The basic principles underlying the financial provisions of the Constitution are as follows

It is the unquestioned right of Parliament under any responsible system of Government not only to ensure that public funds are raised only with its consent but also to exercise complete control over the way in which the nation’s revenues are spent by the Government.

The framers of the Constitution had kept in view these basic considerations while laying down the principles which would guide the operation of public finance and the procedure that would regulate the financial transactions of the Government.

The basic principles underlying the financial provisions of the Constitution are as follows:

(1) There shall be no taxation without a law authorising it. If any levy is to be made upon the people, the sanction must be that of law.

(2) There shall be no expenditure without the authority of Parliament. Such authority should be embodied in an Act of Parliament and not merely expressed by a Resolution.

(3) As an essential safeguard for the sound administration of the nation’s finances, Parliament should have unrestricted power to superintend, scrutinise, regulate and determine financial administration.

(4) The executive should alone have the initiative in making proposals for taxation and expenditure and no such proposals can be initiated by a private member.

(5) The House of the People should have supremacy over the Council of States in all financial matters.

(6) All revenues received by the Union Government should form the “Consolidated Fund of India” from which alone the Government shall withdraw money for its expenditure and repayment of debts.

(7) To meet unforeseen requirements exceeding the authorised expenditure, a reserve fund called the “Contingency Fund of India” should be placed at the disposal of the Government facilitating advances subject to subsequent regularisation.

(8) The President shall not withhold his assent from a Money Bill passed by Parliament. In the matter of finance, Parliament is supreme.

On the basis of these principles, the Constitution proceeds to lay down a detailed financial procedure. In laying down such a detailed procedure the framers were influenced by a set of established principles. These are:

(1) Procedures should not obscure fundamental issues.

(2) Procedures should ensure that no bad or irresponsible decisions are taken by the executive.

(3) Procedures should make it possible to consider the budget as a whole and as an integral part of national accounting rather than as a series of unrelated parts.

(4) Procedures should ensure a complete and coordinated circuit between expenditure and resources.

(5) Procedures should leave ample room for long-term economic planning and development, treating annual allocations and sanctions as effective and strong links of such planning and development.

With these principles in view one may examine the mechanics of the financial procedure. Under Article 112, every year “the President shall cause to be laid before both the Houses of Parliament” the annual financial statement, popularly known as the Budget.

The person through whom the President acts in this respect is the Finance Minister who is the custodian of the nation’s finances. The budget will show the estimated receipts and expenditure for that financial year.

According to custom, it is presented on the last day of February in order that Parliament will have sufficient time to discuss the proposals in general and authorise appropriation before the beginning of the new financial year on the first day of April.

There will be no discussion of the budget on the day on which it is presented to Parliament; this it to give members time to study the proposals before the discussion of the budget begins.

The expenditure embodied in the budget is divided into two separate parts : the expenditure charged upon the “Consolidated Fund of India” which are “non-votable”, and the sums required to meet the other expenditure from the Consolidated Fund which are “votable”. The following items belong to the charged expenditure:

(a) The salary and allowances of the President;

(b) The salaries and allowances of the Presiding Officers of the Houses of Parliament;

(c) Debt charges of the Government of India;

(d) The salaries and allowances of the judges of the Supreme Court and High Courts, the Comptroller and Auditor-General and pension payable to retired judges of the Federal Court;

(e) Sums required satisfying any Court decree or award and any other expenditure declared by the Constitution or by Parliament to be so charged.

Although Parliament does not vote on these items as these payments are guaranteed under the Constitution, there is no bar to a discussion on any of them by either of the two Houses.

With respect to the second part of expenditure, estimates are to be submitted in the form of demands for grants by the House of the People. The House has the power to assent to, reduce or reject these demands. Every demand for a grant should be made only with the recommendation of the President.

Under the rules of procedure, ordinarily, a separate demand has to be made in respect of the grant proposed for each Ministry and each demand should contain not only a statement of the total grant proposed, but also a detailed estimate under each grant divided into items.

