Financial Administration in India

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May 12, 2012 at 6:24 am #67471

Anonymous
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I am posting here important Questions & Answers from the Chapter “Financial Administration in India” for the preparation of departmental examination to be held at PSC buildings.

May 12, 2012 at 6:41 am #72482

Anonymous
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Q. Describe the overall process of control over the financial administration in a state.
Parliament controls the financial administration as under:
1. Legislative control
2. Administrative control
3. Audit control
What is Legislative control?
There are two parts of legislative control over finance as under:
(i) Policy making
(ii) Implementation of Policy
The Legislature has the control of the fund and determines how to increase the resources and how to spend the same on specified objects in each year. The same is reflected in the budget showing the estimated receipts and proposed expenditure of the administration for a Financial year i.e. policy making.
The second stage of finance is control over implementation of policies. The moneys voted by the Legislature have been utilised properly for which the same are approved by the Legislature.
What Is Administrative control?
It is the duty of the Administration to carry out the policies determined by the Legislature whether the collection of moneys and utilised them on specified objects for implementation of policies as laid down by the Legislature have been properly made by the administration or not. The administration should also ensure the formulation of similar accountability on the part of each authority subordinate to the one immediately above.
What Is Audit control?
The object and function of the Audit are given below
(1) Fiscal Accountability
(i) Fiscal integrity
(ii) Full disclosure
(iii) Observing of rules and regulations and laws
(2) Managerial accountability
(i) Efficiency and economy in the use of public moneys
(ii) Property
(iii) Personnel and other resources.
(3) Programme Accountability
Activities of the Govt, are achieving the objective with due regard to both costs and results.
Audit is the main instrument to secure accountability of the lower formation in the set up to the administration and of the Administration to the Legislature in the area of financial administration. Audit is an indispensable part of financial system and one of the important organs necessary to ensure the sound functioning of Parliamentary democracy. The policies framed by the legislature are to be implemented by the Govt. The same will be examined by the audit. Audit reports submitted to the Legislature by the C.A.G. through President/Governor as the case may be, are examined by Public Accounts Committee on behalf of the legislature.

May 13, 2012 at 5:34 am #72492

Anonymous
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Q. Describe the structure of Administration.
India has been constituted into a Union of States on 26th January, 1950. There are 28 States and 7 Union territories. The President of India is elected by an electoral college consisting of elected members of both Houses of Parliament and Legislative Assemblies of States. He is the Executive Head of the Union. He has a Council of Ministers headed by the Prime Minister who advises him to exercise his functions. Parliament is the supreme authority to make laws to the exercise of such rights, authority and jurisdiction as are exercisable by the Govt. of India by agreement and to the giving directions to the States in specified matter.
The executive power of the States is vested in the Governor who is appointed by the President of India. He has a Council of Ministers headed by the Chief Minister, who advises him to exercise his functions. State Legislature has power to make laws for the State. Every Union Territory is administered by the President of India through an Administrator appointed by him, but where there is separate legislature there is a Council of Minister headed by Chief Minister who advices the Administrator in exercise of his function.

May 13, 2012 at 7:46 am #72493

Anonymous
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Q. How Legislative powers are distributed between the Union and the States as per our Constitution under Article 246?
Legislative powers are distributed between Union and States under Article 246 of the Constitution as under:
(a) Parliament may make laws for whole or any territory in India.
(b) State Legislature may make laws for whole or any part of the State under the Constitution of India, the various matters of legislation have been detailed in the Seventh Schedule of the Constitution. There are three lists in the Schedule, viz,
(i) Union List
The items mainly included in the list are of national and international importance such as, Defence, Foreign Affairs, Banking, Currency etc.
(ii) State List
The items mainly included in the list are of the local importance such as Police, Agriculture, Public Health etc.
(iii) Concurrent List
Items mentioned in this list on which the Union and the States have the power to make laws are such as Criminal Law, Forest, Education, Civil Procedure, Marriage Trust, and Welfare of the Labour etc.
It may be mentioned here that Central Law prevails over the State Law, if any, on the subject except in cases where the State Law has been assented to by the President. But Parliament is competent to any time to enact any law with respect to same matter including a law adding to, amending, varying or repealing the law made by State Legislature.

