Abstract

The Ministry of Finance plays a vital role in shaping both monetary and fiscal policies in India. This Chapter is aimed at providing an overview of the current state of the art of budgetary decision-making in India and highlighting the challenges faced by the government in implementing fiscal policies. The Chapter also provides an insight into the role of the Ministry in promoting effective coordination between institutions, and mastering the balance of institutional collaboration remains crucial for sustaining long-term economic stability and growth.

Keywords: Vital, Budgetary, Challenges, Implementing, Insight, Coordination, Mastering, Collaboration, Crucial, Sustaining, 

Introduction

Understanding the distinction between financial administration and management is crucial for comprehending how government finances are structured and managed, ensuring accountability and efficiency in the use of public funds. While financial administration involves high-level policy-making and strategic oversight, financial management focuses on the implementation and operational aspects, ensuring that financial resources are utilised effectively in line with established policies. In simple terms, administration refers to “what should be done” (policy, rules, overall direction) and management refers to “how it is done” (executing and controlling financial activities). 

The budget serves as the foundation of financial administration, linking all operations in the realm of public finance. The scope of financial administration encompasses the preparation of estimates, appropriation of funds, expenditure control, accounting, audit, reporting, and review. These activities are performed by the following agencies: (a) the Executive, which needs funds; (b) the Legislature, which approves funds; (c) the Finance Ministry, which manages the allocation and expenditure of funds; and (d) the Audit, which reviews and assesses how the funds have been utilised. 

Budget

Even after several reforms introduced by British rule in its era, the financial system was very rigid, rule-based, and complicated, leaving little room for public involvement or reform. The financial system was designed more to serve the goals of British rule than to address India’s needs. Unfortunately, India inherited this outdated and inflexible system at the time of independence. 

With the attainment of independence, India saw a complete transformation in its goals, policy direction, and financial administration environment. The financial administration framework was adapted and reshaped to align with the objective of an independent nation. 

India’s budgetary process is now guided by Articles 112–117 of the Constitution. The Union Budget, officially known as the Annual Financial Statement, is presented every financial year before both Houses of Parliament. This document outlines the estimated revenue and expenditure of the government. The budget is organised according to three main parts of the government’s accounting structure.1

i. The Consolidated Fund of India

ii. The Contingency Fund of India

iii. Public Account of India

Each section reflects different categories of government financial operations, ensuring a structured and transparent approach to managing public finances. 

Types of Government Budgets

The government budget comprises: the Revenue Budget and the Capital Budget. 

1. Capital budget: All government assets and liabilities are included in this budget. Two further categories into which the capital budget can be further separated are as follows: Capital Receipts: This category includes all incoming cash flows, whether non-debt or debt. Capital Expenditure: This category includes all costs incurred for developing machinery, equipment, healthcare, and education. 

2. Revenue Budget: The revenue budget includes all expenses paid out of revenue and information regarding revenue receipts. The revenue budget holds the government’s money-generating sources accountable.

Other types of budgets in India are as follows:

3. Zero-based budgeting: Every expense must be justified from abrasion for each new budgeting cycle. Instead of building on the previous budget, departments start from zero, reassess all activities and costs, and allocate funds based on current needs and priorities. 

4. Outcome Budget: Introduced in 2005, this budget type links financial outlays to the measurable outcomes of government programmes. It assesses the performance of ministries and departments by tracking how funds are being used and whether they are delivering results. This helps in making government spending more accountable and result-oriented.

5. Gender Budgeting: This is a policy tool aimed at converting government commitments towards women’s empowerment into budgetary allocations. It involves integrating a gender perspective into the planning and budgeting process. 

Budgeting Process in India

India’s government budget process unfolds in four distinct phases: formulation, enactment, execution, and review. Budget formulation begins with the government forecasting its income and spending for the upcoming financial year. This draft is then presented to the Legislature during the enactment stage, where it is debated and approved through the Finance and Appropriation Bills. 

