The Ministry of Finance is among the key ministries in the Government of India – Essay

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The Ministry of Finance is among the key ministries in the Government of India, which is quite understandable. It prepares the budget of the Government of India and also sees its execution. It thus administers the finances of the Central Government.

It is concerned with all economic and financial matters affecting the country as a whole The Finance Ministry mobilizes resources for development. Equally, it regulates the expenditure of the Central Government including the transfer of resources to the states. It is responsible for taxation administration.

It deals with currency and coinage, and regulates and controls both foreign investment in the country and foreign exchange.

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It negotiates bilateral and international aid and other matters for the economic development of the country. In short, this Ministry is responsible not only for financial management in the Government but also for fiscal management. Wide-ranging, thus are the responsibilities of the Ministry of Finance.

The Ministry of Finance being an important ministry in the Government of India, its political chief is invariably a senior minister of cabinet rank and politically powerful. The Ministry of Finance consists of the following four Departments.

(1) Department of Economic Affairs

(2) Department of Expenditure

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(3) Department of Revenue

(4) Department of Company Affairs

Till 1977, the Ministry of Finance had the Department of Banking – which looked after all the banks (including foreign banks), matters relating to the Reserve Bank of India, cooperative banking, and other long-term financial institutions (excluding the Life Insurance Corporation and the Unit Trust of India). The Department of Banking was abolished in May 1977.

The Department of Economic Affairs formulates the economic policies and programmes of the Government. Since 1991 it is engaged in the formulation and implementation of economic reforms inaugurating liberalisation of the economy. The Department of Economic Affairs prepares the Central Budget and looks after currency and coinage.

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It deals with stock exchanges as well as stock issues besides; it regulates the country’s foreign exchange resources. Also, matters relating to technical and economic aid for economic development are looked after by this Department. The Department of Economic Affairs, first created in 1947, is of central importance in the financial administration of the country.

It monitors current economic trends and advises the Government on all matters having a bearing on internal and external economic management. It is the controlling authority for the Indian Economic Service.

The department of expenditure

The Department of Expenditure administers the expenditure of the Government of India. It thus reviews the staffing of the Central Government establishment with a view to securing economy. Besides it looks after grants to the states provided for in India’s Constitution. Other matters falling within its jurisdiction are capital budget, state budget and local taxation. The Department comprises the following four divisions (1) Establishment Division; (2) Plan Finance Division (3) Staff Inspection Unit, and (4) Finance Commission Division.

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Department of revenue

The Department of Revenue, headed by a secretary, exercises control in respect of matters relating to all direct and indirect union taxation through two statutory boards, namely the Central Board of Direct Taxes and the Central Board of Indirect Taxes.

The Central Board of Excise and Customs formulates policy on levy and collection of customs and central excise duties, prevention of smuggling and administration of matters relating to customs, central excise and narcotics. The Board is the administrative authority for its subordinate organisations, namely customs houses, Central Excise Commission rates and the Central Revenues Control.

The Department is also entrusted with the administration and enforcement of controls and regulatory matters provided in the enactments concerning central sales tax, stamp duties and other relevant fiscal statues. Also vested in the Department is control over production and disposal of opium.

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Tax policies are formulated in order to mobilize financial resources for the country, achieve sustained growth of the economy, and achieve stability and to promote social welfare by providing incentives for investments in social sector.

These two Boards are constituted under the Central Board of Revenue Act 1993. Each Board has a chairman and five members, who are also ex-officio special secretaries and additional secretaries respectively to the Government of India.

The Central Board of Excise and Customs is assisted by the following attached and subordinate offices:

1. Directorate General of Inspection and Audit

2. Directorate General of Revenue and Intelligence

3. Directorate General of Anti-Evasion

4. Natural Academy of Customs, Excise and Narcotics

5. Directorate of Organisation and Management Service

6. Directorate of Statistics & Intelligence

7. Directorate of Publicity & Public Relations

8. Directorate of Preventive Operations

9. Central Revenues Control Laboratory

10. Directorate of vigilance

Department of company affairs

The Department of Company Affairs is the primary agency responsible for the development and efficient functioning of the corporate sector in India. The object is sought to be achieved through administration of two central laws, namely the Companies Act, 1956 and the Monopolies and Restrictive Trade Practices Act, 1969. It also regulates the professions of chartered accountants, cost accountants and company secretaries.

The Ministry of Finance has under it a number of organisationis, the following being the more important ones:

1. Industrial Credit and Investment Corporation of India

2. Industrial Development Bank of India

3. Industrial Finance Corporation of India

4. Small Industries Development Bank of India.

5. Export – Import Bank of India

6. Board for Industrial and Financial Reconstruction

7. Appellate Authority for Industrial and Financial Reconstruction (AAIFR)

Mention needs to be made of the Staff Inspection Unit under the Department of Expenditure. Set up in 1964 with the object of effecting economics in manpower consistent with administrative efficiency and evolving performance standards and work norms in government offices. Since its inception the SIU has completed 1220 studies covering 6, 40,523 posts out of which 94858 were discovered to be surplus.

Each department is headed by a secretary but one of the secretaries is the Finance Secretary who is in over-all administrative charge of the Ministry. The exact location of the Finance Secretary has not remained the same: sometimes he has come from the Department of Revenue and on another occasion from the Department of Economic Affairs. All the Departments are important but the Department of Economic Affairs is generally rated very high on account of the nature of the work it is engaged in.

One may thus note that the Ministry of Finance plays a critical role in the financial, fiscal and monetary management of the country. It is natural for this Ministry to be headedtiy a senior minister and sometimes the prime minister himself has held this portfolio.

A discussion of the Ministry of Finance would be utterly incomplete without a reference to the central bank of the country that is the bank which regulates money supply, currency and credit. This function in India is carried out by the Reserve Bank of India. The Reserve Bank of India is a pre-independence body having been set up in 1935 under the Reserve Bank of India Act 1934. The raison of this bank lies in the utmost need to keep the function of control of currency and credit in the country de- politicized, entrusting it to an independent authority, which can act with continuity.

The best and indeed the only practical device for securing the independence and continuity are to set up a Central Bank, independent of political influence. The Finance Member of the Viceroy’s Executive Council while piloting the Bill in the Central Legislative Assembly observed.

‘In modern life and in modern economic organisations, there are two important functions: The function of those who have to raise and use money and there are the functions of those who are responsible for producing the actual tokens of money, the money in circulation.

The basis of the whole proposal (to set up the Reserve Bank of India) is to keep these two functions separate.’ He continued: ‘The largest user of money in a country is the government and the whole principle of the proposal is that the government when it wants money to spend, should have to raise that money by fair and honest means in just the same way as any private individual has to raise money which he requires to spend for his own maintenance. If the government is in control of the authority which is responsible for exercising the other function, then all sorts of abuses can intervene.

Initially, the Reserve Bank of India was a private shareholders’ bank with some subscription from the Government to empower it to nominate the directors. In 1948 the Bank was nationalised. The Reserve Bank of India regulates the issue of Bank notes. It keeps reserves with a view to securing monetary stability and, furthermore, operates the currency and credit system of the country. The Reserve Bank of India also acts as the custodian of the Government of India’s foreign exchange reserves and other assets including gold, and as an agent for managing public debt.

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