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Difficulty: MediumFiscal Policy, Union/State Budgeting, Public Finance, and Taxation Structure

Consider the following statements regarding the constitutional funds of the Union Government of India:

1. All revenues received by the Government of India, treasury bills issued, and receipts from the recovery of loans form part of the Consolidated Fund of India.
2. Payments and executive disbursements out of the Public Account of India require prior parliamentary appropriation under Article 266(2).
3. The Contingency Fund of India is placed at the disposal of the President of India to enable advances for meeting unforeseen expenditure pending parliamentary authorization.

Which of the statements given above is/are correct?

  1. 1 and 3 onlyAnswer
  2. B
    1 and 2 only
  3. C
    2 and 3 only
  4. D
    1, 2, and 3

Answer

The statements asserting that the Consolidated Fund includes revenues and loan recoveries, and that the Contingency Fund is placed at the disposal of the President, are correct.
Statement 1 is accurate because Article 266(1) mandates that all revenue, borrowings, and loan repayments belong to the Consolidated Fund of India. Statement 3 is accurate because Article 267(1) establishes the Contingency Fund under the President's authority to cover urgent, unforeseen expenditure pending legislative approval. Statement 2 is inaccurate because the Public Account of India (Article 266(2)) handles fiduciary/banking transactions (such as Provident Fund deposits) which are executed by administrative action without needing parliamentary appropriation laws.

Step-by-Step Solution

1
Analyze Statement 1 regarding the composition of the Consolidated Fund of India.
Statement 1 is correct under Article 266(1) of the Constitution of India, which specifies that all revenues received, money raised by loans/treasury bills, and loan recovery receipts credit into the Consolidated Fund.
It forms the primary operational fund of the Union Government.
2
Evaluate Statement 2 regarding parliamentary appropriation for the Public Account of India.
Statement 2 is incorrect under Article 266(2). Payments from the Public Account relate to banking-type transactions (e.g., provident funds, judicial deposits, national small savings fund) and are operated by executive action without requiring parliamentary approval.
The government acts merely as a trustee or banker for public account funds.
3
Examine Statement 3 regarding the nature and operating authority of the Contingency Fund of India.
Statement 3 is correct under Article 267(1). The fund is placed at the disposal of the President of India (held on their behalf by the Finance Secretary) to meet emergency or unforeseen expenditures before Parliament formalizes the outlay through supplementary demands.
It ensures the executive has immediate liquidity in emergencies without violating constitutional norms.

Key Concept

Constitutional Funds of the Union Government (Consolidated Fund, Public Account, and Contingency Fund)
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Topics

Fiscal Policy, Union/State Budgeting, Public Finance, and Taxation Structure