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"Budgeting & Budgetary Control in Government of India " - K. N

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

2 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 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.

3 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.

4 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

5 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 is incurred from the Consolidated Fund and no amount can be withdrawn from the Fund without authorisation from Parliament.

6 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.

7 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

8 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.

9 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

10 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

11 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.

12 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.

13 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

14 Stages in Budget enactment
Presentation of Budget before the Lok Sabha 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.

15 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)

16 Types of Budgeting Zero Based Budget – Outcome 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.

17 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.

18 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.

19 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

20 Budget in DoP TABLE 1 Revenue and Expenditure (for the year & ) (INR in Million) Particulars Actuals Actuals % age lnc (+)/ Dec(-) over previous year Revenue Sale of Stamps Postage Realised in Cash Commission on Money Orders and Indian Postal Orders etc. Remuneration for Saving Bank/Saving Certificates Work. * Other Receipts 794.57 789.98 2.01% 2.99% 0.46% 11.79% -0.58% Total 6.90%

21 Budget - Deptt. of Posts Expenditure General Administration Operations
Agency Services **Others Total Gross Expenditure Less Recoveries 21.68% 36.84% -1.73% 46.26% 36.80% 45.92% Net Expenditure 36.51% Deficit (Net Exp - Revenue) 84.84%

22 Budgetary control A budget is a blue print of a plan expressed in quantitative terms. 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.

23 Budgetary control  Maximization of Output / Profit: The budgetary control aims at the maximization of 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 budgeted targets.

24 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. Every department is 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 Measuring Performance: By providing targets to various departments, budgetary control provides a tool for measuring managerial performance. The budgeted targets are compared to actual results and deviations are determined. The performance of each department is reported to the top management. This system enables the introduction of management by exception.

25 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 in budgeted and 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.

26 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.

27 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

28 Summary of General budget
The Finance minister of India presents the annual Union Budget (Annual Financial Statement)  in the Parliament on the last working day of February. The budget has to be passed by the Lok Sabha before it can come into effect on 1 April, the start of India's fiscal year. The Union budget is preceded by an economic survey which outlines the broad direction of the budget and the economic performance of the country for the outgoing financial year.

29 Thank You +91 – 9013130181 (M)

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