Fiscal Policy and the Budget — Quick Revision

A last-week sheet for government budgeting. Learn the formulas and the asset–liability test; most Prelims questions reduce to them.

Constitutional Map

Article	Provision
110	Money Bill
112	Annual Financial Statement
113	Estimates; charged expenditure not voted
114	Appropriation Bill
115	Supplementary, additional, excess grants
116	Vote on account, vote of credit, exceptional grant
117	Financial Bills
265	No tax without authority of law
266	Consolidated Fund; Public Account
267	Contingency Fund
280	Finance Commission
292 / 293	Borrowing by the Union / States

Fund	Key point
Consolidated Fund	All revenues, loans raised and loan repayments; withdrawal by appropriation only
Public Account	PF, small savings, deposits; Government as banker; no appropriation needed
Contingency Fund	At the President’s disposal for unforeseen expenditure; recouped later

Presentation (Annual Financial Statement + Finance Bill)
General discussion (both Houses)
Scrutiny by departmentally related standing committees
Voting on demands for grants (Lok Sabha only; cut motions; guillotine)
Appropriation Bill
Finance Bill (to be enacted within 75 days under the Provisional Collection of Taxes Act, 1931)

	Revenue	Capital
Receipts	Tax revenue (net of States’ share); non-tax: interest, dividends, fees	Non-debt: recovery of loans, disinvestment. Debt: borrowings and other liabilities
Expenditure	Salaries, pensions, interest, subsidies, grants to States	Asset creation, loans and advances, loan repayment

Deficit	Formula
Revenue	Revenue expenditure − Revenue receipts
Effective revenue	Revenue deficit − Grants for creation of capital assets
Fiscal	Total expenditure − (Revenue receipts + Non-debt capital receipts)
Primary	Fiscal deficit − Interest payments
Monetised	Increase in net RBI credit to the Government

High-yield facts

“Budget” is not a constitutional word; Article 112 = Annual Financial Statement.
Charged expenditure: discussed, not voted. Includes the President’s emoluments, CAG’s salary, Supreme Court judges’ salaries, debt charges.
Cut motions: policy cut (₹1), economy cut (specified amount), token cut (₹100).
Ad hoc Treasury Bills ended 1 April 1997 → Ways and Means Advances.
FRBM Act 2003; N.K. Singh Committee 2017 (debt anchor: 60% general, 40% Centre, 20% States); 2018 amendment with an escape clause of 0.5% of GDP.
Effective revenue deficit: introduced in the 2011-12 Budget.
2017-18 Budget: 1 February presentation; Railway Budget merged; Plan/non-Plan ended.
15th Finance Commission: 41% vertical devolution for 2021-26.

Type	Idea
Outcome budget	Outlays linked to outcomes (from 2005-06)
Gender budget	Allocations for women (from 2005-06)
Zero-based	Every item justified afresh
Performance	Spending by function and programme

Grants to States = revenue expenditure; loans to States = capital expenditure.
Dividends from PSUs = non-tax revenue, not capital receipts.
Fiscal deficit is borrowing; disinvestment reduces it.
Rajya Sabha cannot vote on demands for grants.