UPSC Notes on Funds and Its Types
Funds are monetary resources allocated for specific purposes. They are essential for the functioning of governance, economic development, and fiscal management. In the Indian context, the Constitution, financial regulations, and statutory provisions govern the creation, operation, and utilization of funds.
In India, funds are classified into three main types:
- Consolidated Fund of India
- Contingency Fund of India
- Public Account of India
1. Consolidated Fund of India (CFI)
Definition:
The Consolidated Fund of India is the primary account where all revenues received by the Government of India (e.g., taxes, non-tax revenues) and loans raised are credited.
Constitutional Provisions:
- Mentioned under Article 266(1) of the Indian Constitution.
Sources:
- Taxes (Income tax, GST, customs, etc.)
- Non-tax revenues (interest, dividends, etc.)
- Borrowings and loans.
Usage:
- All government expenditures, such as salaries, subsidies, and defense spending, are drawn from this fund.
- No money can be withdrawn without parliamentary approval through the Appropriation Bill.
Key Points:
- Every state has its own Consolidated Fund.
- It is the largest fund under the government's financial management system.
2. Contingency Fund of India
Definition:
The Contingency Fund is used for emergencies and unforeseen expenditures that cannot wait for parliamentary approval.
Constitutional Provisions:
- Mentioned under Article 267(1) of the Constitution.
Characteristics:
- Established by an Act of Parliament.
- Operates under the discretionary control of the President of India.
- Funded with a fixed corpus (currently ₹500 crores for the Union).
Usage:
- Expenditure from the fund is made for emergencies such as natural disasters, pandemics, or urgent requirements of the government.
- The fund is replenished through parliamentary approval.
Key Points:
- It acts as an imprest account.
- States have their own Contingency Funds under the control of the Governors.
3. Public Account of India
Definition:
The Public Account is used to account for funds that the government holds on behalf of the public, which do not belong to the government.
Constitutional Provisions:
- Mentioned under Article 266(2) of the Constitution.
Sources:
- Provident funds, small savings schemes, post office savings, etc.
- Deposits, advances, and remittances received by the government.
Usage:
- The government acts as a trustee for these funds and uses them only for their specified purposes.
- Parliamentary approval is not required for withdrawals from this account.
Key Points:
- Unlike the Consolidated Fund, this account is not subject to budgetary control.
- It is a liability account since the funds ultimately belong to the public.
Comparison of the Three Funds
Importance in Governance
- Transparency and Accountability: Clear categorization ensures better fiscal responsibility.
- Emergency Management: The Contingency Fund enables immediate response to crises.
- Public Trust: The Public Account ensures funds meant for specific purposes are safeguarded.
- Economic Stability: Proper fund management aids in maintaining fiscal discipline.
UPSC Relevance
- Prelims: Direct questions on Articles 266 and 267.
- Mains: Questions on fiscal federalism, financial governance, and resource allocation.
- Essay: Topics like fiscal management and governance reforms.
