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Annual Financial Statement

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Annual Financial Statement is a document presented to the Parliament every year under Article 112 of the Constitution of India, showing estimated receipts and expenditures of the Government of India for the coming year in relation to revised estimates for the previous year as also the actual amounts for the year prior to it.

The receipts and disbursements are shown under three parts in which Government Accounts are to be kept viz.,(i) Consolidated Fund, (ii) Contingency Fund and (iii) Public Account.

Under the Constitution, Annual Financial Statement has to distinguish expenditure on revenue account from other expenditure. Government Budget, therefore, comprises of Revenue Budget and Capital Budget.

The estimates of receipts and expenditure included in the Annual Financial Statement are for the expenditure net of refunds and recoveries, as will be reflected in the accounts.

The estimates of receipts and disbursements in the Annual Financial Statement are shown according to the accounting classification prescribed by Comptroller and Auditor General of India under Article 150 of the Constitution, which enables Parliament and the public to make a meaningful analysis of allocation of resources and purposes of Government expenditure.

Annual Financial Statements for the various years may be seen here.

Annual Financial Statement is essentially the Budget of the Government. In case of the Central Government, the Budget is presented in two parts, viz., the Railway Budget pertaining to Railway Finance and the General Budget (or what is commonly known as Union Budget) relating to the financial position of the Government of India, excluding Railways. The Railway Budget is presented by the Railway Minister sometime in the third week of February. By convention, the General Budget is presented to Lok Sabha by the Finance Minister on the last working day of February of each year. A copy of the respective Budgets is simultaneously laid on the Table of Rajya Sabha.

However, these days, the term Union Budget includes not just the Annual Financial Statement but also the policy documents associated with it like, Budget Speech, Finance Bill, Appropriation Bill, Demand for grants, documents submitted under Fiscal Responsibility and Budget Management Act like, macro economic framework statement, medium term fiscal policy statement etc.

With the Budget of 2017-18 certain landmark budgetary reforms were put in place such as (i) the merger of Railway budget with the General budget, (ii) the advancement of the date of Budget presentation form the last day of February to the 1st of February and (iii) the merger of the Plan and Non-Plan and the Non-Plan classification in the Budget and Accounts with continuance of earmarking of funds for Scheduled Castes Sub-Plan/Tribal Sub-Plan. Similarly, the allocations for North Eastern States will also continue.

The presentation of separate Railway budget started in the year 1924, and has continued after independence as a convention rather than under Constitutional provisions. The presentation of a unified budget will bring the affairs of the Railways to centre stage and present a holistic picture of the financial position of the Government. The merger is also expected to reduce the procedural requirements and instead bring into focus, the aspects of delivery and good governance. Consequent to the merger, the appropriations for Railways will form part of the main Appropriation Bill. There will be no dividend liability for Railways form 2017-18 and Ministry of Railways will get Gross Budgetary support. The advancement of budget presentation by a month and completion of Budget related legislative business before 31st March would pave the way for early completion of Budget cycle and enable Ministries and Departments to ensure better planning and execution of schemes from the beginning of the financial year and utilization of the full working seasons including the first quarter. This will also preclude the need for seeking appropriation through ‘Vote on Account’ and enable implementation of the legislative changes in tax laws for new taxation measures from the beginning of the financial year (now most taxes get implemented by June). The Plan/Non-Plan bifurcation of expenditure has led to fragmented view of resource allocation to various schemes, making if difficult not only to ascertain cost of delivering a service but also to link outlays to outcomes. The bias in favour of Plan expenditure by centre as well as the State Governments has led to a neglect of essential expenditures on maintenance of assets and other establishment related expenditures for providing essential social services. The merger of plan and non-plan in the budget is expected to provide appropriate budgetary framework having focus on the revenue and capital expenditure.

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