The Finance Minister presents the budget to the Lok Sabha on the last working day of February. If the House is not scheduled to meet on the last working day of February, the House is summoned to meet specifically on that day at 5:00 PM for the presentation of the budget. The budget is presented first in the lower house by the Finance Minister. It is also presented before the Rajya Sabha, though it can only discuss it and has no power over grants. 

A few days after its presentation, the general discussion on the budget focuses on its overall principles without delving into specifics or allowing voting. It gives members a chance to express their views on revenue and expenditure, especially the charged expenditure. Through the process, the government gauges the sentiments of the houses and responds through the concluding remarks of the Finance Minister. 

The voting of demand grants in the Lok Sabha covers only votable expenditures, excluding non-votable/charged items. Conducted ministry-wise over 26 days, it allows detailed scrutiny of each ministry’s budget. Once the allotted time expires, any pending demands are put to a vote, regardless of the completion of the discussions. 

The General Budget consists of 109 demands–103 for civil and 6 for defence expenditure–while the railway budget includes 32 demands. Each demand is introduced by the respective minister, typically through a politically oriented speech. This stage allows for active discussion, often initiated through cut motions, which help members focus on specific concerns. Cut motions are of three types: Policy Cut (opposing policy and reducing the demand to Re. 1), Economy Cut (suggesting cost reductions), and Token Cut (raising specific grievances, reducing the demand by Rs. 100). Though rarely passed due to the government’s majority, cut motions play a key role in highlighting administrative shortcomings. Once approved, a demand becomes a grant. 

Charged expenditure refers to a portion of government spending that, while open to discussion in the House, is not subject to voting. This expenditure is drawn from India’s consolidated fund and is excluded from voting because it is fixed, mandatory, and cannot be altered or reduced. 

The Appropriation Bill is introduced after the Lok Sabha has voted on all grant demands, including those under charged expenditure. The withdrawal of funds from the consolidated Fund of India, as required under Article 114 of the Constitution, which mandates that no money can be withdrawn without legal appropriation. The bill follows the usual legislative process, but cannot be amended because all grants have already been approved. Once passed by the Lok Sabha, it is certified as a Money Bill and sent to the Rajya Sabha, which can only make recommendations within 14 days. The Lok Sabha may accept or reject these suggestions. The bill then goes to the president for assent, which is typically granted. The bill formalises the approved expenditures and supports the function of the CAG in tracking and auditing government spending. 

The Finance Bill is introduced after the Appropriation Act is passed, completing the budget’s expenditure side. Since revenue is needed to fund this expenditure, taxation proposals are brought forward through the Financial Bill, as mandated by Article 265 of the Constitution, which states that no tax can be levied or collected without legal authority. This bill includes all the tax proposals of the government for the upcoming financial year. While taxes are permanent and governed by existing laws, others, such as income tax and customs, must be approved annually. The Finance Bill is debated clause by clause, and while amendments to reduce or abolish taxes may be accepted, proposals to increase taxes or introduce new ones require the President’s recommendation. Once passed by the Lok Sabha, the bill is sent to the Rajya Sabha, which can suggest changes within 14 days. However, the Lok Sabha has the final say and may accept or reject these recommendations. After both Houses have considered the bill, it goes to the president for assent, after which it becomes law. 

The passage of both the Appropriation and Finance Bills marks the completion of the budget enactment process.

Once passed, the budget enters the execution phase. Here, the government enforces the provisions outlined in the Finance and Appropriation Acts—collecting revenue and disbursing funds across various departments and services as authorised. In India, the Ministry of Finance has been given the responsibility to exercise overall control over budget execution. The Ministry oversees the spending of various authorities through a three-stage process:

i. Approve policies or programmes in principle, 

ii. Accepting budget provisions and 

iii. Granting prior approval for expenditures, unless delegated to administrative ministries or departments. 

