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How budget is made and passed in India

Posted by Admin on July 29, 2014 | Comment

Every year, citizens of India wait in anticipation of a people-friendly budget. The expectations build up days prior to the budget presentation.  Much predictions and discussions happen on possible provisions of the budget. Although presentation of budget garners maximum media attention, the actual action starts after the Railway Budget or the General Budget is tabled in Parliament. What follows is a lengthy and meticulous process of passing it before it finally becomes effective.

 budget making processes in india

General Discussion

The Ministry of Parliamentary Affairs announces the dates for general discussion on the budget after consulting the Finance Ministry. In Lok Sabha, the budget is discussed in two phases. During the first phase, discussion continues for about five days and its scope remains confined to the principles and policies as proposed by the budget. The Finance Minister can take up questions and reply to the general discussion in both the Houses.

Demands for Grants & Cut Motion

After the discussion on both Railway and General Budget, the House remains adjourned for a fixed period. This interim period is utilised for considering the Demands for Grants of various Ministries by the concerned Parliamentary Committees. It was back in 1993-94 when such a system was introduced.

Separate demands for each ministry are presented before the committees that later make reports to the House within a specific time. It’s mandatory for the committees to submit reports to the House within the specified time period. The purpose of these reports is to convince the House about the need for additional grant.

Once the reports of the Standing Committees are received, the discussion and voting on Demands for Grants for each ministry takes place. The Speaker of the House allocates the time for discussion and voting. On the final day, all the outstanding demands are taken up. This practice is commonly known as ‘guillotine’.

While Lok Sabha has the power to accept or reject any Demand and even reduce the amount of Grant sought by the government, the Rajya Sabha only retains the power to hold general discussion on the budget and it does not vote on the Demands for Grants. Members of Lok Sabha are well within their rights to criticise the budgetary provisions/policies proposed by a particular ministry and suggest methods to boost nation’s financial health.

It is at this precise juncture that cut motions can be moved in order to reduce any demand for grant. Parliament, however, doesn’t allow any amendments to motions seeking to reduce any demand. The members, intending to move such a motion, should submit a notice at least two days before the day when the demands for grants for that concerned department will be taken up in the House.

Vote on Account, Appropriation Bill and Finance Bill

Since the entire process of passing the budget goes beyond the current financial year, a provision is made in the Constitution that guarantees Lok Sabha the power to make any grant in advance through a vote on account. It helps government to run its machinery until the voting of demands for grants and the passing of the Appropriation Bill and Finance Bill. Vote on Account normally takes two months.

After the general discussion on the budget and voting on Demands for Grants are completed, the Appropriation Bill is introduced in Parliament. The intention of this bill is to give government the power to incur expenditure from the Consolidated Fund. It is then passed according to the procedure followed for any other money Bills.

The flurry of activities continues as the next immediate task for Parliament is to pass the Finance Bill, which brings into effect the taxation proposals made after the presentation of the general budget. In this case, the scope of discussion widens as the members can discuss any action of the government.

The budget comes into effect once Parliament passes the Finance Bill, which it has to do within 75 days of the introduction of the bill in the House.