Budget Basics:

Basics From the Start to the End

This article iss to help you understand and remember the jargons, The preparation of Budget is done by a specialized nodal agency
procedures, technicalities in and around the budget. The article is under Ministry of Finance.
deliberately written describing the procedure of the budget making
instead of directly giving the concepts to you, which could be shorter
but would require a lot of mugging, this way at the first instance it
might take 10-15 15 mins more than just reading the facts directly but
will go a long way in staying your memory intact. This format will
help you get an overall picture, which will in process help to
remember the facts by making connections instead of mugging
mugg up the
facts in isolation, which are eventually asked in the exam.

<<Tip: Read by imagining yourself as one of the actorss in the Budget

Making process>>

The term “Budget” is nowhere mentioned in the Constitution of India.

Article 112 of the Constitution mandates it but is called as the
Annual Financial Statement.

Ministry of Finance
- Cabinet Minister

MoS for Finance 1 MoS for Finance 2

Dept of
Dept of Economic Dept of Dept of Financial
Dept of Revenue Disinvestment and
Affairs Expenditure Services
Public Asset Mgmt

Budget Division

Budget Making Process – Timeline

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 September October November December

•Budget division •The

The Expenditure
sends out notices to division holds
all the ministries and discussion with
departments seeking officials of the depts
expenditure details reg proposals and
for the current and expenditure
estimates for next demands.
year.
•Other
Other Depts of MoF
•All the revenues hold discussion with
details from all economists and
ministries and details experts and invite
are calculated proposals from
general public
•Core Budget team •Blue sheets are
takes over to finalize prepared which are
all the proposals, top secret which have
headed by Finance the outline formula
Minister. of the finalized
proposals and the
•Prime Minister gives
order of the priorities
his input in line with
of the budget.
his government's
agenda and •The Intelligence
priorities. Officers lockdown
North Block for
outsider entry and
even Finance
Minister can't take
anything out of the
building.
•The Economic Survey
Preparation under
the CEA begins.

 Then the blue-sheets are further discussed
between the Finance Minister and the Prime minister on the
overall fiscal scenario, scope for fresh spending, new schemes
or additional revenue measures and the direction of the
budget.
 Once the draft of the budget is finalized, the
ministry begins the mammoth task of printing hundreds of
copies of the budget documents. A copy needs to be provided
to each parliamentarian on the day of budget speech and
hence the number almost touches over 1000.
“Halwa Ceremony” and Printing the documents
 The printing process starts with a traditional
“halwa” ceremony; a sweet dish is prepared and served in
North Block. This officially marks the beginning of budget
printing and lock-in of over 100 officials into
nto the basement of
North Block for 10 days.These
These include personnel from
Finance Ministry and four other ministries, legal experts,
technicians for handling
ng the press, and proof readers as each
e the budget – personal taxation – is provided for printing.
provision of the budget could have far reaching effect and any
leakage could lead to individuals or organizations
zations making
windfall trading profits
 High-tech
tech tapping devices, an army of security
personnel, sophisticated surveillance gadgetry, digital
deterrents, electronic sweeping devices and jammers, huge
scanners are all pressed into service to provide the ti
tightest
security possible.
 Special arrangements for the food and lodging are
made for the officials. The indoor canteen prepares meals and
provides uninterrupted supply of tea and coffee.
 The
he entire North Block is set up as an electronic
cocoon. No one is allowed to carry a communication device
into the basement and special jammers are used to restrict
network signals.
 Intelligence Bureau (IB) assumes charge of the
surveillance over the premises and the Bureau Director
himself monitors and examines the secsecurity provisions. An
officer of rank of joint Director heads the IB team comprising
of over 24 officers of Deputy Superintendent of Police rank at
the North Block. Surprise drills are conducted to take out any
potential loop holes in the set up. Special al
alertness is required
post third week of February when the most secret portion of
 Any slip on part of IB sleuths if detected can lead to
over two year suspension of the entire team. IB also asks
Delhi
hi Police to provide high category of security to Finance
Secretary as he is one person in know of all the budget

