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Annual Financial Statement

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Annual Financial Statement

‘Annual Financial Statement’ of India is prepared by:

	A	CSO

	B	Niti Aayog

	C	Department of Economic Affairs

	D	DIPAM

Your Ans is

Right ans is C

Your Answer Is Correct

Your Answer Is Wrong

Explanation :

The Union Budget of India, also referred to as the Annual Financial Statement in the Article 112 of the Constitution of India is prepared by the Budget Division of Department of Economic Affairs, Ministry of Finance.

Related Question

Grants And Funds In Indian Budget

Consider the following statements:

Supplementary Grant is granted when the amount authorised by the Parliament through the appropriation act for a particular service for the current financial year is found to be insufficient for that year.
The Comptroller and Auditor General (CAG) brings the demand for an excess grant to the notice of Parliament through a report on appropriation account.
Additional Grant is granted when a need has arisen during the current financial year for supplementary or additional expenditure upon some new service not contemplated in the Budget for that year.

Which of the statement(s) is/are correct?

	A	Only 1

	B	2 and 3

	C	1 and 3

	D	1,2 and 3

Your Ans is

Right ans is D

Your Answer Is Correct

Your Answer Is Wrong

Explanation :

Context: Recently, the Lok Sabha has passed supplementary demand for grants for the second batch (2020-2021).

The budget contains the ordinary estimates of income and expenditure in a financial year.The parliament can make various other grants under extraordinary or special circumstances. These include:

Constitutional Provision

Article 115: Supplementary, additional or excess grants
Article 116: Votes on account, votes of credit and exceptional grants

Supplementary Grant

It is granted if the amount authorized by the parliament through the appropriation act to be expended for a particular service for the current financial year is found to be insufficient for the purpose of that year.

Additional Grant

It is granted when a need has arisen during the current financial year for supplementary or additional expenditure upon some new service not contemplated in the Budget for that year.

Excess Grant

Itis the money given to the government when the already allocated money for expenditure for that year does not turn out to be enough and extra money is sought.
This demand for extra money or excess grants is made when the expenditure has been incurred after a financial year has expired.
The Comptroller and Auditor General (CAG) brings the demand for an excess grant to the notice of Parliament through a report on appropriation account.
The excess grant is then examined by the Public Accounts Committee, which makes recommendations regarding their regularisation in its report to Parliament.

Vote of Credit

It is granted for meeting an unexpected demand upon the resources of India, when on account of the magnitude or the indefinite character of the service, the demand cannot be stated with the details ordinarily given in a budget.
Hence, it is like a blank cheque given to the Executive by the Lok Sabha.

Exceptional Grant

It is granted for a special purpose and forms no part of the current service of any financial year.

Token Grant

It is granted when funds to meet proposed expenditure on a new service can be made available by re-appropriation, a demand for the grant of a token sum may be submitted to the vote of the House and, if the House assents to the demand, funds may be so made available.

The Fiscal Responsibility And Budget Management (FRBM) Act

Consider the following statements:

The Fiscal Responsibility and Budget Management (FRBM) Act is a law enacted by the Government of India in 2003 to ensure fiscal discipline – by setting targets including reduction of fiscal deficits and elimination of revenue deficit.
Under the Act, Escape clauses provide flexibility to governments to overshoot fiscal deficit targets in times of need, enabling them to respond to economic shocks.

Which of the statements given above is/are correct?

	A	Only 1

	B	Only 2

	C	Both 1 and 2

	D	Neither 1 nor 2

Your Ans is

Right ans is C

Your Answer Is Correct

Your Answer Is Wrong

Explanation :

The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003, establishes financial discipline to reduce fiscal deficit
The FRBM Bill was introduced by the then finance minister, Yashwant Sinha, in 2000. The Bill, approved by the Union Cabinet in 2003, became effective from July 5, 2004.
It aims to introduce transparency in India's fiscal management systems.
The Act’s long-term objective is for India to achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India.

Key features

The FRBM Act made it mandatory for the government to place the following along with the Union Budget documents in Parliament annually:

Medium Term Fiscal Policy Statement
Macroeconomic Framework Statement
Fiscal Policy Strategy Statement

Escape Clause

Escape clause generally refers to a contract provision that specifies the conditions under which a party can be freed from an obligation.
The escape clause under the FRBM Act details a set of events in which the Central government can deviate from fiscal deficit targets.
It provide flexibility to governments to overshoot fiscal deficit targets in times of need, enabling them to respond to economic shocks.
To ensure escape clauses are not misused, they are generally allowed only in exceptional circumstances, and with a check on the quantum of deviation.
The term was used by FRBM Review Committee headed by NK Singh, in 2016.