The budget execution is continuously reviewed throughout the year. Preliminary reviews are conducted in September (based on 4 months of actual spending), followed by reviews in December and January. Revised estimates are prepared by January using data from the first nine months. If additional funds are needed, the Finance Ministry may present a supplementary budget to parliament. Adjustments are common—excess or shortfalls within a grant are balanced by transferring funds between heads, with the approval of the Ministry of Finance. Unused funds are surrendered and reallocated as needed.

The final stage, legislative review, involves conducting audits and financial evaluations to ensure that the government’s financial activities align with the approved plan, maintaining transparency and accountability (these are further elaborated upon in subsequent paragraphs in the chapters). 

The Budget as a Means of Political Strategy 

A public budget serves as a strategic financial plan that aligns government activities with the necessary resources, ensuring adequate funding to support key functions like national defence, housing initiatives, and infrastructure maintenance. It ensures that public money is effectively allocated to meet the demands of various programmes and services. Public budgeting goes beyond being a purely technical exercise; it is also fundamentally and appropriately a political process. They are expressions of government priorities and societal values. They embody decisions about the scope of government responsibility, delineating which services will be provided and which will not. These decisions reflect a collective consensus on the roles and obligations of government, such as whether it should supply services that could otherwise be offered by the private sector, such as water, electricity, transportation, or housing, and whether access to essential services, such as healthcare and shelter, should be guaranteed to all citizens, irrespective of income. Budgets also confront critical policy questions regarding state intervention in instances of market failure, particularly when individual financial insecurity is at risk. 

Budgeting is inherently about setting priorities. It necessitates difficult choices, such as allocating limited resources among competing demands such as public safety, environmental protection, national defence, education, and regional development. The budget process serves as a mechanism for reconciling divergent interests among various stakeholders, ultimately determining public resource distribution. For example, decisions may involve deciding whether to allocate funds towards employment programmes for the economically disadvantaged or towards increased security measures in response to civil unrest. 

Moreover, the public budget reflects the degree to which elected officials prioritise constituent needs and respond to pressure from interest groups. It plays a central role in ensuring democratic accountability. It enables citizens to evaluate how public funds are used and whether governmental actions align with public expectations. In this way, the budget becomes a critical tool for translating citizen preferences into tangible policy outcomes, reinforcing democratic legitimacy. At the macroeconomic level, the national budget functions as a key instrument of fiscal policy, shaping employment, inflation, and overall economic growth. 

Thus, the process of budgeting offers insight into the distribution of political power, both within and among branches of government, and among interest groups, political parties, and the public. Budgetary decision-making dynamics illuminate the institutional and political structures that influence policy outcomes. 

Budgeting occupies a distinctive and pivotal space within the political system. Its importance lies in the substantive policy choices it encapsulates government reach, resource distribution, interest group influence, and public accountability. Its uniqueness stems from its procedural demands: the necessity for balance, responsiveness to external conditions, and timely resolution to ensure the uninterrupted functioning of the government. 

There are at least five major perspectives on how politics influence budgeting: 

i. Budgeting as a Technical Task: This view views budgeting as a non-political, technical process focused on efficiency and effectiveness. Politics is considered a disruption. Professionals and elected officials often clash over where to draw the line between objective analysis and political influence.

ii. Budgeting Through Routine Negotiations: Budgeting is a predictable annual bargaining process among government officials. Everyone typically gets something, which reduces conflict. Interest groups are included, but no one dominates.

iii. Influence of Powerful Interests: This perspective argues that well-funded and influential interest groups largely shape the budget. Some groups have more power than others, creating outcomes of inequality. The process is less democratic and more competitive, with clear winners and losers.

iv. Control through Budget Rules: Politics, in this view, is centred on how the budget process itself. Government branches and other actors try to influence the rules. The openness and complexity of the process affect the power of different players. 

v. Budget as a Policy Arena: This approach views the budget as a tool for setting and debating public policy. It involves spending priorities, taxation, and borrowing decisions. Trade-offs between areas such as social programmes and defence reflect broader policy goals. 

