Types of Funds in India - Its Overview, Types & Significance (2024)

The Consolidated Fund of India (Article 266), Contingency Fund of India (Article 267), and Public Accounts of India are the three main forms of funds for the Central Government listed in the Indian Constitution (Article 266).

This topic of the Types of Funds in India is important from the perspective of the UPSC IAS Examination, which falls under General Studies Paper 2 (Mains) and General Studies Paper 1 (Prelims) and particularly in the Polity section. In this article, We shall discuss the different types of funds, functions of the controller general of accounts, types of grants, types of expenditures, and other important details.

What is Government Funding

Formal funding given by the Union, state or municipal government organization in recognition of a commendable endeavor is known as government funding. It functions essentially as a transfer payment. Technical assistance and other forms of financial support, such as loans, loan guarantees, subsidized interest rates, direct appropriations, and revenue sharing, are not included in grants. There may also be revenue-sharing arrangements with the government in some circ*mstances, such as when a discovery results in a patent that generates income. Any situation in which a company or endeavor receives all or part of its financial assistance from a government is referred to as government funding.

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Types of Central Government Funds

The Consolidated Fund of India, the Contingency Fund of India, and the Public Accounts of India are the three types of Central Government funds listed in Article 266 of the Indian Constitution.

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Consolidated Fund Of India (Article 266(1))

• The Consolidated Fund of India keeps track of the government of India’s revenue from income tax, customs, central excise, and other sources, as well as its outlays, with the exception of unusual items. It was established in accordance with Article 266(1) of the Indian Constitution.
• All money raised by the government, including loans with open disclosure, Treasury bills, and borrowings from other nations or international organizations, is always credited to this Fund.
• This account is also used by the Indian government to cover expenses.
• Without the consent of Parliament, the government is not permitted to take any money out of this account.
• The Fund’s corpus increased from Rs 5 crore to Rs 500 crore in 2005.
• In the most recent Union Budget, the government increased the Contingency Fund of India through the Finance Bill 2021 from Rs 500 crore to Rs 30,000 crore.
• The President of India has access to the Union government’s emergency fund, which he disburses in response to requests from the Union Cabinet that are then approved by Parliament. A Parliamentary ok is required.
• After the emergency has been resolved, the FundFund is compensated up to its $500 billion maximum. The Consolidated Fund of India provides the necessary funding.

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Expenses Charged on The Consolidated Fund of India

Charges assessed against the Consolidated Fund are known as non-votable charges. There is no vote on the withdrawal of these costs from the Consolidated Fund of India. Here are some expenses charged to the Consolidated Fund of India:

• Emoluments and allowances paid to the President of India, as well as other expenses related to his position.
• Salaries and allowances for the Chairman and Deputy Chairman of the Rajya Sabha, as well as the Speaker and Deputy Speaker of the Lok Sabha.
• The salaries, allowances, and pensions of Supreme Court judges.
• High Courts’ judge's pensions.
• In addition to the administrative salaries of the supreme court, the state’s consolidated Fund also covers the judges' and staff's salaries, pensions, and perks.
• As a result, they are unable to cast a vote in the state legislature (though they can be discussed by it).
• The high court judge’s pension is funded by the Consolidated Fund of India, not the government; it should be noted.
• Similarly to this, all administrative expenses, as well as the salaries, perks, and pensions of the judges and staff who work for the Supreme Court, are covered by the Consolidated Fund of India.

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Public Accounts of India (Article 266(2))

• Flows for transactions where the government is only acting as a banker are reported in the Public Accounts of India.
• In accordance with the Constitution’s Section 266(2), this Fund was created. It takes into account transactional flows where the government only serves as a banker.
• This applies to small deposits, provident funds, and a variety of other situations. The government does not own these monies.
• At some point, they must be returned to their rightful owners.
  • Due to the Fund’s structure, parliamentary authorization is not needed for expenditures made from it.

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Contingency Fund of India (Article 267)

• The aforementioned FundFund is accessible to the President, who may take money out of it in advance to cover unexpected expenses before the Parliament gives its approval via legislation approved in accordance with articles 115 or 116.
• It could be created by Parliament and will be known as the “contingency fund of India.”
• It must be compensated on a regular basis in the amounts indicated in the applicable statute.
• A fund characterized as a contingency fund that will accept recurrent contributions of any amounts the law may define is the “contingency fund of the State.”
• A State’s legislature may establish it through legislation.
• The State’s Governor will have access to the aforementioned FundFund and may withdraw funds from it ahead of time to pay for unforeseen expenses before the Legislative Body approves them.
• In order to respond to any catastrophic occurrence, Article 267 of the Constitution requires the creation of a corpus under the Contingency Fund of India.
• The Indian President is in charge of this unrest.
• Without the approval of the Parliament, the government is not allowed to seize control of its finances.
• The corpus must then be raised in size by the same amount.
• According to the constitution, central government accounts must be maintained in one of three categories.
• The Public Accounts and the Consolidated Fund of India are the other two.
• The Contingency Fund has a single Major Head in government accounts to accommodate all fund transactions.
• When the Union Cabinet seeks them following a natural disaster, the funds are given to the President, who then releases them.
• Parliament's approval is required before further withdrawal from this FundFund is authorised.
• The money is being held in escrow on the President’s behalf by the Union finance ministry.
• The government occasionally increases the Fund’s size.
• From Rs 5 crore to Rs 500 crore, the Fund’s corpus expanded in 2005.
• Additionally, in the most recent Union Budget, the government increased the Contingency Fund of India from Rs 500 crore to Rs 30,000 crore through the Finance Bill 2021.
• While Parliament is in session, the funds may be raised by an amendment to a finance bill.
• Through Ordnance, if necessary or if the House is not in session.
• In accordance with the Contingency Fund of India Act, 1950, the Secretary of the Department of Economic Affairs must provide his or her approval before any withdrawals from the FundFund.
• The Fund’s corpus was increased the previous year, and the Expenditure Secretary was given more authority over its administration.
• The spending secretary now has access to 40% of the corpus’s cash.
• Both the Economic Affairs Secretary and the Expenditure Secretary will need to provide their consent before any additional releases from the contingency fund may be made.