The discussion on the budget can be divided into two parts: a general discussion and a detailed discussion which takes place when every time a separate demand is placed before the House.

During the general discussion, the accent is on general problems connected with the nation’s finances and the principles involved in the budget proposals. At the end of the discussion the Finance Minister has a right to reply.

It is during the second stage that members get the opportunity to move cut motions to reduce the amount of demand. Every cut motion to a demand for grants represents disapproval of some aspect or other of the governmental policy or administration involved in the demand.

The procedure recognises three different types of cut motions. If the cut motion aims to reduce the demand by one rupee only, the motion will be known as “Disapproval of Policy Cut”. The motion in this case represents disapproval of the policy underlying the demand.

If the reduction demanded is either in the form of a lump sum of omission or reduction of an item in the demand, the motion which embodies such cut it known as “Economy Cut”.

Here the object of the motion is economy in Governmental spending. If the motion seeks to reduce the demand by a cut of Rs. 100 it aims to ventilate a specific grievance which is within the sphere of the responsibility of the Government and such a motion is known as a “Token Cut”.

The admissibility of these cut motions is regulated by rules laying down conditions. The cut motions provide the maximum opportunity for members to examine every part of the budget and subject it to detailed criticism and offer suggestions for improvement.

Voting on demands by itself does not complete the formalities connected with the provision of funds to the Government. There should be legal sanction for the appropriation of sums from the Consolidated Fund. To facilitate this procedure provides for two different pieces of financial legislation. One is the Appropriation Act and the other is the Finance Act.

The former fixes the amount which can be drawn out of the Consolidated Fund for meeting the expenditure against each grant. The Constitution does not permit any withdrawal in excess of the amount provided in the Act. The latter deals with the legislation which authorises the raising of funds through taxation as embodied in the financial proposals of the year.

Mention has been made earlier of the constitutional prohibition against funds being withdrawn from the Consolidated Fund except under appropriations made by law. But it has been found, from time to time, that the expenditure voted by Parliament for a Department is not enough because of unforeseen or unexpected reasons.

If the expenditure is incurred without Parliamentary authorisation, it would be illegal. But if the executive awaits Parliamentary sanction before incurring the expenditure, the Department concerned will be put to great inconvenience.

Besides, the expenditure may be urgently required and the inability of the Government to make provision for it may be detrimental to the public interest. To provide for such contingencies, Parliament is authorised under Article 267, to establish a “Contingency Fund of India into which shall be paid, from time to time, such sums as may be determined by law”.

This Fund is placed at the disposal of the President to enable advances to be made by him for the purpose of meeting unforeseen expenditure pending its authorisation in accordance with the established financial procedure. The idea of the Contingency Fund, as most of the other ideas in the financial field, is taken from England. The Contingency Fund stands at Rs. 150 million now.

Once advances have been made available from the Contingency Fund for meeting the unforeseen and urgent financial needs of a Department in excess of the authorised amount, such advances have to be regularised. As we have seen, the executive cannot spend funds without the specific authority of Parliament. The situation is met through the device of a “supplementary budget”.

A supplementary budget is one which includes all those sums which the Department has drawn in excess of the annual grant. It is presented during the course of the financial year. The procedure for getting supplementary grants is similar to that prescribed for the annual budget. When the supplementary demands are passed, advances taken from the Contingency Fund are returned to it in order to restore the Fund to its original amount.

A discussion of the financial procedure is not complete without going into the respective roles of two Committees of Parliament whose activities have an important bearing on the financial affairs of the Government. These are the Estimates Committee and the Public Accounts Committee.

Mention must also be made of the role of the Comptroller and Auditor-General of India in this connection. These are dealt with separately. Taking into consideration the policies, programmes and activities of the Government, one major conclusion emerges, namely, that the fundamental principles which have been embodied in the financial provisions of the Constitution are substantially realised in practice.

The fact that the Government of the day enjoys the support of a party with even an overwhelming majority in Parliament has not made the Parliamentary control of public finances and the less real.