---
title: "Government Budgeting & Fiscal Policy Explained"
description: "Understand the constitutional architecture of the Union Budget, the FRBM framework, and how receipts, expenditure and the various deficits are classified and"
url: "https://modeldiplomat.com/learn/lessons/upsc-indian-economy-government-budgeting-fiscal-policy"
---

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Government budgeting & fiscal policy

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# Government budgeting & fiscal policy

The constitutional architecture of the Union Budget, the FRBM framework, and the classification of receipts, expenditure and deficits for UPSC GS-3.

## The Budget as a constitutional instrument

The Union Budget is not merely an accounting statement; it is the **Annual Financial Statement** mandated by **Article 112 of the Constitution**, which the President causes to be laid before both Houses of Parliament for every financial year (1 April–31 March). Article 112 requires the estimated receipts and expenditure to be shown separately, and to distinguish expenditure on **revenue account** from other expenditure. The Budget rests on three companion provisions: **Article 110** defines a **Money Bill** (taxation, borrowing, Consolidated Fund withdrawals); **Article 113** governs how estimates are submitted to the Lok Sabha as **Demands for Grants**; and **Article 114** provides that no money is withdrawn from the Consolidated Fund except under an **Appropriation Act**.

## The three funds

The Constitution creates three pools. The **Consolidated Fund of India (Article 266(1))** receives all revenues, loans raised and recoveries; no withdrawal is lawful without parliamentary appropriation. The **Public Account (Article 266(2))** holds money where government acts as banker—provident funds, small savings, the National Small Savings Fund—and disbursements need no annual vote. The **Contingency Fund (Article 267)**, corpus ₹30,000 crore since the 2021 enhancement, is at the disposal of the President for unforeseen expenditure, later recouped by Parliament.

## Charged versus voted expenditure

Under Article 112(3), certain **charged expenditure**—the salaries of the President, Supreme Court and High Court judges, the CAG, interest and debt servicing—is **non-votable**, though debatable. All other expenditure is **voted** by the Lok Sabha through Demands for Grants. The Rajya Sabha cannot amend a Money Bill; under Article 109 it may only recommend changes within 14 days, which the Lok Sabha may reject.

## The budget calendar and reforms

Since **2017** the government merged the Railway Budget (separate since 1924, on the Acworth Committee recommendation) into the General Budget and advanced presentation to **1 February**, ending the colonial end-February date so that the Finance Act is enacted before the financial year begins. The **Plan/Non-Plan** distinction was abolished from 2017–18 following the **Rangarajan Committee**, leaving the cleaner **revenue–capital** classification as the analytical spine. Parliamentary control operates through the **Cut Motions** (Disapproval of Policy, Economy, Token), the **vote on account** under Article 116 for interim spending, and the financial committees—**Public Accounts Committee, Estimates Committee and Committee on Public Undertakings**—which scrutinise expenditure after the CAG reports under Article 151.

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