Legislative Fiscal Operations Oversight 

The parliament holds authority over revenue, expenditure, borrowing, and public accounts. Legislative approval is mandatory for imposing new taxes, increasing the rates of existing taxes, withdrawing funds from the Consolidated Fund for public spending, and raising loans. Public Accounts are audited by an independent statutory body, separate from the executive branch, and are reviewed by the Public Accounts Committee to ensure transparency and accountability. In India, four key principles govern financial control:

i. The executives, represented by Ministries, cannot raise funds through taxation, borrowing, or any other means without the prior approval of Parliament. The Cabinet must initiate any request for additional expenditure. 

ii. The Lok Sabha holds exclusive authority over money bills. Such bills must originate in the Lok Sabha, which alone has the power to approve taxation, loans, and government spending. The Rajya Sabha may reject a grant, but is not permitted to increase the amount.

iii. Grants can only be voted on following a formal request from the government. The Lok Sabha or any State Legislative Assembly cannot approve a grant unless it is first proposed by the government. 

iv. Proposals to introduce new taxes or increase existing rates must also originate from the government. 

In India, the instruments of legislative control are: questions, adjournment motions, resolutions, votes, budgets, and legislative committees, including the Public Accounts Committee, Estimates Committee, Committee on Subordinate Legislation, and the Committee on Assurances. 

As mentioned above, in the budgeting process, Parliament has a greater opportunity to discuss budget proposals. Parliament maintains control over public spending through the CAG, which audits all government accounts to verify that expenditure stays within the limits approved by Parliament, unless additional authorisation has been granted. The CAG also ensures that all spending follows the prescribed financial rules and procedures. Through these audit reports, the CAG upholds the government’s financial accountability to Parliament. 

Accounting and Audit Techniques in India

Although accounting and auditing are interrelated, they perform separate and independent roles. To promote efficiency and reduce costs, they have traditionally been overseen by a single authority (CAG). Realising the increasing need for separation of accounts from audit, the Government of India decided to separate the accounts of the Central/Ministries/Departments, which had been with the CAG. Continuous efforts were made at various times to distinguish and separate these functions to enhance transparency, objectivity, and accountability in financial oversight. All Ministries of the Government of India were brought under the scheme of departmentalisation of accounts between 1st April to 31st December, 1976.

Thus, the present accounting system in India separates the functions of accounting from the audit system to maintain independence and objectivity in financial reporting. The CAG of India, an independent constitutional authority, conducts audits of three-tier government accounts to ensure compliance, transparency, and accountability. Under the CAG, there is an Accountant General appointed in each state who keeps that particular state’s records in his office and then passes them on to the CAG at the time of auditing. The CGA is the principal accounting adviser to the Government of India under the Department of Expenditure in the Ministry of Finance. The accounting functions at the state and local government levels are also managed by the CAG only.  

Standards and Government Accounting Techniques

India’s accounting system is crucial for the efficient operation of the government’s financial management and decision-making processes. It provides a framework for recording, analysing and reporting financial transactions and information in a clear and organised way. The system adheres to specific principles and methods to maintain accuracy, reliability, and accountability in financial reporting. The Indian government uses the accrual method of accounting, where income and expenditure are recorded when they are earned or incurred rather than when cash is received or paid. This method provides a clearer and more comprehensive picture of the financial health and performance of the government. Further, the government accounting in India follows the double-entry system, meaning that every financial transaction impacts at least two accounts, one as a debit and the other as a credit. This system ensures balanced records and enhances financial data accuracy and reliability. 

