Expenditure budget

Expenditure budget

Subject: Indian Budgeting

Context: Government looks at expenditure budget to revive growth.

Concept:

• With less than 1.5% of GDP as additional spending in pandemic year government has significant scope for spending as recent green shoots in economy if supported by further public investment can help the growth of the economy.
• British economist John Maynard Keynes had argued that free markets cannot be relied upon to fuel GDP growth when there is a recession, of the kind India and the world, has witnessed in 2020 following the Covid-19 pandemic.
• India witnessed contraction of discretionary expenditure by consumer leading to fall in demand and hence private sector investing less. Thus, it necessitates more spending by the government.

About expenditure budget:

• Expenditure budget provides all the information about the total finance of the Union in a financial year.
• It divides expenditure in two parts: capital expenditure and revenue expenditure. While the former results in the creation of a physical asset or investment, the latter comprises mainly operational expenses such as payment of wages, pensions, subsidies, and interest.
• Revenue expenditure does not lead to any asset creation or reduction of liabilities. Whereas capital expenditure yields asset or invested in sectors which will yield dividend in future (Ex- Skill).
• Expenditure budget has two components:

1. Charged expenditure: According to Article 112 (3) and Article 202 (3) of the Constitution of India, certain expenditure does not require a vote and is charged to the Consolidated Fund. They include:

Salary, allowances and pension for the President as well as Governors of States, Speaker and Deputy Speaker of the House of People, the Comptroller General of India and Judges of the Supreme and High Courts.

They also include interest and other debt related charges of the Government and any sums required to satisfy any court judgment pertaining to the Government.

2. Voted expenditure: Other revenue and capital expenditure which need approval of the Lok Sabha.

• The information about both capital and revenue expenditure is further given in two separate categories as charged and voted expenditure as per the requirement of voting in the Lok Sabha.
• The demands for grants in budget include both charged and voted expenditure.