Multiple tiers of government are set up in geographically vast countries with heterogeneous populations with the belief that they enable more efficient and equitable provisioning of public goods through co-operation, co-ordination and competition between central and sub-national governments through a pre-defined set of rules. In Indiathere are three tiers of government: Union, State and Local. Local Bodies are both rural and urban. Urban Local Bodies (ULBs) are of three types namely Municipal Corporations, Municipal Councils and Nagar Panchayats and suburban government bodies.

Each of these tiers has constitutionally mandated responsibilities to raise resources and spend them. An annual statement of receipts and expenditure are presented by all tiers of government which together constitute government budget in India.

How is a Household Budget different from a Government Budget?

  • A household’s income is ascertained before spending occurs. A government, on the other hand, estimates its expenditure requirements before mobilises resources to meet its expenditure requirements.
  • Unlike in the case of household, a government’s revenues do not have to match its expenditures. It has a variety of methods for managing the gap between spending and revenue; also it needs to be responsible for ensuring that deficits are sustainable.
  • The ways in which as well as the scope for raising money is very different for a government from that of a private household. Private households have limited capacity to meet unexpected and unforeseen expenditures and have limited sources of borrowing funds. The government, on its part, can borrow from various sources and can also print money or carry out disinvestment of public sector enterprises in order to meet the gap between its spending and expenditure.
  • The very motive behind government budgeting is different from that of budgeting by private households.

Most budget documents like Annual Financial Statement, Detailed Demand for Grants, etc. contain information for 3 financial years. For instance, the Union Budget 2017-18 will contain figures for 2015-16 Actuals, 2016-17 Revised Estimates and 2017-18 Budget Estimates.

Budget Estimates (BE) refer to the amounts of expenditure ‘projected’ by the government for the ongoing / approaching financial year (April 1, 2017 – March 31, 2018).

After the initial projection of expenditure for an ensuing financial year, the government revises those projections after six months of the concerned financial year are over. These ‘revised projections’ are known as Revised Estimates (RE).

Actuals: Actuals refer to the amounts actually spent by the government in a previous financial year, which have been audited and certified by the office of C&AG of India. It usually takes the office of C&AG around eight months to audit and certify the accounts / actual expenditures reported by the government after the financial year ends.