The Role of the Controller General of Accounts (CGA)

The CGA, which functions under the Department of Expenditure in the Ministry of Finance, serves as the principal accounting advisor to the Government of India. The CGA is tasked with establishing and maintaining a robust and technically sound management accounting system. Its responsibilities include the preparation of monthly and annual analysis of government expenditure, revenue, borrowings, and key fiscal indicators of the Union Government. In accordance with Article 150 of the Constitution, the CGA submits the Annual Appropriation Accounts (civil) and Union Finance Accounts to Parliament, based on the CAG of India’s advice. Accompanying these reports is a Management Information System (MIS) document titled ‘Accounts at Glance,” which is shared with the members of Parliament. The CGA also develops policies on the general principles, formats, and procedures of accounting applicable to both central and state governments. Through a comprehensive financial reporting framework. This system supports the effective execution of fiscal policies and promotes the efficient use of government resources through improved cash management and the implementation of a FMIS. Additionally, the CGA supports the adoption of a management accounting system within ministries and departments and oversees internal audit units within the These units help maintain technical accounting standards and evaluate the financial performance and operational effectiveness of various programmes and schemes. The CGA also handles banking arrangements related to government disbursements and receipt collections, and it works closely with the RBI to reconcile the cash balances of the Union Government. Moreover, the CGA monitors and coordinates the submission of Action Taken Notes (ATNs) based on the recommendations of the Public Accounts Committee (PAC) and CAG reports via a web-based platform known as the Audit Para Monitoring System (APMS). 

Recently, the Indian government has also undertaken several reforms to strengthen its accounting system. The CAG of India constituted the Government Accounting Standards Advisory Board (GASAB) on 12 August 2002. This establishment was in response to the evolving priorities in PFM, aiming to align with international trends emphasising good governance, fiscal prudence, efficiency, and transparency in public spending. The Government Accounting System (GAS) has brought uniformity to accounting practices across various departments and enhanced the quality of financial reporting. Additionally, the introduction of a revised accounting framework has facilitated more accurate classification and organisation of financial transactions. 

Auditing in India

Auditing is the process of reviewing and validating an organisation’s financial records, statements, and operations. It ensures the accuracy and reliability of financial data and confirms that the financial statements reflect the true financial status. Moreover, auditing is essential for identifying and preventing fraud, mismanagement, and breaches of legal or regulatory requirements. In the Indian context, auditing is of great importance. It provides stakeholders, including investors, financial institutions, and the public, with independent assurance regarding the financial health and efficiency. By highlighting gaps in internal controls, audits support management in taking corrective actions and enhancing governance frameworks. 

Auditing plays a critical role in ensuring accountability and transparency in the handling of public resources. The Government of India maintains a separate department known as the Accounts and Audit Department. CAG of India is the head of the department. Government audit is categorised into various branches, such as Defence, Railways, and Post and Telegraph audits. It primarily focuses on auditing government offices and departments and is not authorised to audit non-government entities. Its operations are strictly governed by government rules and regulations. 

A statutory audit involves examining financial statements as required by law. Statutory audit refers to the audit conducted by the CAG through the Indian Audit and Accounts Department. It is the CAG’s responsibility to: (i) audit all expenditures from the Consolidated Fund of India, including those of the Union, States, and Uts with legislative assemblies, and determine whether the funds disbursed were legally available and appropriately applied to the designated purposes, ensuring compliance with governing authority, and (ii) audit all transactions related to the contingency funds and public accounts of both the Union and States. The CAG is granted constitutional access to the accounts of expenditure made under appropriations granted by Parliament and has the authority to inspect any office related to the transactions under its jurisdiction. Statutory audits can assure the parliament that appropriations have been used in accordance with the rules and regulations and within specified limits. It verifies the accuracy of accounts and helps identify misapplication of funds, fraud, and misappropriation. 

An internal audit is an independent evaluation function that operates within the organisation itself. Its primary objective is to assess and enhance the effectiveness of risk management, internal controls, and governance processes. Internal auditors, who are mainly part of the organisation, offer critical analysis and recommendations to help management strengthen operations, ensure compliance, and reduce risks.

