Introduction
In FY24, the Indian Government earned a revenue of ₹45.17 lakh crores. But where does the Government record all these revenues?
All individuals have bank accounts to manage their income/revenue and expenses. Like all the general public, the Government also needs an account to handle its finances. That is where the Consolidated Fund of India account comes into play.
This fund serves as the core for India’s monetary transactions with integrity in the collection and management of public funds and the expenditure made for the same.
Now, let us understand the notion of the Consolidated Fund of India, its functioning, its relevance and applicability and the measures to control its misuse.
Government Structure of Accounts
The financial accounts of the Government of India are divided into three main categories:
Part I – Consolidated Fund of India
This account encompasses all the Government’s revenue, including both tax and non tax income, as well as loans and their repayments. The account also deducts expenses concerning the Government. All these expenses are to be approved by the Parliament.
Part II – Contingency Fund
This account is used to meet the expenses of urgent and unforeseen events. Like floods, earthquakes, and situations like COVID-19.
Part III – Public Account
This account records debt obligations which are not the liabilities of the Consolidated Fund of India.
It includes the amount received on schemes or deposits, which the Government is obliged to pay. And loans and advances, which it has a right to recoup.
What is the Consolidated Fund of India?
The earnings of the Government come from many sources, such as:
- Taxes – both direct and indirect
- Revenue from government enterprises
- Sales of assets
- Dividends
- Recovery of certain debts and so on.
All the revenue proceeds of the Government are deposited to the Consolidated Fund of India account.
The revenue sources include:
- Revenue collected through income tax, corporate tax
- Revenue collected through Goods and Services Tax (GST)
- Revenue generated through various services offered by the Government.
- Any profits or dividends earned from Public Sector Undertakings (PSUs).
- Income credited because of loan recoveries, debt repayment and disinvestment.
Are any Expenses Charged?
The Government incurs a great number of expenses. Salaries, pensions, infrastructure projects, defence, etc. are some of these expenses. These expenses are debited from the Consolidated Fund of India. Expenditures like these require parliamentary approval.
However, some non-votable charges don’t require budget passage, including salaries and allowances for the:
- President,
- Lok Sabha Speaker and Deputy Speaker,
- Rajya Sabha Chairman and Deputy Chairman,
- Supreme Court judges’ salaries and pensions, and
- High Court judges’ pensions.
Components – Consolidated Fund of India
The fund itself consists of the following parts:
Revenue Account
Under revenue account – there are two accounts – revenue receipt accounts and revenue disbursements accounts.
This account is made up of the incomes derived from taxes and other sources classified as revenue and the spending that is met by that account.
Capital Account
Under capital account – there are two accounts – capital receipt account and capital disbursements account.
The capital account is the one concerned with the expenditure incurred either to increase the concrete assets of the durable type or to minimise the recurring liabilities. It also encompasses the various types of capital receipts.
The Consolidated Fund of India also consists of disbursements charged on the consolidated fund (non-votable charges).
Importance of Consolidated Fund of India
The Consolidated Fund of India is of utmost importance and cannot be emphasised enough.
1. Centrally Managed
This account enables the Government to exert central control over all revenues and expenditures. This diversion in the management of the financial resources allows for better control and accountability over the country’s financial resources.
2. Safeguard
The constitution stipulates that this fund is strictly subject to the regulations. Any public officer involved in the misappropriation of the fund will be held accountable.
3. Transparency and Accountability
The Consolidated Fund is a deterrent from future threatening violations of the basic constitutional rights of the citizens since the Parliament is the only executive that can authorise any withdrawal. This makes the authorities use public funds in their designated projects.
Final Thoughts
The Consolidated Fund of India is a solid foundation that bolsters the public finance system of India. This fund is a safety point that ensures that all Government revenues are contributed centrally and expenditures are carried out in a clear, accountable way.
The Constitution, by virtue of requiring Parliament’s supervision, guarantees the continuity of the democratic process as well as ensures fiscal responsibility. That said, as the Indian economy flourishes, addressing these issues to obtain the maximum benefit from the Consolidated Fund, such as budget deficits and efficient resources management, is still very important.
FAQs
1. What is meant by the Consolidated Fund of India?
The Government earns revenue in many ways – direct and indirect taxes, revenue from state-run companies, asset sales, dividends, debt repayment, etc. All the earnings or revenue of the Government is credited to the Consolidated Fund of India account.
The account also deducts expenses concerning the Government. All these expenses are to be approved by the Parliament.
2. What is the contingent fund of India?
In a big country like India, urgent and unforeseen events can occur anytime. The contingent fund of India helps with the same. In case of unforeseen circumstances or urgent expenses, like floods, earthquakes, etc., this account is used. The President of India makes decisions regarding this fund.
3. Who is the owner of the Consolidated Fund of India?
The Government is the owner of the Consolidated Fund of India. However, the resources from this fund can only be used after the Parliament’s approval, which is obtained through Appropriation Bills. These bills define the types and amounts of expenses authorised for withdrawal.