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 provisions and access to all documents, and hence a desired
target.
 Once printed, sealed trunks of the budget copies are
transferred to the Parliament
arliament in the dead of night at an
undisclosed time and through an undisclosed route.
Budget Day
 The Budget is presented to Lok Sabha on such
day* as the President may direct, which hich has been
changed this year to Feb 1st.
 On the day of the Budget, Finance Minister first
goes to the President to get his signature on the file
approving the budget.
 This is followed by a short cabinet meeting in
Parliament where FM briefs them on main features of
budget just 10 minutes before the presentation.
presentation No
details on tax proposals are given out.
 And they all enter the Lok Sabha, where the
Finance Minister begins reading the Budget Speech after
seeking the permission from the
Speaker.Conventionally,
Conventionally, the budget has been
presented in Lok Sabha by the finance minister.
 The annual financial statement is laid on the table of
Rajya Sabha after the finance minister concludes his
budget speech in Lok Sabha.
 The budget documents are made available to the
members of Parliament after the finance bill has been
introduced in Lok Sabha,, and the House has been
adjourned for the day.
Presentation of Budget
 By Convention, or cursory understanding of the
articles related to the powers of Lok Sabha with respect to the
Money Bill and Finance Bill, the Budget is presented to
LokSabha; there iss no explicit mention in the
Constitution.
 As soon as the presentation of the Budget, the
following three statements under the FRBM Act are also laid
on the Table of Lok Sabha:-
o The Medium Term Fiscal Policy
Statement;
o The Fiscal Policy Strategy Statement; and
o The Macro Economic Framework
Statement.
In an election year, the Budgets may be presented twice—first
twice to get a
Vote on Accountfor a few months (aa provision has been made in the
Constitution empowering the Lok Sabha ha to make any grant in advance
through a vote on account to enable the Government to carry on until
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the voting of demands for grants and the passing of the Appropriation
Bill and Finance Bill.) and later in full the second time.
Discussion on the Budget
 Budgets are discussed in two stages
stages—the
General Discussion followed by detailed discussion and voting
on the demands for grants.
 The whole process of discussion and voting on the
demands for grants and the passage of the Appropriation and
Finance Bills is to be completed within a specified time.
 The Minister of Parliamentary Affairs, after the
presentation of the Budget, holds a meeting of leaders of
Parties in Lok Sabha for the selection of Ministries whose
demands for grants might be discussed in the Hou
House as all the
demand for grants can’t be discussed.
On the basis of decisions arrived at this meeting, the Government
forwards the proposals for the consideration of the Business Advisory
Committee.
 The Business Advisory Committee after considering
the proposals
oposals allots time and also recommends the order in
which the demands might be discussed.
General Discussion on the Budget
During the General Discussion, the House is at liberty to discuss the
Budget as a whole or any question of principles involved th
therein but
no motion can be moved.
Consideration of the Demands for Grants by Departmentally
Related Standing Committees of Parliament (DRSC)
 DRSC created in Parliament in 1993 (they are not
constitutional bodies, this line of questioning is possible)
possible),
considers all the Demands for Grants
Grants.
 After the General Discussion on the Budget is over,
the House is adjourned for a fixed period.
 These Committees are required to make their
reports to the House within specified period and no
permission is granted for
or more time.
Discussion on Demands for Grants
 After the reports of the Standing Committees are
presented to the House, the House proceeds to the discussion
and voting on Demands for Grants, Ministry
Ministry-wise.
 The scope of discussion at this stage is confined to
a matter which is under the administrative control of the
 Ministry and to each head of the demand as is put to the vote
of the House.
o It is open to members to disapprove a
policy pursued by a particular Ministry or
o to suggest measure for economy in the
administration of that Ministry or
o to focus attention of the Ministry to
specific local grievances.
At this stage, cut motions can be moved to reduce any demand for
grant but no amendments to a motion seeking
eking to reduce any demand is
permissible.
Cut Motions
The motions to reduce the amounts of demands for grants are called
‘Cut Motions’.
Cut Motions can be classified into three categories:—
 Disapproval of Policy Cut;
 Economy Cut; and
 Token Cut.
Disapproval of Policy Cut:AA cut motion which says “That the amount
of the demand be reduced to Re. 1” implies that the mover
disapproves of the policy underlying the demand.
 The member giving notice of such a Cut Motion
has to indicate in precise terms the particulars
rticulars of the policy
which he proposes to discuss.
 Discussion is confined to the specific point or
points mentioned in the notice, and are open to the member
to advocate an alternative policy.
Economy Cut:Where the objective of the motion is to bring prudence
in the expenditure, the form of the motion is “That the amount of the
demand be reduced by Rs ____ (aa specified amount)”. The amount
suggested for reduction may be either a lump-sum
sum reduction in the
demand or omission or reduction of an item in thee demand.
