President of India – Discretionary Powers You Never Knew Existed!

Indian President is not a ceremonial head, unlike many other countries.

All important decisions regarding the country are taken in the name of Indian President, though most of these will be based on the binding advice given by Council of Ministers(CoM), as per Article 74 of Indian Constitution.

But there are certain exceptions, where he can use his discretionary powers. Let’s learn more about that.

Discretionary powers of the President: Not based on the advice of CoM

The discretionary powers of the Indian president are not explicitly mentioned in the Indian constitution. But cases, where the Indian President do not act on the advice of CoM, can be understood if one carefully read the provisions related to the Indian President.

The cases of discretionary powers are as below:

#1: Suspensive Veto:

The President has discretionary power when he exercises suspensive veto ie. when he returns a bill (not money bill) for reconsideration of the parliament.

However if the bill is passed again by the Parliament with or without amendments and presented again to the President, it is obligatory for him to give his assent to the bill.

#2: Pocket Veto:

This is not a provision mentioned in the Indian constitution, but this is a possible situation when the President of India can use his discretionary power. In this case, the President neither ratifies nor reject nor return the bill, but simply keeps the bill pending for an indefinite period.

As the time limit within which the President has to take the decision with respect to a bill presented to him for assent, has not been mentioned in the constitution, in effect the inaction of the President stops the bill from becoming an act.

#3: President can seek information from Prime Minister:

Under article 78 the President enjoys the right to seek information from the PM regarding the administration of the affairs of the union.

Under the established convention, the President has the right to warn or encourage the Council of Minister (CoM) in the exercise of its power.

#4: Case of no sitting of both houses:

Under Article 85, the President can summon each House of Parliament to meet at such time and place as he thinks fit, to ensure that six months shall not intervene between its last sitting in one session and the date appointed for its sitting in the next session.

#5: Case of no majority:

When no political party or coalition of parties enjoy the majority in Lok Sabha, then the President has discretion in inviting the leader of that party or coalition of parties who in his opinion is able to form a stable government.

#6: Case of no-confidence with CoM- dissolving Loksabha:

It is for the president to decide if he should dissolve Loksabha or not when CoM loses the majority in Lok Sabha.

Note: The President can dissolve Lok Sabha only on the advice of CoM but the advice is binding only if the government is a majority government.

#7: Case of no-confidence with CoM- dissolving CoM:

It is for the president to decide if he should dissolve CoM or not when CoM loses the majority in Lok Sabha.

#8: Case of a caretaker government

A caretaker government does not enjoy the confidence of Lok Sabha and hence it is not expected to take major decisions but only to make the day-to-day administrative decisions. It is for the President to decide the day-to-day decisions.

The advice given by CoM binding on Indian President: Article 74

Article 74 of the Indian Constitution says that

• (1) There shall be a Council of Ministers with the Prime Minister at the head to aid and advise the President who shall, in the exercise of his functions, act in accordance with such advice:

Provided that the President may require the Council of Ministers to reconsider such advice, either generally or otherwise, and the President shall act in accordance with the advice tendered after such reconsideration.

• (2) The question whether any, and if so what, advice was tendered by Ministers to the President shall not be inquired into in any court.”

Powers exercised on the advice of CoM (non-discretionary powers)

President of India is vested with Legislative, Executive and Judicial powers. But as the advice given by CoM is binding on Indian President, in reality, most of these powers rest with the COM; but decisions are taken in the name of President of India. See some examples.

• President’s rule – He can rule the whole nation or individual states at times of emergency. The President can declare State, National and Financial Emergencies. Punjab, Jharkhand, Jammu and Kashmir and many other states have been under President’s Rule.
• Commander-in-Chief of Indian Armed forces – The President is the Commander-in-Chief of the Indian Armed Forces.
• The President appoints our State governors, Supreme Court and High Court Judges, and the Chief Justice.
• The President can summon and dissolve parliament sessions.
• A ‘bill’ passed in the parliament can become an ‘act’ only after the President’s approval.
• The President of India has the power to reduce the degree of punishment or pardon criminals – even death sentences can be absolved on appeal.
• The President is the head of Indian State while Prime Minister is the head of Indian Government.
• Ambassadors and High Commissioners representing our country are appointed by the President.
• President appoints the Chief Election Commissioner and other Election Commissioners.
• The President delivers the opening address for the first session of the parliament, as well as the first session of a newly elected government, defining the policies of the government.
• IAS or IPS officers (All India Services) by the President of India, based on the advice of UPSC.

