Maarg Manthan · Topic 16.9

Procedure in Financial Matters: Annual Financial Statement / Budget (Article 112)

Indian Polity › Parliament · Topic 16.9

The Budget is the annual financial statement under Article 112, presented by the Finance Minister in the Lok Sabha and passing through six stages ending in the Appropriation and Finance Bills, with the Lok Sabha alone voting on demands for grants.

6 min read · UPSC Prelims · Polity · Parliament

At a Glance

What it is The annual statement of receipts and expenditure, popularly the Budget
Article Article 112
Presented On 1 February since 2017, by the Finance Minister in the Lok Sabha
Stages Six stages in Parliament
Exam link UPSC Prelims, Polity: Parliament

Where Does It Fit?

This is the ninth topic of the category on Parliament. The Constitution refers to the Budget as the annual financial statement. The term ‘budget’ is not used anywhere in the Constitution but is the popular name for the statement under Article 112.

The Budget and Its Contents

The Budget is a statement of the estimated receipts and expenditure of the Government of India in a financial year, which begins on 1 April and ends on 31 March. It contains estimates of revenue and capital receipts, ways and means to raise revenue, estimates of expenditure, the actual receipts and expenditure of the closing year with reasons for any deficit or surplus, and the economic and financial policy of the coming year. Until 2017 there were two budgets, the Railway Budget and the General Budget; the Railway Budget was separated in 1924 on the recommendations of the Acworth Committee (1921) and merged with the General Budget in 2017.

Constitutional Provisions

Article	Provision
112	The President causes the annual financial statement to be laid before both Houses; it shows separately the charged and the voted expenditure and distinguishes revenue expenditure
113	No demand for a grant except on the President’s recommendation; charged expenditure not submitted to the vote but can be discussed; the Lok Sabha can approve, refuse or reduce a demand but not increase it
114	No money withdrawn from the Consolidated Fund except under appropriation made by law; no amendment to the Appropriation Bill varying amount or destination
116	The Lok Sabha may make a grant in advance (Vote on Account)
117	Money bills imposing tax need the President’s recommendation and cannot be introduced in the Rajya Sabha; Parliament can reduce or abolish a tax but not increase it
265	No tax shall be levied or collected except by authority of law

The Six Stages

Presentation: The Finance Minister presents the Budget in the Lok Sabha with the budget speech, conventionally on the last working day of February, and since 2017 on 1 February. There is no discussion on the day of presentation. The Budget is then laid before the Rajya Sabha, which can only discuss it. The Economic Survey is presented a day or a few days before.
General discussion: Takes place in both Houses, usually for three to four days. No cut motion can be moved and the Budget is not voted. The Finance Minister has a general right of reply.
Scrutiny by departmental committees: The Houses are adjourned for three to four weeks, during which the 24 Departmental Standing Committees examine the demands for grants of their ministries and report. This system was established in 1993 and expanded in 2004.
Voting on demands for grants: The Lok Sabha votes each demand separately; this is its exclusive privilege and the Rajya Sabha has no power to vote on demands. Only the votable part is voted; the expenditure charged on the Consolidated Fund can be discussed but not voted. A demand becomes a grant after voting. On the last day the remaining demands are put to vote together, a process called the guillotine.
Passing of the Appropriation Bill: After the demands are voted, the Appropriation Bill authorises withdrawal from the Consolidated Fund for the grants voted and for charged expenditure. No amendment can alter the amount or destination of a grant.
Passing of the Finance Bill: The Finance Bill gives effect to the financial proposals for the next year. Amendments to reject or reduce a tax can be moved, unlike for the Appropriation Bill. It must be enacted within 75 days under the Provisional Collection of Taxes Act, 1931, and the Finance Act legalises the income side.

Cut Motions, Vote on Account and Other Grants

Device	Meaning
Policy cut motion	Disapproves the policy underlying the demand; the amount be reduced to Re 1
Economy cut motion	Shows the economy that can be made; the amount be reduced by a specified sum
Token cut motion	Ventilates a specific grievance; the amount be reduced by Rs 100
Vote on Account	An advance grant for part of the year, generally two months and one-sixth of the estimate, pending the Appropriation Act
Supplementary, additional, excess, exceptional grants and vote of credit	Extra grants under special circumstances, regulated by the same procedure as the regular budget

Cut motions are moved and discussed but not passed since the government has majority support; their passage would amount to want of confidence in the government. In the election year the Interim Budget with a Vote on Account is presented, and the regular Budget follows once the new government takes office.

Why Is This Topic Important?

Every year Budget stages and cut motions are asked often
Link to funds Consolidated Fund and charged expenditure
Recent change 1 February presentation and Railway Budget merger

What Came Next?

The next topic covers special provisions as to financial bills under Article 117.

Key People and Terms

Annual financial statement The Budget
Appropriation Bill Authorises withdrawal
Finance Bill Gives effect to tax proposals
Guillotine Putting all remaining demands to vote
Cut motion Motion to reduce a demand

Exam Corner

Points to Remember

Article 112; 1 February since 2017.
Six stages.
Voting on demands: Lok Sabha only.
Finance Bill to be enacted within 75 days.

Do Not Confuse With

Appropriation Bill and Finance Bill Spending versus taxes
Vote on Account and Interim Budget Advance grant versus election-year budget
Cut motion types Re 1, specified sum, Rs 100

Memory Hook

Present, discuss, committees, vote, appropriate, finance: six steps and the guillotine at the end.

Mains Angle

Questions on this topic usually ask about parliamentary financial control. Use these points to add depth.

Lok Sabha control Exclusive voting right
Committees Departmental scrutiny since 1993
Charged items Discussed, not voted
Practical weakness Cut motions not passed

A Question You May Face

An original practice question, not a past paper question.

“Describe the stages of enactment of the Union Budget and the role of Parliament.”

How to Answer

Introduction Article 112.
Six stages In order.
Controls Cut motions and committees.
Conclusion Effectiveness.

GS Relevance

Prelims: Indian Polity, Budget. GS Paper 2: Parliament and finance.

Frequently Asked Questions

Which Article deals with the Budget?

Article 112 deals with the annual financial statement, the Constitution’s term for the Budget. The word budget does not appear in the Constitution. The President causes the statement of estimated receipts and expenditure to be laid before both Houses every financial year.

When is the Union Budget presented?

The Union Budget is presented to the Lok Sabha by the Finance Minister. Conventionally it was the last working day of February, but since 2017 it has been presented on 1 February, and the Railway Budget has been merged with it.

What are the stages of the Budget in Parliament?

The Budget passes through presentation, general discussion, scrutiny by departmental committees, voting on demands for grants, passing of the Appropriation Bill and passing of the Finance Bill, in six stages in all, before it is enacted.

What is a cut motion?

A cut motion is a motion to reduce a demand for grant, moved during voting on demands. It is of three kinds: policy cut to reduce the amount to Re 1, economy cut to reduce by a specified sum, and token cut to reduce by Rs 100.

What is a vote on account?

A vote on account is an advance grant by the Lok Sabha for part of the financial year, generally two months and one-sixth of the total estimate, so that the government can meet expenses pending voting on demands and enactment of the Appropriation Bill.

PYQ Practice — Statement Analysis

1 The Rajya Sabha votes on the demands for grants.

False

Only the Lok Sabha.

2 The expenditure charged on the Consolidated Fund is voted by the Lok Sabha.