Token Cut:Where the objective of the motion is to point out a specific
grievance within the sphere of responsibility of the Government of
India, its form is: “That the amount of the demand be reduced by Rs.
100”. (Token amount)
 Discussion on such h a cut motion is confined to the
particular grievance specified in the motion which is within
the sphere of responsibility of the Government of India.
Admissibility of Cut Motions
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A cut motion to be admissible should satisfy the following
conditions:—
 It should
ould relate to one demand only, clearly
expressed and should not contain arguments or defamatory
statements.
 It should not reflect on the character or conduct of
any person whose conduct can only be challenged on a
substantive motion.
 It should not make suggestions for the amendment
or repeal of existing laws.
 It should not relate to expenditure ‘Charged’ on the
Consolidated Fund of India.
 It should not relate to a matter which is under
adjudication by a court of law having jur
jurisdiction in any part
of India.
 It should not raise a question of privilege.
The Speaker decides whether a cut motion is or is not admissible
and may disallow any cut motion when in his opinion it is an
abuse of the right of moving cut motions if it is in contravention of
the Rules of Procedure of the House.
 It is a well-established
established Parliamentary convention
that cut motion seeking to discuss the action of the Speaker or
relating to Speaker’s Department or matters under the control
of Speaker are not allowed.
 Cut
ut motions relating to the office of the Vice Vice-
President (who is also ex-officio
officio Chairman of Rajya Sabha) are
not admissible.
 Cut motion relating to matters under consideration
of a Parliamentary Committee is not admissible.
 Normally members of ruling paparty do not table cut motions.
Moving of Cut Motions
Cut motions cannot be moved by proxy. A member should be present
in the House to move his cut motions when the relevant demands for
grants are taken up.
Guillotine
Since all the demand for grants can’t be discussed as mentioned in the
preceding arguments, onn the last of the allotted days for the
discussion, at the appointed time the Speaker puts all questionsrelated
to the demands for grants to vote at once
once. This is known as guillotine.
The guillotine concludes the discussion on demands for grants.
Vote on Account
  A provision has been made in the Constitution  The
he procedure in respect of an Appropriation Bill is
empowering the Lok Sabha to make any grant in advance the same as in respect of other Money Bills.
through a vote on account to enable the Government to
carry on until the voting of demands for grants and the Finance Bill
passing of the Appropriation Bill and Finance Bill.
 “Finance Bill” means a Bill ordinarily
As a convention, vote on account is treated as a formal matter and introduced every year to give effect to the financial
passed by Lok Sabha without discussion. proposals of the Government of India for the next
following financial year.
Vote on account
count is passed by Lok Sabha after the general discussion  The Finance Bill is introduced immediately after the
on the Budget is over and before the discussion on demands for grants presentation of the Budget.
is taken up.  The introduction of the Bill cannot be opposed.
 The
he Finance Bill has to be passed by Parliament
Supplementary and Excess Demands for Grants
and assented d to by the President before the expiry of the
75th day after the day on which it was introduced.
 If the amount authorised to be spent for a particular
 As the Finance Bill contains taxation proposals, it is
service for the current financial year is insufficient then, the
President causes to be presented to Lok Sabha a demand for considered and passed by the Lok Sabha only after the
such excess. Demands for Grants have been voted and the total
expenditure is known.
 All cases involving such excesses are brought to the
 The procedure in respect of Finance Bill is the same
notice of Parliament by the CAG report on the Appropriation
Accounts. as in the case of other Money Bills.
 The excessesses are then examined by the Public
Thus with the passing of the Financial Bill, concludes the Process of
Accounts Committee which makes recommendations in its
Budget.
report to the House.
 During discussion on Excess Demands for Grants
members can point out how money has been spent
unnecessarily or that it ought not to have been spent;
sp beyond Hope you liked the article, share your comments, and also give
this there is no scope for general discussion or for ventilation suggestions, if you want any topics to be covered in this manner.
of grievances.
 The cut motions to Excess Demands for Grants
must relate to the subject matter of the Demands.

Appropriation Bill

 After the demands for grants have been passed by

the House, a Bill to take the money from the Consolidated
Fund of India to meet the grants and the expenditure charged
on the Consolidated Fund of India is introduced, considered
and passed.
 The introduction n of such Bill cannot be
opposed.. The scope of discussion is limited to matters of
public importance or administrative policy implied in the
grants covered by the Bill and which have not already been
raised during the discussion on demands for grants.
 No amendment can be proposed to an
Appropriation Billto vary the amount or altering the
destination of any grant so made or of varying the amount of
any expenditure charged on the Consolidated Fund of India,
and the decision of the Speaker as to whether such an
amendment is admissible is final.

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