The Executive

An executive president is the head of state who exercises authority over the governance of that state, and can be found in presidential, semi-presidential, and parliamentary systems.

They contrast with figurehead presidents, common in most parliamentary republics, in which the president serves symbolic, nonpolitical roles (and often is appointed to office by parliament) while the prime minister holds all relevant executive power. A small number of nations, most notably Somalia, South Africa and Botswana, have both an executive presidency and a system of governance that is parliamentary in character, with the President elected by and dependent on the confidence of the legislature. In these states, the offices of president and prime minister (as both head of state and head of government respectively) might be said to be combined.

The above examples notwithstanding, executive presidencies are found in presidential systems and semi-presidential systems.

In order to prevent the abuse of power, checks and balances are implemented through the legislative and judiciary bodies. For example, in the United States one method is impeachment whereby the president can be held accountable if others deem their actions unconstitutional, with the most recent example being the impeachment trials of President Donald Trump.

Cut Motions: Policy Cut, Economy Cut, and Token Cut

What is meant by policy cut, economy cut, or token cut motions?

You might have noticed about the Demand for Grants while going through Indian Budget.

These are demands usually made in respect of the grant proposed for each Ministry.

But Parliament being the authority to check the expenditure of the government may not approve all demands.

Cut motions are motions in the parliament moved to reduce the amount of demand.

Cut motions

A motion may be moved to reduce the amount of a demand in any of the following ways:-

1. Disapproval of Policy Cut Motions

• A Disapproval of Policy Cut motion is moved so that the amount of the demand be reduced to Re.1.
• It represents the disapproval of the policy underlying the demand.
• A member giving notice of such a motion shall indicate in precise terms the particulars of the policy which he proposes to discuss.
• The discussion shall be confined to the specific point or points mentioned in the notice and it shall be open to members to advocate an alternative policy.

2. Economy Cut Motions

• An Economy Cut motion is moved so that the amount of the demand be reduced by a specified amount.
• It represents the economy that can be effected.
• Such a specified amount may be either a lump-sum reduction in the demand or omission or reduction of an item in the demand.
• The notice shall indicate briefly and precisely the particular matter on which discussion is sought to be raised and speeches shall be confined to the discussion as to how the economy can be effected.

3. Token Cut Motions

• A Token Cut motion is moved so that that the amount of the demand be reduced by Rs.100.
• This is to ventilate a specific grievance that is within the sphere of the responsibility of the Government of India.
• The discussion thereon shall be confined to the particular grievance specified in the motion.

Admissibility of cut motions

In order that notice of motion for reduction of the amount of demand may be admissible, it shall satisfy the following conditions, namely:-

1. it shall relate to one demand only;
2. it shall be clearly expressed and shall not contain arguments, inferences, ironical expressions, imputations, epithets or defamatory statements;
3. it shall be confined to one specific matter which shall be stated in precise terms;
4. it shall not reflect on the character or conduct of any person whose conduct can only be challenged on a substantive motion;
5. it shall not make suggestions for the amendment or repeal of existing laws;
6. it shall not refer to a matter which is not primarily the concern of the Government of India;
7. it shall not relate to expenditure charged on the Consolidated Fund of India;
8. it shall not relate to a matter which is under adjudication by a court of law having jurisdiction in any part of India;
9. it shall not raise a question of privilege;
10. it shall not revive discussion on a matter which has been discussed in the same session and on which a decision has been taken;
11. it shall not anticipate a matter which has been previously appointed for consideration in the same session;
12. it shall not ordinarily seek to raise a discussion on a matter pending before any statutory tribunal or statutory authority performing any judicial or quasi-judicial functions or any commission or court of enquiry appointed to enquire into, or investigate any matter: Provided that the Speaker may in his discretion allow such matter being raised in the House as is concerned with the procedure or stage of enquiry, if the Speaker is satisfied that it is not likely to prejudice the consideration of such matter by the statutory tribunal, statutory authority, commission or court of enquiry;
13. it shall not relate to a trivial matter.

