The Annual Financial Statement is a document presented to Parliament every financial year as part of the Budget process, as required under Article 112 of the Constitution of India. The documents consist of receipts and expenditures of the government in the current year, previous year and the Budget year in three separate parts — Consolidated Fund of India, Contingency Fund of India, and Public Account of India. The government presents a statement of receipts and expenditures for these accounts every year to Parliament. Loans raised by the government, borrowings from the Reserve Bank of India (RBI), and borrowings from foreign governments or institutions are shown under capital receipts, which also show loan recoveries, asset sale, disinvestment, etc.
DEPARTMENT OF ECONOMIC AFFAIRS
- This Ministry consists of five departments, namely, (i) Economic Affairs, (ii) Expenditure, (iii) Revenue, (iv) Investment and Public Asset Management; and (v) Financial Services.
- The Department of Economic Affairs is the nodal agency of the government to formulate and monitor country’s economic policies and programmes.
- A principal responsibility of this Department is the preparation and presentation of the Union Budget (including Railway Budget) to the Parliament and budget for the state governments under President’s Rule and union territory administrations.
- The Directorate of Currency has the administrative control of the Security Printing and Minting Corporation of India Limited(SPMCIL), a wholly owned Government of India Corporation that manages Government of India mints, currency presses, security presses and security paper mill.
- Under Article 112 of the Constitution, a statement of estimated receipts and expenditure of the Government of India has to be laid before Parliament in respect of every financial year. This statement titled ‘Annual Financial Statement’ is the main Budget document.
- The Annual Financial Statement shows the receipts and payments of government under the three parts in which government accounts are kept: (i) Consolidated Fund, (ii) Contingency Fund and (iii) Public Account.
- Under the Constitution, Budget has to distinguish expenditure on revenue account from other expenditure. Government Budget, therefore, comprises (i) Revenue Budget; and (ii) Capital Budget.
Demands for Grants
- The estimates of expenditure from the Consolidated Fund included in the Annual Financial Statement and required to be voted by the Lok Sabha are submitted in the form of Demands for Grants in pursuance of Article 113 of the Constitution.
- Generally, one Demand for Grant is presented in respect of each ministry or department.
- At the time of presentation of the Annual Financial Statement before Parliament, a Finance Bill is also presented in fulfilment of the requirement of Article 110(1)(a) of the Constitution, detailing the imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget.
- A Finance Bill is also a Money Bill as defined in Article 110 of the Constitution.
- After the Demands for Grants are voted by the Lok Sabha, Parliament’s approval to the withdrawal from the Consolidated Fund of the amounts so voted and of the amount required to meet the expenditure charged on the Consolidated Fund is sought through the Appropriation Bill.
- Under Article 114(3) of the Constitution, no amount can be withdrawn from the Consolidated Fund without the enactment of such a law by Parliament.
SOURCES OF REVENUE
- All taxes to in the Union List, except the duties and taxes referred to in Articles 268 and 269, respective surcharge on taxes and duties referred to in Article 271 shall be levied and collected by the Government of India.
- This amount shall be distributed between the Union and the states in such manner as may be prescribed by the President on the recommendations of the Finance Commission.
- The Public Debt of India is classified into three categories of Union Government liabilities into internal debt, external debt and other liabilities.
- The Reserve Bank manages the public debt of the Central and the state governments and also acts as a banker to them under the provisions of the Reserve Bank of India Act, 1934 (Section 20 and 21).
- Direct Benefit Transfer (DBT) is a major reform initiative launched by Government of India in 2013 to provide an overarching vision and direction to enable direct cash transfer of benefits under various government schemes and programmes to individuals.
- The Green Climate Fund (GCF) is a multilateral fund created to support the efforts of developing countries to respond to the challenge of climate change. GCF launched its initial resource mobilization in 2014.
- A Bankruptcy Law Reforms Committee was set up in 2014 for providing an entrepreneur friendly legal bankruptcy framework for meeting global standards for improving the ease of doing business with necessary judicial capacity. Accordingly, the Insolvency and Bankruptcy Code, 2016 (IBC) became operational in 2016.
- The Financial Stability and Development Council (FSDC) was set up as the apex level forum in 2010. The Council monitors macro prudential supervision of the economy including functioning of large financial conglomerates, and addresses inter-regulatory coordination and financial sector development issues, including issues relating to financial literacy and financial inclusion.
