure ‘charged’ upon the Consolidated Fund of
India and the expenditure ‘made’ from the Consolidated
Fund of India.

The charged expenditure is non-votable by the

Parliament, that is, it can only be discussed by the
Parliament, while the other type has to be voted by the
Parliament.
Charged Expenditures:

-Emoluments of the President of India.

-Salaries and allowances of the Chairman and Deputy

Chairman of the Rajya Sabha.

-Salaries and allowances of the Speaker and Deputy

Speaker of the Lok Sabha.
-Salaries, allowances, and pensions of the Judges of the
Supreme Court.

-Salaries and allowances of the Comptroller and Auditor-

General of India and the Central Vigilance Commission.

-Interest on and repayment of loans raised by the

Government.

-Payments made to satisfy court decrees.

The Appropriation Bill is introduced only after the
Demand for Grants has been discussed and approved
by the Lok Sabha
Finance Bill

● Under Article 110 to implement the government's

taxation proposals.

● Introduced in Lok Sabha immediately after the General

Budget presentation but taken up for consideration and
passing after the Appropriation Bill is passed.
Parliament must pass the Finance Bill within 75 days of its
introduction.
● Both Appropriation and Finance Bills are Money Bills.

● Sent to Rajya Sabha, which can recommend changes, but

Lok Sabha decides whether to accept them.

● If Lok Sabha rejects Rajya Sabha’s recommendations, the

bill is still deemed to be passed.
Ats
fat
41
.
Macro- Economic Framework Statement (MEFS)

● The statement contains an overview of the

economy.
·
● This includes an assessment regarding the GDP
growth rate, fiscal balance of central government and
the external sector balance of the economy.
·
GDP · current
Account
·

Inflation
Balance
Export Import
·

Money
·

forey Reserves
supply
● This is under Section 3(5) of FRBM Act, 2003.

● FRBM Act instructs government to make an

assessment of growth prospects for the economy with
regards to specific underlying assumptions.
D2 .
The Medium-Term Fiscal Policy cum Fiscal
Policy Strategy Statement

-Purpose: Outlines government's fiscal strategy for

the medium term.
Features: Sets three-year rolling targets for key
fiscal indicators related to GDP, including:

-
-Fiscal Deficit
-Revenue Deficit
-Primary Deficit
-Tax Revenue
-Non-tax Revenue
~
-Central Government Debt
Rest
of documents :
The Expenditure Budget is a comprehensive document
that consolidates and presents the financial allocations
for various schemes and programs across different
sectors of the government on a net basis, both Revenue
and Capital, at one place.

Classification: Expenditures are categorized under

two broad umbrellas:

-Centre's Expenditures
-Transfers to States/Union Territories (UTs).
E part
Top
The “Output Outcome Monitoring Framework” will
have clearly defined outputs and outcomes for various
Central Sector Schemes and Centrally Sponsored
Schemes with measurable indicators against them and
specific targets for FY 2024-25.
s
 -
est
00

O
Revenue (in Decreasing Order)

1. Borrowing and Other Liabilities (24%)

2. Income Tax (22%)
3. GST and other taxes (18%)
4. Corporation tax (17%)
5. Non-Tax Receipts (9%)
6. Union Excise Duties (5%)
7. Customs (4%)
8. Non-Debt Capital Receipts (1%)
Expenditure (in descending Order):

1. States' share of Taxes and Duties (22%)

2. Interest Payments (20%)
3. Central Sector Schemes (16%) excluding defense and subsidies

4. Finance Commission and other transfers (8%)

5. Centrally Sponsored Schemes (8%)
6. Defence (8%)
7. Major Subsidies (6%)
8. Pensions (4%)
9. Other Expenditure (9%)
Structure of budget
 ↑
Structure of budget

vis
O
34 2
. Lath Crore 16 .
4 lakh core

Estimates
crore lath more

Budget (2025-26)
Revenue Receipt :

● These Receipts neither creates any liability nor reduces

an asset.

● They are regular source of income for government and

recurring in nature
● It includes:

1. Tax Revenue: Income Tax > GST > Corporation Tax >
Union Excise Duties > Customs, etc.

2. Non-tax revenue: Profits and dividends from PSU’s,

fiscal and general services (like post, railways), interest
on loan forwarded by government, fees penalties, fines,
gifts, grants and donations, etc
Capital Receipts

● These receipts either creates liability or results in

reduction of asset

● They are non-recurring and non-routine in nature

● Includes: Recovery of Loans, Disinvestment,

Borrowing from market or RBI, Provident Fund
CRLDYL
-
EE
-
CR
-
-

V
Expenditure :
Revenue Expenditure

● Expenditures spent on day to day functioning of

organs of the state and for providing various
schemes

● It represents recurring expenditure on day to day

operational activities

● Includes: Salaries, wages, pensions, subsidies, and

interest payments, welfare payments, etc.
 X
Capital Expenditure

● Expenditure that creates any asset or reduces any

liability of the government.