Speaker to decide admissibility

The Speaker shall decide whether a cut motion is or is not admissible under these rules and may disallow any cut motion when in his opinion it is an abuse of the right of moving cut motions or is calculated to obstruct or prejudicially affect the procedure of the House or is in contravention of these rules.

Notice of cut motions

If notice of a motion to reduce any demand for the grant has not been given one day previous to the day on which the demand is under consideration, any member may object to the moving of the motion, and such objection shall prevail unless the Speaker allows the motion to be made.

Difference between Full Budget and Vote on Account

While studying Budget related topics, many are confused about the differences between full budget, interim budget, and vote on account. Don’t worry! We hope this post will clear all your queries!

To understand the connection better, I recommend you to understand the following rule first.

Rule: Executive (Government) needs the approval of Legislature (Parliament) for spending!

Yes, the government cannot spend as it wishes!

Even though the government collects money from the public by means of various taxes and fees, for the expenditure of the same, it needs approval from another authority – ie. Legislature.

In the case of the Central government, the Legislature corresponds to the lower house of the Parliament ie. Loksabha.

Where is this rule (mandate) written? Answer: Constitution of India.

Article 266 of the Constitution of India mandates that Parliamentary approval is required to draw money from the Consolidated Fund of India. Besides, Article 114 (3) of the Constitution stipulates that no amount can be withdrawn from the Consolidated Fund without the enactment of a law (appropriation bill).

The Parliamentary Approval takes its time!

The full budget is usually passed only after long discussions. Even though the government (executive) seeks approval of expenditure for the next financial year (April 1 to March 31) in the current financial year itself, the approval from legislature takes its time.

Very often, discussion and voting of demands for grants and passing of Appropriation Bill go beyond the current financial year. This was precisely the case before 2016 when the budget was presented on the last working day of February, and it was difficult to get passed within the same financial year.

But the government needs money for its day to day functions…

Since Parliament is not able to vote the entire budget before the commencement of the new financial year, the necessity to keep enough finance at the disposal of Government.

A special provision is, therefore, made for “Vote on Account” by which Government obtains the Vote of Parliament for a sum sufficient to incur expenditure on various items for a part of the year.

Vote on Account

Vote on Account is a grant in advance to enable the government to carry on until the voting of demands for grants and the passing of the Appropriation Bill and Finance Bill.

This enables the government to fund its expenses for a short period of time or until a full-budget is passed. As a convention, a vote-on-account is treated as a formal matter and passed by Lok Sabha without discussion.

Vote on Account was frequently used until 2016 when the Budget was presented on the last working day of February. However, since 2017, the budget presentation date was advanced to February 1. This helped the executive to use almost 2 months time to get the full-budget passed in the same financial year. So, since 2017, Vote on Account is not usually used as part of the government budgeting process, unless in special cases like an election year.

Normally, the Vote on Account is taken for two months only. The sum of the grant would be equivalent to one-sixth of the estimated expenditure for the entire year under various demands for grants.

Can Vote on Account be granted for more than 2 months?

Yes. During election year or when it is anticipated that the main Demands and Appropriation Bill will take longer time than two months, the Vote on Account may be granted for a period exceeding two months.

For example, in 2019, Vote on Account is taken for 4 months.

Difference between Full Budget and Vote on Account

• Full Budget deals with both expenditure and revenue side but Vote-on-account deals only with the expenditure side of the government’s budget.
• The vote-on-account is normally valid for two months but a full budget is valid for 12 months (a financial year).
• As a convention, a vote-on-account is treated as a formal matter and passed by Lok Sabha without discussion. But passing for budget happens only after discussions and voting on demand for grants.
• A vote-on-account cannot alter direct taxes since they need to be passed through a finance bill. Under the regular Budget, fresh taxes may be imposed and old ones may go.
• As a convention, a vote-on-account is treated as a formal matter and passed by the Lok Sabha without discussion. But the full budget is passed only after discussions and voting on demand for grants.