Types of Audits

In India, auditing covers various types, such as financial, compliance, receipt, and performance audits. A financial audit ensures that the executive’s administrative actions align with prescribed laws, financial rules, and procedures. It also evaluates the appropriateness of these actions and avoids unnecessary expenditures. A compliance audit primarily involves verifying that all payments are properly authorised and backed by valid vouchers in the prescribed format. Its main objective is to ensure compliance with the relevant administrative, financial, budgetary, and accounting rules and regulations as outlined in the Constitution or enacted by Parliament. In a receipts audit, the audit department’s role is to ensure that the revenue department has established and is following proper regulations and procedures to effectively monitor the assessment, collection, and correct allocation of revenue.

Financial and compliance audits typically focus on examining individual transactions and do not assess the effectiveness of the schemes or programmes that those transactions support. Consequently, they fall short in evaluating an organisation’s performance in achieving its goals or objectives. Performance audit, on the other hand, aims to determine whether resources have been used efficiently and optimally. It assesses how effectively resources have been applied and the extent to which their use results in measurable benefits. However, conducting a performance audit requires expertise in defining quantifiable objectives within the government and establishing clear benchmarks to evaluate resource utilisation. Due to these challenges, the scope of government performance auditing remains somewhat limited.

Each of these audits serves a distinct purpose, collectively providing a well-rounded evaluation of an organisation’s financial and operational performance. They help identify areas for improvement, ensure compliance with laws, and support overall enhancement of organisational effectiveness. 

The Constitution offers strong safeguards to preserve the CAG’s independence from executive influence. Although appointed by the president, the CAG can only be removed by the Parliament.  Once appointed, their tenure and conditions of service cannot be altered to their disadvantage. After retirement or removal, the CAG is barred from accepting any position under either the Union or State governments. Additionally, the CAG’s salary, allowances, pension, and office expenses are charged to the Consolidated Fund of India, indicating that they are not subject to parliamentary approval. 

Once the auditing process is completed, auditors compile audit reports that summarise their findings, observations, and recommendations. The CAG submits three reports: Audit reports on appropriation accounts, finance accounts, and commercial and public sector enterprises, along with union and state government revenue receipts. These reports are submitted to the President/Governor of the State/Administrator of the UT with the legislature, who then lay them before the legislature. The PAC examines these reports and submits its findings to the relevant ministry for consideration. Most of the recommendations of the committee are accepted by the government. However, in cases where some recommendations are not accepted, the committee reviews them and presents a report on the action taken to parliament. 

Thus, the purpose of an audit is not to conduct an investigation or solely focus on fault-finding. Rather, it aims to highlight gaps in rules and regulations, identify irregularities and lapses, and recommend ways to improve the execution of plans and projects, ensuring greater speed, efficiency, and cost-effectiveness, where possible.

Monetary and Fiscal Oversight: The Role of India’s Ministry of Finance

The Ministry of Finance plays a crucial role in India’s development planning, overseeing financial institutions and managing the country’s financial landscape. With three key departments, namely, the Department of Economic Affairs, the Department of Expenditure, and the Department of Revenue, the Ministry is responsible for fiscal administration. 

The Ministry of Finance plays a central role in fiscal policy by performing several essential functions. The Department of Economic Affairs and the Budget Division prepare the government’s budget. Additionally, the Ministry exercises “financial control” through the Department of Expenditure, which encompasses budget preparation, execution, and other related matters. The Ministry carefully reviews proposals from various spending departments to assess their financial implications, thus gaining influence in shaping policies across these sectors. Focusing on the broader financial impact, the Ministry sets priorities in the national interest and ensures a balanced allocation of resources among different services. The Ministry of Finance is a pillar of development, financial stability, and good governance in India through its commitment to financial discipline and uniform standards. 

The Reserve Bank of India (RBI) manages India’s monetary policy, which is vital for maintaining price stability, controlling inflation, and fostering economic growth. While the RBI primarily handles monetary policy, the MofF plays an important role in influencing its direction through ongoing interaction with the central bank. Monetary policy focuses on regulating the money supply and interest rates to stabilise the economy, whereas fiscal policy is more concerned with development, infrastructure, and budgetary decisions.