- Financial Stability Board (FSB) was established in 2009 under the aegis of G20 by bringing together the national authorities, standard setting bodies and international financial institutions.
Government launched the following to mobilize the long term investment in infrastructure in the country:
- Banks continue to be major source of financing infrastructure. RBI has been modifying guidelines for advances to infrastructure including 5/25 scheme, take out financing.
- The Government has also set up India Infrastructure Finance Company Limited (IIFCL) with the specific mandate to play a catalytic role in the Infrastructure sector.
- Government of India has conceptualized Infrastructure Debt Funds (IDFs) to accelerate and enhance the flow of long term debt into infrastructure projects to help in the migration of project loans for operating assets from banks to the fixed income markets.
- Real Estate Investment Trusts (REITs)/Infrastructure Investment Trust (InvITs) are trust-based structures that maximize returns through efficient tax pass-through and improved governance structures.
INTERNATIONAL FINANCIAL COOPERATION
- The G20 was formed in 1999, as a forum of Finance Ministers and Central Bank Governors.
- The BRICS nations or Brazil, Russia, India, China and South Africa form the five key pillars of south-south cooperation and are the representative voice of Emerging Markets and Developing Countries
- The United Nations Development Programme (UNDP) is the largest channel for development cooperation in the UN.
- SAARC Development Fund (SDF) was established in 2008 by the SAARC countries to improve the livelihood of the people and to accelerate economic growth.
- Bilateral Official Development Assistance: In terms of the guidelines issued in 2005, bilateral development assistance can be accepted from all G-8 countries, namely USA, UK, Japan, Germany, France, Italy, Canada and the Russian Federation as well as from European Commission.
- India is a founder member of the International Monetary Fund (IMF) which was established to promote a cooperative and stable global monetary framework.
- BRICS Nations are the founding members of the New Development Bank (NDB), which has been instituted with a vision to support and foster infrastructure and sustainable development initiatives in emerging economies.
- India is one of the founding Members and the second-largest shareholder of Asian Infrastructure Investment Bank (AIIB), a Multilateral Development Bank (MDB) set up in 2016.
DEPARTMENT OF EXPENDITURE
- The Department of Expenditure is the nodal Department for overseeing the public financial management system in the central government and matters connected with state finances. It is responsible for the implementation of the recommendations of the Finance Commission and Central Pay Commission.
- The Controller General of Accounts (CGA), in the Department of Expenditure, is the Principal Accounting Adviser to the Government of India.
- The Public Financial Management System (PFMS) is a web-based online software application designed, developed, owned and implemented by the CGA.
- The Institute of Government Accounts & Finance (INGAF) is the training arm of the Controller General of Accounts. It was set up in February, 1992.
- The Central Pension Accounting Office (CPAO) was established in 1990 for Payment and Accounting of Central (Civil) Pensioners and pension to freedom fighters etc. CPAO is a subordinate office under the Office of the Controller General of Accounts, Ministry of Finance.
GOODS AND SERVICES TAX
- The Goods and services Tax Council was constituted in 2016. GST was implemented in the country in July, 2017.
- It covers all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax.
- In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy till a date notified on the recommendation of the GST Council.
- Compensation to the states for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years.
- The Central Board of Direct Taxes (CBDT), created by the Central Boards of Revenue Act 1963, is the apex body entrusted with the responsibility of administering direct tax laws in India. It is the cadre controlling authority for the Income Tax Department (ITD).
- Permanent Account Number (PAN) is a 10 digit alphanumeric number allotted by the Income Tax Department to taxpayers and to the persons who apply for it under the Income Tax Act, 1961.
- e-Nivaran aims to fast track taxpayer’s grievance redress, ensuring early resolution by integrating all the online and physical grievances received by the department and keeping track of it until it reaches its logical conclusion.
- Aayakar Sewa Kendra (ASK) is the single window system for implementation of Citizen’s Charter of the Income Tax Department and a mechanism for achieving excellence in public service delivery.
- The Narcotics Control Division administers the Narcotic Drugs and Psychotropic Substances Act,1985.
- The Central Bureau of Narcotics (CBN) headed by the Narcotics Commissioner is headquartered at Gwalior. The administrative control of the department lies with CBEC while its operational functions are monitored by the Department of Revenue.
