SBI Interview Preparation- Need Of Budget

 Why do we need budget?

The Two problems

Ask yourself a question : How does government earn the money?
Obviously, by collecting taxes from us : income tax , sales tax , customs duty and so on

but here is the first problem:

Constitution of India says: “The government cannot put any tax on us without the passing a Law in Parliament…..(Problem #1)

·         Anyways, All this tax money goes in the “Consolidated fund of India.”

·         When government wants to pay salaries to bureaucrats, create new (bogus) schemes like MNREGA etc., wants to purchase new missiles and fighter planes, it will take out money from this Consolidated fund of India.

But here is the second problem:

Constitution of India says, The government cannot take out even a single penny from this fund without authorization from the Parliament…..(Problem #2)
So, What do we conclude from Problem #1 & #2?
Government will need the permission of Parliament for to earn money and to spend money.
Hence each year, the Finance Minister prepares two files: they have the details of

·         1. How government wants to earn money from citizens

·         2. How government wants to spend the money.

·         He puts these files in a leather suitcase. French word for this bag /Purse: “bougette“. That’s how we got the word Budget.

·         You must have seen the Finance Minister holding a brown colored leather bag and getting photographs outside the Parliament on the day of budget.

The Two files

·         The first file (how government wants to earn money by taxing us)

·         it is called “Finance bill“.

·         The second file (how government wants to spend the money)

·         it is called “Appropriation bill“

·         We call them “Bills” because they are only proposed by government and not yet passed by the Parliament. (Just like Lokpal “Bill”)

·         When they passed by the Parliament, and President of India signs on these files, they become “Acts”.

Choice of Words

·         The Finance Minister does not lay down a budget in the Parliament.

·         He lays down the “Annual financial statement”. (There is no word “Budget” in the whole Constitution of India: Article 112)

·         Same way, Parliament does not pass the budget. It passes the Appropriation bill and the Finance Bill.

Million Dollar Question

Still remains: why do we need budget? Why did Constitution of India impose these “problems” on the government?

·         To ensure the financial accountability of executive (Government) towards the legislature (parliament) and by extension towards the people of India.