"Budgeting&

Budgetary Control
in Government of
India "
- K. N. JHA, Director,
National Institute of Communication Finance,
Ministry of Communications & IT, GoI
8. 4.2013

What is Budget ?
The term Budget is actually derived from a French
word BOUGETTE which means a sack or pouch or
leather bag.
As per the British legacy the Union Budget of India
used to be presented on the evening of last working
day of the month of February to follow the British
Budget. This was discontinued in 2001 when the
then Finance Minister presented it at 11.00 Hrs.
The Union Budget of India (General Budget) is
presented each year on the last working day of
February by the Finance Minister of India in
Parliament.

Annual Financial Statement

Under Article 112 of the Constitution of
India, a statement of estimated receipts
and expenditure of the Government of
India has to be laid before Parliament in
respect of every financial year which
runs from 1st April to 31st March.
This statement titled Annual Financial
Statement is the main Budget
document.

AFS
In the Constitution of India the term
Budget is no where used rather it is AFS.
Annual Financial Statement shows the
receipts and payment of Govt. under
three parts in which Govt. accounts are
kept
1. Consolidated Fund
2. Contingency Fund and
3. Public Account

Consolidated Fund
All revenues received by Govt.
Loans raised by Govt.
Receipts from recoveries of loans
granted by the Govt.
All expenditure of Govt. is
incurred from the Consolidated Fund
and no amount can be withdrawn from
the Fund without authorisation from
Parliament.

Contingency Fund
Occasions may arise when Govt. may have to
meet urgent unforeseen expenditure pending
authorisation from Parliament. The Contingency
Fund is an imprest placed at the disposal of the
President to incur such expenditure.
Parliamentary approval for such expenditure
and for withdrawal of an equivalent amount
from the Consolidated Fund is subsequently
obtained and the amount spent from
Contingency Fund is recouped to the Fund.

Public Account
Certain other transactions enter Govt.
accounts in respect of which government
act more as a Banker. For example
transactions related to Provident Fund,
Small savings of Post offices etc. The
money thus received are kept in Public
Account and the connected disbursement
are also made therefrom.
Parliamentary approval is not required to
operate this fund

 Moneys held by Government in Trust as in the case of

Provident Funds, Small Savings collections, income of
Government set apart for expenditure on specific
objects like road development, primary education,
Reserve/Special Funds etc. are kept in the Public
Account. Public Account funds do not belong to
Government and have to be finally paid back to the
persons and authorities who deposited them.
Parliamentary authorisation for such payments is,
therefore, not required, except where amounts are
withdrawn from the Consolidated Fund with the
approval of Parliament and kept in the Public Account
for expenditure on specific objects, in which case, the
actual expenditure on the specific object is again
submitted for vote of Parliament for drawal from the
Public Account for incurring expenditure on the
specific object.

Preparation of Budget
By Budget Division of Min. of Finance
After consulting other Ministries and
the Planning Commission
Planning Commission plays an
important role in making provision
for plan activities of the government
and scrutinizing the plan proposals of
various Ministries / Departments

Government Budget
Under the Constitution, Budget has
to distinguish expenditure on
revenue account from other
expenditure. Govt. Budget thus
comprises of Revenue Budget
Capital Budget

Revenue Budget

Revenue Budget consists of the revenue receipts of Government (tax

revenues and other revenues) and the expenditure met from these
revenues. Tax revenues comprise proceeds of taxes and other duties
levied by the Union. The estimates of revenue receipts shown in the
Annual Financial Statement take into account the effect of various taxation
proposals made in the Finance Bill. Other receipts of Government mainly
consist of interest and dividend on investments made by Government,
fees, and other receipts for services rendered by Government.
Revenue expenditure is for the normal running of Government
departments and various services, interest payments on debt, subsidies,
etc. Broadly, the expenditure which does not result in creation of assets for
Government of India is treated as revenue expenditure. All grants given to
State Governments/Union Territories and other parties are also treated as
revenue expenditure even though some of the grants may be used for
creation of assets.

Capital Budget
Capital Budget consists capital receipts and capital
payments.
The capital receipts are loans raised by Government from
public, called market loans, borrowings by Government
from Reserve Bank and other parties through sale of
Treasury Bills, loans received from foreign Governments and
bodies, disinvestment receipts and recoveries of loans from
State and Union Territory Governments and other parties.
Capital payments consist of capital expenditure on
acquisition of assets like land, buildings, machinery,
equipment, as also investments in shares, etc., and loans
and advances granted by Central Government to State and
Union Territory Governments, Government companies,
Corporations and other parties.

Budget Timeline
RE BE Sept./Oct.
Draft Budget prepared and finalized
28/29 February
Budget tabled before Parliament March
General discussion on Budget Proposal
March/ April
Study of DFG by Standing Committee April
Detailed discussion on DFG April
New Financial Year begins - April

Stages in Budget enactment

1. Presentation of Budget before the Lok
Sabha
2. General discussion on the Budget
3. Vote on Account
Purpose is to keep the govt.
functioning pending voting on the Demand
for Grants which requires sufficiently long
time. Vote on Account is obtained from
Parliament through an Appropriation (Vote on
Account) Bill.

Stages in Budget enactment

4. Scrutiny by departmentally related
Standing
Committees of Parliament.
5. Voting on Demand for Grants.
6. Passing of Appropriation Bill
7. Passing of Finance Bill (detailing
the imposition, abolition, remission,
alteration or regulation of Taxes
proposed in the Budget)

Types of Budgeting
Zero Based Budget
It is a method of Budgeting in which all
budgetary allocations are set to nil at the
beginning of financial year.