- The Government Opium and Alkaloid Factories (GOAF), under the administrative control of the Department of Revenue, are engaged in the processing of raw opium for export purposes.
- PSBs and PSB sponsored Regional Rural Banks (RRBs) have dominant market presence and constitute 78 percent of the bank network of Scheduled Commercial Banks (SCBs).
- The Reserve Bank of India (RBI) is India’s central banking institution, which controls the monetary policy of the Indian rupee. It commenced its operations on April 1, 1935 in accordance with the Reserve Bank of India Act, 1934. RBI is the sole body that is authorized to issue currency in India.
- The Regional Rural Banks (RRBs) were established under Regional Rural Banks Act, 1976. RRBs are jointly owned by Government of India, concerned state government and sponsor banks with the issued capital shared in the proportion of 50 per cent, 15 per cent and 35 per cent, respectively.
- The Kisan Credit Card (KCC) scheme was introduced in 1998-99, as an innovative credit delivery system aiming at adequate and timely credit support from the banking system to the farmers
- The Rural Infrastructure Development Fund (RIDF) was set up within NABARD during 1995-96 by way of deposits from Scheduled Commercial Banks operating within the country from the shortfall in their agricultural/priority sector/weaker sections lending.
- The performance of the banking sector (domestic operations), Public Sector Banks (PSBs) in particular, improved in 2018-19.
- The Gross Non-Performing Advances (GNPA) ratio of Scheduled Commercial Banks (SCBs) decreased from 11.5 per cent to 10.1 per cent between March 2018 and December 2018, as also, their Restructured Standard Advances (RSA) ratio declined from 0.7 to 0.4 per cent.
- The Stressed Advances (SA) ratio decreased from 12.1 to 10.5 per cent during the same period. GNPA ratio of PSBs decreased from 15.5 to 13.9 per cent between March 2018 and December 2018.
- Life Insurance Corporation of India (LIC) was established by an Act of Parliament called the Life Insurance Corporation of India Act, 1956.
- The insurance sector was opened for private participation with the enactment of the Insurance Regulatory and Development Authority Act, 1999. The Insurance Regulatory and Development Authority of India (IRDAI) is functioning from its head office in Hyderabad, Telangana.
- The government launched the Pradhan Mantri Vyay Vandana Yojana (PMVVY) to protect elderly persons aged 60 years and above against a future fall in their interest income due to the uncertain market condition, as also to provide social security in old age.
- Under Aam Aadmi Bima Yojana (AABY) administered through Life Insurance Corporation of India, below poverty line (BPL) and marginally above poverty line citizens are covered under 48 identified occupations.
SOCIAL SECURITY SCHEMES
- The Atal Pension Yojana (APY) was launched in 2015. The APY is focussed on all citizens in the unorganised sector, who join the National Pension System (NPS) administered by the Pension Fund Regulatory and Development Authority (PFRDA).
- Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a one-year life insurance scheme, renewable from year to year, offering coverage of two lakhs rupees for death due to any reason and is available to people in the age group of 18 to 50 years (life cover up to 55 years of age) having a bank account who give their consent to join and enable autodebit.
- The Pradhan Mantri Suraksha Bima Yojana (PMSBY) is a one-year personal accident insurance scheme, renewable from year to year, offering coverage for death/disability due to an accident and is available to people in the age group of 18 to 70.
- Objectives of Pradhan Mantri Jan Dhan Yojana (PMJDY) include: (i) universal access to banking facilities for all households across the country through a bank branch or a fixed point business correspondent (BC) within a reasonable distance. (ii) to cover all households with atleast one basic bank account with RuPay Debit card having inbuilt accident insurance cover of ₹ 1 lakh.
- With a view to providing adequate retirement income, the National Pension System (NPS) was introduced. It has been made mandatory for all new recruits to the Government (except armed forces) with effect from January 1, 2004 and has also been rolled out for all citizens with effect from May 1, 2009 on a voluntary basis.
- To encourage the workers in the unorganized sector to save voluntarily for their old age, an initiative called Swavalamban Scheme was launched in 2010.
- Pradhan Mantri Mudra Yojana (PMMY) was launched in 2015, to enable income generating small business enterprises to have access to loans.
DEPARTMENT OF INVESTMENT AND PUBLIC ASSET MANAGEMENT