Finance Bill

Consider the following statements with reference to the Finance Bill:

The Finance Bill is a part of the Union Budget, stipulating all the legal amendments required for the changes in taxation proposed by the Finance Minister.
This Bill encompasses all amendments required in various laws pertaining to tax, in accordance with the tax proposals made in the Union Budget.
The Finance Bill, as a Money Bill, needs to be passed both by the Lok Sabha and the Rajya Sabha.

Which of the statement(s) given above is/are correct?

	A	Only 1

	B	1 and 2

	C	1 and 3

	D	1, 2 and 3

Your Ans is

Right ans is B

Your Answer Is Correct

Your Answer Is Wrong

Explanation :

As per Article 110 of the Constitution of India, the Finance Bill is a Money Bill.
The Finance Bill is a part of the Union Budget, stipulating all the legal amendments required for the changes in taxation proposed by the Finance Minister.
This Bill encompasses all amendments required in various laws pertaining to tax, in accordance with the tax proposals made in the Union Budget.
The Finance Bill, as a Money Bill, needs to be passed by the Lok Sabha — the lower house of the Parliament.
Post the Lok Sabha’s approval, the Finance Bill becomes Finance Act.

Difference between a Money Bill and the Finance Bill

A Money Bill has to be introduced in the Lok Sabha as per Section 110 of the Constitution. Then, it is transmitted to the Rajya Sabha for its recommendations.
The Rajya Sabha has to return the Bill with recommendations in 14 days. However, the Lok Sabha can reject all or some of the recommendations.

The Speaker of the Lok Sabha is authorised to decide whether the Bill is a Money Bill or not. Also, the Speaker’s decision shall be deemed to be final.

Appropriation Bill

Consider the following statements with reference to the Appropriation Bill:

Appropriation Bill gives power to the government to withdraw funds from the Consolidated Fund of India for meeting the expenditure during the financial year.
Under Article 114, no amount can be withdrawn from the Consolidated Fund of India without the enactment of such a law by Parliament.

Choose the correct answer from the codes given below:

	A	Only 1

	B	Only 2

	C	Both 1 and 2

	D	Neither 1 nor 2

Your Ans is

Right ans is C

Your Answer Is Correct

Your Answer Is Wrong

Explanation :

Appropriation Bill is a money bill that allows the government to withdraw funds from the Consolidated Fund of India to meet its expenses during the course of a financial year.
As per article 114 of the Constitution, the government can withdraw money from the Consolidated Fund only after receiving approval from Parliament.
To put it simply, the Finance Bill contains provisions on financing the expenditure of the government, and Appropriation Bill specifies the quantum and purpose for withdrawing money.

Procedure

The government introduces the Appropriation Bill in the lower house of Parliament after discussions on Budget proposals and Voting on Demand for Grants.
The Appropriation Bill is first passed by the Lok Sabha and then sent to the Rajya Sabha.
The Rajya Sabha has the power to recommend any amendments in this Bill.
However, it is the prerogative of the Lok Sabha to either accept or reject the recommendations made by the upper house of Parliament.

Interim Budget

Consider the following statements:

Interim Budget is a full budget in all practical sense, but is made by the government during the last year of its term.
‘Vote On Account’ deals only with the revenue side of the government’s budget.
‘Vote On Account’ is normally valid for 2 months.

Choose the correct answer from the code given below:

	A	1 only

	B	1 and 3 only

	C	1,2,and 3

	D	2 only

Your Ans is

Right ans is B

Your Answer Is Correct

Your Answer Is Wrong

Explanation :

Interim Budget is a full budget in all practical sense, but is made by the government during the last year of its term with no major policy announcements.
Vote on Account deals with only the expenditure side of the budget (generally 1/6th of the total budget is allotted) and is normally valid for 2 months, while Interim /Full Budget is valid for 12 months.
As a matter of Convention, Vote On Account is treated as a formal matter and is passed by Lok Sabha without any discussion; while Full Budget is passed only after elaborate discussion and voting on the demand for grants.

Source: Indian Polity by M Laxmikanth

Consolidated Fund Of India (CFI)

Which of the following expenses are charged on Consolidated Fund of India (CFI)?

Salaries & Allowances of Lokpal
Salaries & Allowances of Comptroller & Auditor General (CAG)
Expenses of UPSC

Choose the correct answer from the code given below:

	A	1 only

	B	2 and 3 only

	C	1, 2 and 3

	D	1 and 2 only

Your Ans is

Right ans is C

Your Answer Is Correct

Your Answer Is Wrong

Explanation :

Expenses of Lokpal, CAG and UPSC are charged upon CFI.

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