What is an interim budget then?

An interim budget in all practical sense is a full budget but made by the government during the last year of its term – ie. just before the election. An interim Budget is a complete set of accounts, including both expenditure and receipts. But it may not contain big policy proposals.

Is it mandatory for the government to present vote on account instead of a full budget in an election year?

It is not mandatory for the government to present a vote on account in an election year.

Though the convention is to present an interim budget and get the fund required for spending via the vote on account route, the government (if it wishes so) can even go for a Full Budget and get the appropriation bills passed to get the finances.

However, during an election year, the ruling government generally opts for a vote-on-account or interim budget instead of a full budget. While technically, it is not mandatory for the government to present a vote-on-account, but it would be inappropriate to impose policies that may or may not be acceptable to the incoming government taking over in the same year.

Documents Made Simple: Key to Budget Documents

In the post ‘Government Budgeting basics‘, we have seen that Indian Budget is not a single document, but consists of many documents like Annual Financial Statement, Demand for Grants, Appropriation Bill, Finance Bill etc. Also, there are certain budget documents as per the requirements of FRBM act 2003. In this post, we shall go into the details of each of these documents and see what these documents are all about.

Annual Financial Statement

Annual Financial Statement (AFS), the document as provided under Article 112, shows estimated
receipts and expenditure of the Government of India for next financial year (say, 2017-18) in relation to estimates for the previous financial year (ie 2016-17) as also expenditure for the year before last financial year (ie. 2015-16). The receipts and disbursements are shown under the three parts, in which Government Accounts are kept viz.,(i) Consolidated Fund, (ii) Contingency Fund and (iii) Public Account. The estimates of receipts and expenditure included in the Annual Financial Statement are for the expenditure net of refunds and recoveries, as will be reflected in the accounts.

Annual Financial Statement has the following heads.

1. Statement I – Consolidated Fund of India [Receipts and Expenditure: Revenue Account; Receipts and Expenditure: Capital Account]
2. Statement IA – Expenditure charged on the Consolidated Fund of India
3. Statement 2 – Contingency Fund of India
4. Statement 3 – Public Accounts of India [Receipts and Expenditure]
5. Receipts & Expenditure of Union Territories without Legislature.

Demand For Grants

Article 113 of the Constitution mandates that the estimates of expenditure from the Consolidated
Fund of India included in the Annual Financial Statement and required to be voted by the Lok Sabha are submitted in the form of Demands for Grants. The Demands for Grants are presented to the Lok Sabha along with the Annual Financial Statement. Generally, one Demand for Grant is presented in
respect of each Ministry or Department. However, more than one Demand may be presented for a
Ministry or Department depending on the nature of expenditure. In regard to Union Territories without Legislature, a separate Demand is presented for each of the Union Territories. In budget 2014-15 there were 106 Demands for Grants.

Each Demand first gives the totals of ‘voted’ and ‘charged’ expenditure as also the ‘revenue’ and ‘capital’ expenditure included in the Demand separately, and also the grand total of the amount of expenditure for which the Demand is presented. This is followed by the estimates of expenditure under different major heads of account. The breakup of the expenditure under each major head between ‘Plan’ and ‘Non-Plan’ is also given. The amounts of recoveries taken in reduction of expenditure in the accounts are also shown. A summary of Demands for Grants is given at the beginning of this document, while details of ‘New Service’ or ‘New Instrument of Service’ such as formation of a new company, undertaking or a new scheme, etc., if any, are indicated at the end of the document.

PS: For more reference on any of these budget documents refer: Key to Budget Documents by Ministry of Finance as given in indiabudget.nic.in.

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. 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.