September 3, 2012 at 12:26 pm #72758

Anonymous
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Q. How finance is control by Government?
Control of Finance of the Union and the States is made by Finance Ministry/ Finance Department of the Union or the States as the case may be. Ministry of Finance/Finance Department delegates financial power to the other Ministries/Departments. Finance Department acts as a coordinator in respect of control of finance and overall responsibility is lying with them. There is a Financial Adviser in each Ministry/Department for the purpose of speedy and effective discharges of their function in financial matters which include planning, programming, budgeting, monitoring and evaluation etc. The initial responsibilities for administration of each department of Govt. activities in the Union, Union Territory or in a State is laid upon the Head of the Department who is responsible for collection of revenue and control of expenditure.

September 25, 2012 at 8:02 am #74434

Anonymous
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Q. What is the provision as per Article No. 266 of the Constitution regarding Finance of Govt. ?
There are two separate Consolidated Funds for the Union and the States. All revenues received by the Govt. loans raised by the Govt. by issue of Treasury Bill or Ways and Means advances and moneys received for repayment of loans are credited to the Fund and all expenditure are made out of the fund subject to the approval of the Legislature. It may be mentioned here that all reccipts and payments of Union Territories without separate the Legislature are made from the Consolidated Fund of India.
There are separate Contingency Fund of Govt. of India and State Govt. under the disposal of the President of India / Governor of the State as the ease may be for the purpose of meeting unforeseen emergent nature of expenditure pending authorisation of the Parliament or State Legislature as the case may be.
There are separate Public Accounts of the Govt. of India and State Govt. All moneys received from the public are credited to his account if not deposited to the Consolidated fund and disbursed from this account as per rules. All transactions of the Union or other States are made through this account for the purpose of adjustment.
It may be mentioned here that in case of ‘Union Territory’ where there is no separate Legislature, the financial transactions are made through Union’s Consolidated Fund, Contingency Fund and Public Accounts.

September 25, 2012 at 8:05 am #74435

Anonymous
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Q. What are the provisions in the Constitution regarding the distribution of Financial resources between Union / State ?
There are several principles in respect of distribution of Financial resources as per our Constitution :
(A) Tax exclusively to the Union :
(i) Customs Duty.
(ii) Corporation Tax / Income Tax.
(iii) Tax on capital value of assets of individual and companies.
Tax exclusively to the States :
(i) Land Revenue.
(ii) Agricultural Income Tax.
(iii) Stamp duty except in document to included in the Union list.
(iv) Tax on vehicles, animals, consumption of electricity, luxuries, amusements etc.
(v) Sales Tax.
(vi) Professional Tax not exceeding Rs. 2500/- per annum,
(C) Duties levied by Union but collected and appropriated by the States : (Article No. 268)
(i) Stamp duties on bill of exchange.
(ii) Excise duties on medicinal and toilet preparations containing alcohol.
(D) Tax levied as well as collected by Union but assigned to States where leviable : (Ammended Article No. 269)
Taxes on sales or purchase of goods and taxes on the consignment of goods. The net proceeds are not to go to the consolidated fund of India. It relates to inter-state commerce.
(E) Tax levied and collected by Union and distributed between Union and States : (Ammended Article No. 270)
All taxes and duties referred to Union list, except those under Article 268, 269, surcharge and other duties under Article 27 and any cases levied for specific purpose, under any law and collected by the Govt. of India.
Though the net proceed or a share of the proceeds of certain taxes levied and collected by Govt. of India are distributed to the States by Act by Parliament. Parliament has the right to levy surcharge for the purpose of Govt. of India. There is a provision of payment of Grant-in-aid to backward States for promoting the welfare of Scheduled Caste and Scheduled Tribes, and also raising the level of administration of tribal areas.
Net Proceeds
The net proceeds (i.e. gross collection minus the cost of the collection) are distributable and the amount of taxes in respect of Union emoluments and the share attributable to Union Territories are to be deducted for arriving at the divisible net proceed to the states.