A sound monetary policy ensures that all economic sectors can conduct transactions effectively, providing a foundation for fiscal policy. It stabilises the economy by adjusting interest rates, controlling inflation, and balancing demand and supply. The involvement of the Finance Ministry in monetary policy is essential as it guides the government’s fiscal decisions, including revenue generation and expenditure management. 

Conflicts between finance ministries and central banks are common globally, and India is no different. Effective coordination between the two institutions requires diplomacy and structure. Historically, the coordination between the Finance Ministry and the Reserve Bank of India (RBI) has been effective, even in challenging times, such as periods of double-digit inflation. However, more recently, the friction between these institutions has emerged, straining relationships.

Thus, the Ministry of Finance plays a vital role in shaping India’s monetary and fiscal policies. It ensures financial discipline, uniformity, and equitable allocation of resources across sectors through its fiscal responsibilities. Moreover, its involvement in coordinating monetary policy with the RBI contributes to maintaining economic stability, managing inflation, and fostering growth. 

As the Ministry continues to guide India’s development, promoting effective coordination between institutions and mastering the balance of institutional collaboration remains crucial for sustaining long-term economic stability and growth. 

Public Borrowing and Public Debt

When the government faces a budget deficit, i.e., when its expenditure exceeds its revenues, it resorts to borrowing from the public. This borrowing is done through various instruments, such as government-issued treasury bills, post-office savings certificates, national savings certificates, provident funds, and fixed deposits. Public and private sector banks and institutions marketed these financial products with attractive interest rates to entice investors. The government uses public borrowing funds to finance development activities and promote economic growth. Additionally, public borrowing helps manage inflation by removing the economy’s excess purchasing power during inflationary periods. However, when these avenues are exhausted, the government borrows from the RBI to cover the remaining budget deficit, a process known as deficit financing. Deficit financing allows the government to quickly address resource shortages. The interest paid by the government on these borrowings returns to the RBI in the form of profits, making it beneficial to the government. However, deficit financing involves printing new currency through the RBI, which increases the economy’s money supply. This surplus money in circulation can lead to higher demand, reduced supply, and subsequently rising prices, resulting in inflation.

Public debt refers to the amount of money the government owes to the public, including both the principal borrowed and the interest it needs to repay. As mentioned earlier, public borrowing involves various instruments, such as treasury bills and savings certificates. Over time, public debt in developing countries has been steadily increasing due to poorly managed budgets and unforeseen circumstances that hinder the proper implementation of even well-designed budgets. Public debt can be categorised as both internal and external. Internal debt, as discussed above, involves borrowing within the country, whereas external debt refers to borrowing from international institutions such as the World Bank and the IMF. 

Endnotes

1. The Consolidated Fund of India: It comprises all government revenues, including tax and non-tax receipts, loans raised, and load recoveries. All government expenditures are made from this fund, and no money can be withdrawn without prior approval from Parliament. 

Contingency Fund: This fund is used to cover urgent and unforeseen expenses that arise before Parliament approves them. It operates as an imprest and is at the disposal of the President. Once Parliament grants approval, the equivalent amount is withdrawn from the Consolidated Fund to reimburse the Contingency Fund. Currently, the authorised corpus of the fund is Rs.500 crore, as sanctionedby Parliament. 

2. Public Account: This account holds funds managed by the government on behalf of others, such as Provident Fund contributions, small savings, and other deposits. Since these funds do not belong to the government and must eventually be returned to the rightful owners, parliamentary approval is not required for payments from this account. 

Charged Expenditure: Certain expenditure are designed as ‘charged’ on the Consolidated Find of India under the Constitution. These include the salaries and allowances of key constitutional authorities such as the President, Vice-President, Judges of the Supreme Court, and the CAG of India, as well as interest on government borrowings and court decree payments. These expenses are not subject to a parliamentary vote because they are presented separately in the Union Budget.