- The word "budget" does not appear in the Constitution; Article 112 calls it the Annual Financial Statement.
- Since 2017 the Union Budget is presented on February 1, and the Railway Budget has been merged with it.
- Independent India's first budget was presented by R.K. Shanmukham Chetty on November 26, 1947.
Constitutional Provisions
| Article | Provision |
|---|---|
| 112 | Annual Financial Statement (Budget) |
| 113 | Demands for grants voted by the Lok Sabha |
| 114 | Appropriation Bill — no money can be withdrawn without it |
| 116 | Vote on account, votes of credit and exceptional grants |
| 265 | No tax shall be levied except by authority of law |
| 266 | Consolidated Fund and Public Account of India |
| 267 | Contingency Fund of India (₹30,000 crore since 2021) |
| 280 | Finance Commission |
Types of Deficit
- Revenue deficit = revenue expenditure − revenue receipts.
- Effective revenue deficit = revenue deficit − grants for creating capital assets.
- Fiscal deficit = total expenditure − (revenue receipts + non-debt capital receipts). It equals the Government's total borrowing requirement.
- Primary deficit = fiscal deficit − interest payments.
Budget articleArt 112
Presented onFebruary 1
FRBM Act2003
Finance CommissionArt 280
GST launchedJuly 1, 2017
GST CouncilArt 279A
FRBM Act, 2003
The Fiscal Responsibility and Budget Management Act set targets for reducing deficits. The N.K. Singh Committee (2017) recommended a general government debt-to-GDP ratio of 60% (40% Centre, 20% states) and a fiscal deficit of 3% of GDP for the Centre.
Cut Motions
- Policy cut — reduce the demand to ₹1; signals disapproval of the policy.
- Economy cut — reduce the demand by a specified amount.
- Token cut — reduce the demand by ₹100 to voice a specific grievance.
Finance Commission
Constituted by the President every five years under Article 280 to recommend how taxes are shared between the Centre and states. The first was chaired by K.C. Neogy (1951). The 15th (N.K. Singh) recommended 41% devolution to states. The 16th Finance Commission, chaired by Arvind Panagariya, was constituted on December 31, 2023 for the period 2026–31.
Goods and Services Tax
- Introduced by the 101st Amendment (2016), which added Articles 246A, 269A and 279A; rolled out on July 1, 2017.
- The GST Council is chaired by the Union Finance Minister, with state finance ministers as members.
- GST rate rationalisation (2025): the 56th GST Council meeting (September 3, 2025) moved most goods to two main slabs of 5% and 18%, with 40% for luxury and sin goods, effective September 22, 2025.
- GST is a destination-based tax: CGST and SGST on intra-state supplies, IGST on inter-state supplies.
Q1. The Union Budget is referred to in the Constitution as the:
✅ Answer: (c) Annual Financial Statement
💡 Explanation: Article 112 calls it the Annual Financial Statement.
Q2. Primary deficit is equal to:
✅ Answer: (a) Fiscal deficit minus interest payments
💡 Explanation: Primary deficit removes interest payments to show current borrowing needs.
Q3. Who chairs the GST Council?
✅ Answer: (d) The Union Finance Minister
💡 Explanation: Under Article 279A, the Union Finance Minister chairs the GST Council.
Q4. A "token cut" motion seeks to reduce a demand for grants by:
✅ Answer: (b) ₹100
💡 Explanation: A token cut reduces the demand by ₹100 to raise a specific grievance.
Q5. Who chairs the 16th Finance Commission?
✅ Answer: (c) Arvind Panagariya
💡 Explanation: Arvind Panagariya chairs the 16th Finance Commission, constituted on December 31, 2023.
🔁 Revise in 60 Seconds
- Art 112 Budget; 266 Consolidated Fund; 267 Contingency Fund; 280 Finance Commission.
- Fiscal deficit = total borrowing; primary deficit = FD − interest.
- Budget on Feb 1 and Railway Budget merged — both since 2017.
- GST: 101st Amendment, July 1, 2017; GST Council Art 279A.
📌 Prelims Traps to Avoid
- ✘ The Contingency Fund is at the disposal of the President, not Parliament.
- ✘ Policy cut = ₹1; token cut = ₹100.
- ✘ Finance Commission is under Article 280; the GST Council is under Article 279A.
What is fiscal deficit?
Fiscal deficit is total expenditure minus revenue receipts and non-debt capital receipts. It shows how much the Government must borrow in a year.
Who chairs the 16th Finance Commission?
Arvind Panagariya, former Vice-Chairman of NITI Aayog. The Commission was constituted on December 31, 2023 and covers 2026–31.