Public Finance and the Union Budget
Public finance deals with how government raises, receives, spends and manages public money. The supplied notes focus strongly on the constitutional framework around the Union Budget and the three funds.
1. Annual Financial Statement
The supplied resource identifies Article 112 with the Annual Financial Statement. It contains estimated receipts and expenditures for one financial year. The notes also state that the Constitution itself does not use the word “budget” as the formal term.
2. Three constitutional funds
| Fund | Article | Core idea in the notes |
|---|---|---|
| Consolidated Fund of India | 266(1) | Main government fund containing revenues and specified borrowings |
| Contingency Fund of India | 267 | Used for unforeseen expenses pending authorisation by Parliament |
| Public Account of India | 266(2) | Public money received by government other than amounts credited to the Consolidated Fund |
3. Consolidated Fund
The source describes it as the most important government fund. It includes government revenues, loans raised by the government and certain foreign/institutional loans. Money cannot be appropriated from it except according to law and constitutional procedure.
4. Contingency Fund
The Contingency Fund is used to meet unforeseen expenses pending parliamentary authorisation. The supplied notes mention immediate relief in natural calamities and new policy decisions awaiting approval.
5. Public Account
The Public Account contains public money received by government other than amounts credited to the Consolidated Fund. The notes give small savings, provident fund schemes and other deposits held in government custody as examples.
6. Revenue and capital budget
The supplied resource divides the Union Budget broadly into a Revenue Budget and a Capital Budget, each having receipts and expenditure components.
7. Revenue expenditure
- The source defines revenue expenditure through the absence of asset creation and liability reduction in the described classification.
- Examples listed include interest payments, grants to States/UTs, defence and police, subsidies, pensions, salaries, education, health and other social services.
- It is generally recurring expenditure connected with normal government functioning.
8. How to revise public finance
- Memorise the three funds with their Articles.
- Understand the purpose of each fund rather than memorising names alone.
- Then learn revenue versus capital classification.
- Finally practise statement-based MCQs where two constitutional provisions look similar.