07 February 2017

The Explainer: What is the Govt's Contingency Fund?

What are the different types of accounts of the Government of India?
The Government of India has three major types of accounts. These are listed in the Union Budget. The three are:
(a)   Consolidated Fund of India;
(b)   Contingency Fund of India, and
(c)   Public Accounts.

What is the Consolidated Fund of India?
This is the most important account maintained by the Government of India. The Consolidated Fund of India contains all the revenues (tax and non-tax revenues) earned and all the expenditures incurred by the Government of India.

No money from the Consolidated Fund of India can be spent by the Government without approval of the Parliament of India.

What is the Contingency Fund of India?
Contingency means ‘unforeseen’ or ‘emergency’. As mentioned above, all withdrawals  from the Consolidated Fund of India require prior approval of the Parliament.

However, sometimes there are emergency expenses for which the Government may not wait for the Parliament’s approval; like, expenses incurred to tackle a devastating flood/earthquake.

In such cases, the Government of India will withdraw funds from the Contingency Fund of India. Once the expense is met, the Government may seek approval of the Parliament for such withdrawal. In short, the Parliament’s approval comes post-facto (i.e., after the expense has been made).

However, after the Parliament approves such expense, an equal amount is withdrawn from the Consolidated Fund of India to be put back into the Contingency Fund of India.

What are Public Accounts?
Public Accounts hold money that does not belong to the Government of India. Such accounts include the Employees Provident Fund and Small Savings Scheme. This money belongs to the general public but is held in Government’s trust.

Whenever withdrawals are made from such accounts, the Government pays out the amounts without the Parliament’s approval.

05 February 2017

The Complete Explainer Series

The complete collection of my Explainers on matters of politics and economics.

GK topics for GDPI

Economic Issues for GDPI

List of disputes between China and the U.S.

Israel-Palestine Part 1

Credit Rating

Who are bulls, bears, pigs and chickens? (Stock Markets 2) http://www.bjnocabbages.com/2011/07/explainer-stock-market-part-ii.html

What influences the share price? (Stock Markets 3) http://www.bjnocabbages.com/2011/08/explainer-stock-market-part-iii.html

Why a Fiscal Deficit is dangerous?

The Explainer: What does the Budget consist of?

What does the Budget consist of?
Take a look at the table graphic below. This document titled, Budget at a Glance, is the best document to understand the components of the various types of figures in the Budget. 

The Union Budget 201718 consists of the following:
(a)   Actuals for 201516,(b)   Budget Estimates for 201617,
(c)   Revised Estimates for 201617, and 
(d)   Budget Estimates for 201718.

The Actuals for 2015-16 may be represented as such but they STILL would be PROVISIONAL only. This means that these figures are NOT the final figures for 201516 but are subject to further revision. In fact, the final figures for 201516 will only be available toward the end of Financial Year 201617 (or Fiscal Year ’17).

Budget Estimates (BE) relate to the figures which the Finance Minister set out in his Budget Speech last year (i.e., on 28 February 2016) for the Financial Year 201617.

However, all figures – related to revenue collection, expenditure, other allocations – are subject to change. These numbers are mere ESTIMATES and not actuals. As the year progresses, such figures may sometimes need to be revised. For example, if there is low industrial and agricultural activity (meaning lower economic output), tax collections may dip. This, in turn, will reduce the government’s Revenue Receipts.

In such case, the Government may revise the Budget Estimates (made in the Budget). Such altered figures are labeled Revised Estimates (RE). These RE are listed in the third column.

In the fourth and last column, you will find Budget Estimates for the coming Financial Year 2017-18. These figures reflect the various estimates made by the Government in terms of Receipts (including tax collections) and Expenditures (including interest payments and salary payments to government employees).

02 February 2017

The Explainer: Budget Basics

In India, there is hardly any economic event that captures popular imagination as much as the Union Budget. In this Budget series, The Explainer will focus on the complex budget jargon that puts off even 'interested-in-budget' souls.

So, here we go!

What is a Fiscal Year?
Any twelve-month period that is used for submission of accounts, taxation purposes and to state financial reporting by private and public sector companies is called a Fiscal Year.

In India, the Government has laid down the provision that the 12-month starting on April 1 and ending on March 31 of next year will be treated as a Fiscal Year.

To put it in perspective, this article is being written on 2 February 2017, i.e., in Financial Year 2016-17. This is also called Fiscal Year ’17.

In the same way, the financial year for 2017-18 will start on 1 April 2017 and will end on 31 March 2018. So on 1 April 2017, we will enter Fiscal Year ’18.

Why is the Union Budget usually presented in February?
The Finance Minister of India presented the annual Union Budget for 2017-18 in the Parliament of India on February 1. It is typically presented in February for the following reasons: 

(a) After presentation, the Budget is tabled in the Parliament where members of both the Houses would debate the various provisions listed in the Budget. This would require a few days of debate and discussion. 

(b) Also, after such budget debate, any amendment to the original provision (like increasing or decreasing the allocation for a said ministry/program and rolling back any budget proposal) will have to be tabled, discussed, passed, and brought into law by the Parliament. 

(c) Also, the administrative system, especially in case of tax administration, would need to be geared up to reflect any change in the financial, taxation or any other system.

What is the Economic Survey?
The Finance Minister's Budget Speech contains two major components: Part A and Part B.

Part A of the Speech contains the Economic Survey while Part B comprises the Union Budget Speech.

The Economic Survey is tabled by the Ministry of Finance in the Parliament along with the Union Budget.

The Economic Survey is an assessment of the performance of the Indian economy in the fiscal year going by. For example, the Economic Survey 2016-17 presents an assessment of the performance of the Indian economy in that fiscal year (i.e., 2016-17).

What is the Budget?
So while the Economic Survey is an assessment of the performance of the Indian economy in the fiscal year gone by (i.e., the one that ends on March 31 this year), the Union Budget is a statement of revenues and expenditures for the coming fiscal year, i.e., the one that starts on April 1 of this year.

The second part of this Explainer will appear tomorrow.