The whole process beginning with the presentation of the Budget and ending with discussions and voting on the Demands for Grants requires sufficiently long time. The Lok Sabha is, therefore, empowered by the Constitution to make any grant in advance in respect of the estimated expenditure for a part of the financial year pending completion of procedure for the voting of the Demands. The purpose of the ‘Vote on Account’ is to keep Government functioning, pending voting of ‘final supply’. The Vote on Account is obtained from Parliament through an Appropriation (Vote on Account) Bill.

Finance Bill

At the time of presentation of the Annual Financial Statement before Parliament, a Finance Bill is also
presented in fulfillment 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 a Money Bill as defined in Article 110 of the Constitution. It is accompanied by a Memorandum explaining the provisions included in it.

Memorandum Explaining the Provisions in the Finance Bill

To facilitate understanding of the taxation proposals contained in the Finance Bill, the provisions and their implications are explained in the document titled Memorandum Explaining the Provisions of the Finance Bill.

Documents as per the requirements of FRBM act: 

Macroeconomic Framework Statement

The Macroeconomic Framework Statement presented to Parliament under Section 3(5) of the Fiscal
Responsibility and Budget Management Act, 2003 and the rules made thereunder contains an assessment of the growth prospects of the economy with specific underlying assumptions. It contains assessment regarding the GDP growth rate, fiscal balance of the Central Government and the external sector balance of the economy.

Fiscal Policy Strategy Statement

The Fiscal Policy Strategy Statement, presented to Parliament under Section 3(4) of the Fiscal Responsibility and Budget Management Act, 2003, outlines the strategic priorities of Government in the fiscal area for the ensuing financial year relating to taxation, expenditure, lending, and investments, administered pricing, borrowings and guarantees. The Statement explains how the current policies are in conformity with sound fiscal management principles and give the rationale for any major deviation in key fiscal measures.

Medium-term Fiscal Policy Statement

The Medium-term Fiscal Policy Statement presented to Parliament under Section 3(2) of the Fiscal
Responsibility and Budget Management Act, 2003, sets out three-year rolling targets for four specific fiscal indicators in relation to GDP at market prices namely (i) Revenue Deficit, (ii) Fiscal Deficit, (iii) Tax to GDP ratio and (iv) Total outstanding Debt at the end of the year. The Statement includes the underlying assumptions, an assessment of sustainability relating to balance between revenue receipts and revenue expenditure and the use of capital receipts including market borrowings for generation of productive assets.

Medium-term Expenditure Framework Statement

The Medium-term Expenditure Framework Statement presented to Parliament under Section 3 of the
Fiscal Responsibility and Budget Management Act, 2003 sets forth a three-year rolling target for the expenditure indicators with a specification of underlying assumptions and risks involved. The objective of the MTEF is to provide a closer integration between budget and the FRBM Statements.
PS: This Statement is presented separately in the session next to the session in which Budget is presented, i.e. normally in the Monsoon Session.

Explanatory Documents

Expenditure Budget Volume-1

This document deals with revenue and capital disbursements of various Ministries/Departments and
gives the estimates in respect of each under ‘Plan’ and ‘Non-Plan’. It also gives analysis of various
types of expenditure and broad reasons for the variations in estimates.

Expenditure Budget Volume-2

The provisions made for a scheme or a programme may spread over a number of Major Heads in the
Revenue and Capital sections in a Demand for Grants. In the Expenditure Budget Vol. 2, the estimates made for a scheme/programme are brought together and shown on a net basis at one place, by Major Heads. To understand the objectives underlying the expenditure proposed for various schemes and programmes in the Demands for Grants, suitable explanatory notes are included in this volume in which, wherever necessary, brief reasons for variations between the Budget estimates and Revised estimates for the current year and requirements for the ensuing Budget year are also given.

Receipts Budget

Estimates of receipts included in the Annual Financial Statement are further analysed in the document
“Receipts Budget”. The document provides details of tax and non-tax revenue receipts and capital receipts and explains the estimates. The document also provides the arrears of tax revenues and non-tax revenues, as mandated under the Fiscal Responsibility and Budget Management Rules, 2004. The trend of receipts and expenditure along with deficit indicators, statement pertaining to National Small Savings Fund (NSSF), statement of revenues foregone, statement of liabilities, statement of guarantees given by the government, statements of assets and details of external assistance are also included in Receipts Budget.