September 25, 2012 at 8:08 am #74436

Anonymous
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Q. What are the procedures of borrowing money by Govt. of India and State Govts. ?
As per Article 292 of the Constitution, Govt. of India may borrow money under the following terms and conditions :
(i) On the basis of executive power money may be borrowed upon the security of the Consolidated Fund of India.
(ii) Limitation of borrowing money upon the security of the Consolidated Fund of India is fixed from time to time by the Parliament by law.
(iii) Govt. of India may borrow money within the Territory of India and also outside the Territory of India.
As per Article 293(1) and (2) of our Constitution, State Govt. may borrow money under the following terms and conditions :
(i) On the basis of executive power money may be borrowed upon the security of the Consolidated Fund of the State.
(ii) Limitation of borrowing money upon the security of Consolidated Fund of State is fixed from time to time by the Legislature.
(iii) State Government is authorised to borrow money within the Territory of India.
(iv). Government of India may, subject to such conditions as may be laid down by Parliament, make loans to any State upon the limit fixed by the Parliament by law.
(v) Govt. of India may give guarantee in respect of loan raised by any State.
Special limitation on the Power of States (Art. 293):
(i) If there is any outstanding loan made by the Govt. of India or if there is loan for which a guarantee has been given by the Govt. of India, State Govt. may not raise any loan without the consent of the Govt. of India.
(ii) A consent may be granted subject to such conditions, if any, fixed by the Govt. of India.

October 2, 2012 at 3:27 pm #74645

Anonymous
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What is an Annual Financial Statement? What does a budget contain?
Annual Financial Statement is commonly known as Budget i.e. estimated receipts and estimated expenditure for the coming year. The same is prepared by the Government and presented to the legislature with the approval of the President/Governor as the case may be before commencement of financial year i.e. 1st April in each year.
There are three heads in the budgets :
(1) Consolidated Fund, (2) Contingency Fund, (3) Public Account. The budget includes (i) Revenue Budget and (ii) Capital Budget.
A system of performance budgeting has been introduced both in the Centre and in the State for the following purpose : (a) Meaningful reflection of the national development effort, (b) Evaluating the progress of project against target, (c) To serve a tool for securing the efficient management of operations entrusted to the Administration. The individual items which make up the budget are shown not only in financial terms but as far as possible in physical terms as well, thereby establishing a proper relationship between inputs and outputs and enabling a proper assessment of the performance in relation to costs.
There are two parts of Consolidated Fund : (1) Charged expenditure and (2) Voted expenditure. The expenditure charged upon can not be placed to vote of legislature. The same is submitted to the Legislature for the purpose of discussion only.
After passing Demand for Grants Financial Bill relating to taxation proposals is placed to the Legislature. When the same is passed by Legislature, it is called Finance Act. After passing Demand for Grants Appropriation bill relating to expenditure is placed to the Legislature. When the same is passed by Legislature, it is called Appropriation Act. No money can be withdrawn until and unless Appropriation Act is passed by the Legislature.

October 7, 2012 at 5:41 am #74711

Anonymous
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What is charged expenditure?
The estimates as relates to expenditure charged upon the Consolidated Fund shall be submitted to the Parliament/State Legislature as the case may be for the purpose of discussion only, but the same could not be produced to the Vote.
Separate items mentioned in the Constitution to make expenditure charged upon the Consolidated Fund of the Union and the State respectively.
Charged expenditure of the Government of India—
(a) Salary and other expenditure of the President and his office.
(b) Salaries of the Chairman and the Deputy Chairman of the Council of States and also of the Speaker and the Deputy Speaker of the House of the People.
(c) Debt charges for which Govt, of India is liable including interest, sinking fund charges etc.
(d) Salaries and Pensions of the Judges of the Supreme Court.
(e) Salaries and pensions or the judges or the High Court or any Union Territory.
(f) Salaries and Pensions of the Comptroller and Auditor General.
(g) Sums required to satisfy the judgement of any Court or Tribunals.
(h) Any other expenditure declared by law as charged expenditure. The following items have been declared as charged expenditure by Law :
(i) Administrative expenses of the Supreme Court and High Court,
(ii) Administrative expenses of the establishment to the CAG.
(iii) Grant-in-aid to be given to such States as determined by the President.
(iv) Expenditure of U.P.S.C. including Salaries and Pensions payable to the members and staff of U.P.S.C.
Charged expenditure of State
(a) Salary of the Governor and other expenditure of his office.
(b) Salaries of the Speaker, the Deputy Speaker of the State Legislature and the Chairman and the Deputy Chairman of the Legislative Council.
(c) Debt Charges including interest and sinking fund etc.
(d) Salaries and Pensions of the Judges of the High Court.
(e) Sums required to satisfy the judgement of any Court or Tribunal.
(f) Any other expenditure declared by law as charged expenditure.
Following items have been declared as charged expenditure by law :
(i) Administrative expenses of the High Court.
(ii) Special Expenses under Article 290 (certain special expends and pension).
(iii) Expenditure of the State P.S.C. including salaries and pensions payable to its members and staff.
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