● It represents non-recurring expenditure

● Includes: Repayment of loans, expenditure on

-
acquiring capital assets, nationalisation,

Capital Expenditure 2024-25 (RE) :

 -
-
0
&
O
Every
100 pe
Capex return pe

returns
100Rs Revenue
expenditure < 100 Rs
.

- ↓
Budgetry Deficits
 redundant
Budget Deficit now

● Budget Deficit = Total expenditure - Total receipts

= Ad-hoc treasury bills
u
● Ad-hoc treasury bills are issued by the central
government to RBI. They enable government to cover
temporary time lag between the receipts and
expenditures.
● However government used them for permanent
borrowing which was leading to unintentional
monetization of deficit (printing of currency).

● Ad-hoc treasury bills were abandoned in 1997 and

since then concept of Budget Deficit has become
redundant in India
Ways and Means Advance (WMA)

● It was introduced in 1997 to replace Ad-hoc treasury

bills and comes under Section 17(5) of the RBI Act of
1934.

● Under WMA, RBI provides short term loans to

central and state governments to enable them to cover
the temporary mismatch between their receipts and

①
expenditure similar to overdraft facility.
● The government can avail immediate cash from the
RBI. But it has to return the amount within 90 days.
Interest is charged at the existing repo rate.
Fiscal Deficit

● It is the excess of total expenditure over total

receipts (excluding the borrowings) of the government
over a financial year.

● It is indication of total borrowings needed by

government.
it determi
Borowings

& extal free a Remin

eipts
Capital

Borrowings
=
#
Fiscal the
Deficit over
years
:
Target
: 4
.
5%
by
2025- 2
Fiscal Deficit 2024 -
25 (RE) >
- 4 .
8 %

2025 - 26 (BE) - 4 4%.

prioritising
Government is macroeconomic
stability
.

The fiscal deficit target is 4.1 per cent of GDP for

FY2025-26 (FY26)
The finance minister also reiterated the commitment
to bring the deficit down below 4.5 per cent of GDP
by FY2025-26 (FY26).

More encouragingly, this is coming largely from a

cut in the revenue deficit
 its
Tax
buoyancy is
helping centre to
aligh with

roadmap of fiscal consolidation .

Tox 24(RE) >

- 1 2

buoyancy
2023 - .

11
2024 -
25 (BE) >
-
Counter-cyclical fiscal strategy :

Governments should spend more when private firms and

households do not feel confident and hold back
spending.

Once private firms and households feels confident, the

government should dial back on its expenditure.

This counter-cyclical fiscal strategy smoothens growth

and makes it more sustainable.
While governments, especially democratically elected ones,
find the first part easy to do, they are generally reluctant to
step back when the economy recovers.
Revenue Deficit

● Revenue deficit = Revenue Exp- Revenue Receipts

● It shows the extent of reduction in assets and/or

increment in liabilities of the government for meeting
its current consumption expenditure.

● It is undesirable concept of budgetary deficit.

FRBMA Act 2002 asked for the elimination of
Revenue Deficit.
Effective Revenue Deficit

--
Effective Revenue Revenue Grants in aid for
Deficit Deficit capital assets

● Central government transfer grants to state, part

of which is utilised for creation of capital assets.
All Grants are however added to Revenue
Expenditure.
 Grantstostate
Revchit in
Effective RD =

assets

-⑧
Revenue Exp-Revenue Receipts
Interests

Salaries Revenue Exp .

ants
· cital Exp .
Primary Deficit

● Primary Deficit = Fiscal Deficit (Current borrowings)

– Interest payments (of previous borrowings)

● It indicates the fiscal situation of the government

during the current financial year ignoring the debt
burden of the past.

● It shows extent to which government is further

increasing or decreasing debt burden of the past.
 Example :

Revenue
Expenditure
100
100

+
76
so + 20

T Interest
Payment Borrowing

Fiscal Deficit = 24

24-20 4
Deficit
=

Primary
=
=

Extent to which
govt ,
is
borrowing
to meet its current s
expense
A high primary deficit means the government is
borrowing not just to pay interest but also to finance
current expenditures.

⑨
Indicates excessive government spending beyond
revenues, leading to debt accumulation.

A zero or negative primary deficit suggests that

borrowings are primarily for paying interest on past
debt rather than new spending.
·
3
Budget-