Budget at a Glance

This document shows in brief, receipts, and disbursements along with broad details of tax revenues and other receipts. This document also exhibits broad break-up of expenditure – Plan and Non-Plan, allocation of Plan outlays by sectors as well as by Ministries/Departments and details of resources transferred by the Central Government to State and Union Territory Governments. This document also shows the revenue deficit, the gross primary deficit and the gross fiscal deficit of the Central Government. The excess of Government’s revenue expenditure over revenue receipts constitutes revenue deficit of Government. The difference between the total expenditure of Government by way of revenue, capital and loans net of repayments on the one hand and revenue receipts of Government and capital receipts which are not in the nature of borrowing but which finally accrue to Government
on the other, constitutes gross fiscal deficit. Gross primary deficit is measured by gross fiscal deficit reduced by gross interest payments. In the Budget documents ‘gross fiscal deficit’ and ‘gross primary
deficit’ have been referred to in abbreviated form ‘fiscal deficit’ and ‘primary deficit’, respectively. This document also shows liabilities of the Government on account of securities (bonds) issued in lieu of
oil and fertilizer subsidies.

Highlights of Budget

This document explains the key features of the Budget, inter alia, indicating the prominent
achievements in various sectors of the economy. It also explains, in brief, the budget proposals for allocation of funds to be made in important areas. The summary of tax proposals is also reflected in the document.

Other Documents Along with Budget Statements

Detailed Demands for Grants

The Detailed Demands for Grants are laid on the table of the Lok Sabha sometime after the presentation of the Budget, but before the discussion on Demands for Grants commences. Detailed Demands for Grants further elaborate the provisions included in the Demands for Grants as also actual expenditure during the previous year. A break-up of the estimates relating to each programme/organisation, wherever the amount involved is not less than 10 lakhs, is given under a number of object heads which indicate the categories and nature of expenditure incurred on that programme, like salaries, wages, travel expenses, machinery and equipment, grants-in-aid, etc. At the end of these Detailed Demands are shown the details of recoveries taken in reduction of expenditure in the accounts.

Outcome Budget

With effect from Financial Year 2007-08, the Performance Budget and the Outcome Budget hitherto presented to Parliament separately by Ministries/Departments, are merged and presented as a single document titled “Outcome Budget” by each Ministry/Department in respect of all Demands/ Appropriations controlled by them, except those exempted from this requirement. Outcome Budget broadly indicates physical dimensions of the financial budget of a Ministry/Department, indicating actual physical performance in the preceding year (2015-2016), performance in the first nine months (up to December) of the current year (2016-2017) and the targeted performance during the ensuing year (2014-2015).

Annual Reports

A descriptive account of the activities of each Ministry/Department during the year 2016-2017 is given in the document Annual Report which is brought out separately by each Ministry/Department and circulated to Members of Parliament at the time of discussion on the Demands for Grants.

Economic Survey

The Economic Survey brings out the economic trends in the country which facilitates a better appreciation of the mobilisation of resources and their allocation in the Budget. The Survey analyses the trends in agricultural and industrial production, infrastructure, employment, money supply, prices, imports, exports, foreign exchange reserves and other relevant economic factors which have a bearing on the Budget, and is presented to the Parliament ahead of the Budget for the ensuing year.

Conclusion:

The Budget of the Central Government is not merely a statement of receipts and expenditure. Since
Independence, with the launching of Five Year Plans, it has also become a significant statement of government policy. The Budget reflects and shapes, and is, in turn, shaped by the country’s economy. For a better appreciation of the impact of government receipts and expenditure on the other sectors of the economy, it is necessary to group them in terms of economic magnitudes, for example, how much is set aside for capital formation, how much is spent directly by the Government and how much is transferred by Government to other sectors of the economy by way of grants, loans, etc. This analysis is contained in the Economic and Functional Classification of the Central Government Budget which is brought out by the Ministry of Finance separately.