Outcome Budget
This type of Budgeting tries to ensure
that budget outlays translate into concrete
outcome. Physical and quantifiable targets are
monitored through this budgetary exercise.

Types of Budgeting
Gender Budgeting
Gender Budgeting came
into force in 2004 05. To
contribute towards the women
empowerment and removal of
inequality based on gender, role of
budgeting has been accepted
through this step.

Appropriation Accounts
The annual accounts of the Government, comprising the
Union Government Finance Accounts and the
Appropriation Accounts, are prepared by the Controller
General of Accounts.
These documents are presented before the Parliament
after their statutory audit by the Comptroller and Auditor
General of India.
Preparation and submission of Appropriation Accounts to
the parliament completes the cycle of budgetary process.
Through Appropriation Accounts parliament is informed
about the expenditure incurred against the appropriations
made by the parliament in the previous financial year. All
the expenditures are duly audited and excesses or savings
in the expenditure are explained.

Budget speech P. Chidambaram,

FM
Post Offices
108. Government has initiated an
ambitious IT driven project to
modernise the postal network at a
cost of `4,909 crore. Post offices will
become part of the core banking
solution and offer real time banking
services. I propose to provide `532
crore for the project in 2013-14.

Budget in DoP
Particulars

TABLE 1
Revenue and Expenditure
(for the year 2008-09 & 2009-10)
(INR in Million)
Actuals
Actuals
2008-09
2009-10

Revenue
Sale of Stamps
6056.64
Postage Realised in
20364.48
Cash
3382.97
Commission on Money
Orders
28024.60
and Indian Postal
Orders etc.
794.57
Remuneration for
Saving
Bank/Saving Certificates
Work.
* Other Receipts
Total
58623.26

% age lnc (+)/

Dec(-) over
previous year

6178.11
20972.82
3398.42

2.01%
2.99%
0.46%

31327.68

11.79%

789.98

-0.58%

62667.01

6.90%

Budget - Deptt. of Posts

Expenditure
General Administration
Operations
Agency Services
**Others
Total Gross
Expenditure
Less Recoveries
Net Expenditure
Deficit (Net Exp Revenue)

5999.55
60359.74
4300.06
26902.95
97562.30
3008.16
94554.14
35930.88

7300.02
82596.64
4225.79
39346.96
133469.41
4389.36
129080.05
66413.04

21.68%
36.84%
-1.73%
46.26%
36.80%
45.92%
36.51%
84.84%

Budgetary control
A budget is ablue printof a plan
expressed in quantitativeterms.
Budgeting is a technique for
formulating budgets. Budgetary
Control, on the other hand, refers to
the principles, procedures and
practices of achieving given
objectives through budgets.

Budgetary control
Maximizationof Output / Profit:The budgetary
control aims at themaximizationof output. To achieve
this aim, a proper planning and co-ordination of
different functions is undertaken. There is proper
control over various capital and revenue expenditures.
The resources are put to the best possible use.
Co-ordination:The working of the different
departments and sectors is properly co-ordinated. The
budgets of different departments have a bearing on
one another. The co-ordination of various executives
and subordinates is necessary for achieving
budgetedtargets.

Budgetary control
Specific Aims:The plans, policies and goals are decided by
the top management. All efforts are put together to reach the
common goal of the organization. Everydepartmentis given a
target to be achieved (RFD). The efforts are directed towards
achieving some specific aims. If there is no definite aim then
the efforts will be wasted in pursuing different aims.
Tool for MeasuringPerformance:By providing targets to
various departments, budgetary control provides atool for
measuringmanagerial performance. The budgetedtargets are
compared to actual results and deviations are determined.
The performance of eachdepartmentis reported to the top
management. This system enables
theintroductionofmanagement by exception.

Budgetary control
Economy:The planning of expenditure will be systematic and
there will be economy in spending. The finances will be put to
optimum use. The benefits derived for the concern will ultimately
extend to industry and then to national economy. The national
resources will be used economically and wastage will be eliminated.
Determining Weakness:The deviations inbudgetedand actual
performance will enable the determination of weak spots. Efforts
are concentrated on those aspects where performance is less than
the stipulated.
Corrective Action:The management will be able to take
corrective measures whenever there is a discrepancy in
performance. The deviations will be regularly reported so that
necessary action is taken at the earliest. In the absence of a
budgetary control system the deviation can determined only at the
end of the financial period.
Re- allocation of Budget in time is an important aspect.

Budgetary control
Consciousness:It creates budget
consciousness among the employees. By fixing
targets for the employees, they are made
conscious of their responsibility. Everybody
knows what he is expected to do and he
continues with his work uninterrupted.
Reduces Costs:In the present world on
economy measures budgetary control has a
significant role to play. Every government tries
to reduce the cost of development and growth.
This is possible by effective budgetary control.

Who controls Budget in the Govt.?

Parliament
Standing Committee of Parliament
Planning Commission of India
Administrative Head of the
Ministry/Deptt.
Financial Advisors
Media
Public

Summary of General budget

TheFinance minister of Indiapresents the
annualUnion Budget (Annual Financial
Statement) in theParliamenton the last
working dayof February. The budget has to
be passed by theLok Sabhabefore it can
come into effect on 1 April, the start of
India'sfiscal year. The Union budget is
preceded by aneconomic surveywhich
outlines the broad direction of the budget and
the economic performance of the country for
the outgoing financial year.

Thank You
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