The following table summarises the three funds.

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Controller General of Accounts (C.G.A.)

• For the benefit of the Government of India, a technically competent Management Accounting System is developed and maintained by the Controller General of Accounts (C.G.A.), who reports to the Department of Expenditure in the Ministry of Finance.
• The Office of C.G.A. provides the Union Government with monthly and yearly analyses of spending, revenue, borrowings, and different fiscal indicators.
• According to Article 150 of the Constitution, the Annual Appropriation Accounts (Civil) and Union Finance Accounts must be reported to Parliament.
• In addition to these documents, an M.I.S. Report titled “Accounts at a Glance” is prepared and sent to honorable members of Parliament.
• The Ministry of Finance’s Controller General of Accounts (C.G.A.), who is in charge of managing the organization and this system, is in charge of doing so.
• The company has taken the lead in offering services that keep up with the quickly evolving technical environment and the growing I.C.T. adoption across the nation.
• For the federal government, a comprehensive, integrated financial information system aims to deliver precise data that promotes accountability in the usage and reporting of public spending.
• Creating client-oriented, integrated apps to enhance operational effectiveness across streams of public finance management systems has generated a lot of interest.

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Functions of C.G.A.

• The creation and upkeep of a trustworthy and efficient accounting and financial reporting system for the Government of India is the responsibility of the Controller General of Accounts (C.G.A.) of the Department of Expenditure in the Ministry of Finance.
• The C.G.A. is assisted by officers from the Indian Civil Accounts Service who are proficient in all facets of accounting, budgeting, and public financial management.
• According to departmentalized accounting systems, Indian Civil Accounts Service staff are operationally in charge of the accounting, reporting, and internal audit duties in Civil Ministries (ICAS).

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Types of Expenditures

Expenses incurred by the Indian Consolidated Fund are Charged Expenditures, Voted or Votable Expenditures, Supplementary Grants, Excess Grants, and Additional Grants.

Charged Expenditures

• In the annual budget presentation of the Consolidated Fund of India, charged expenses are referred to as non-votable expenses.
• The Lower House of Parliament or the State Assemblies must first approve before the Indian government can spend any money from the Consolidated Fund.
• According to Articles 112(3) and 202 of the Indian Constitution, some chargeable expenditures from the combined Budget may be made without a vote.

Voted/Votable Expenditures

• The Union budget will be up for voting for voted expenditures.
• Grant applications represent the expenses of the Budget. The Budget also outlines the government’s financial recovery strategy.
• Typically, a separate grant application for each ministry is submitted, with allowances for a specific category.
• The budget documents also contain these grant requests.

Supplementary Grants

• Supplemental grants offer the extra funds needed to cover government expenses.
• A budget for supplemental or additional funds is presented to the Parliament when grants that the Parliament has approved are insufficient to pay for the necessary expenses.
• These grants are recommended to and approved by the Parliament prior to the end of the fiscal year.
• The Ministries of Finance and Railways submit a Demand for Excess Grant when actual expenses exceed the budgeted allotments approved by Parliament.
• These offenses are reported to the Indian Parliament by the Comptroller and Auditor General of India.
• These violations are investigated by the Public Accounts Committee, which also makes recommendations to Parliament.
• After the actual expense has been incurred and following the conclusion of the fiscal year in which the expense was expended, the request for excess grants is made and presented to the Parliament.

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Excess Grants

• Grants that are distributed in excess of what has been authorized to cover government costs are known as surplus grants.
• A budget for supplemental or additional funds is presented to the Parliament when grants that the Parliament has approved are insufficient to pay for the necessary expenses.
• These grants are recommended to and approved by the Parliament prior to the end of the fiscal year.

Additional Grants

• An additional grant is given when a new service that wasn’t planned for in the Budget necessitates greater spending during the current fiscal year.

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Conclusion

Thus, there are various types of funds that are available in India as we have discussed in the article above, All these funds equivalently help to better govern the citizens of the country and thus to enhance the atmosphere of Good Governance in the country.

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