Budget 2024: What is Contingency Fund?

The government in the annual budget every year gives details about how the money would be spent and from where this money would be raised during the financial year.

The government in the annual budget every year gives details about how the money would be spent and from where this money would be raised during the financial year. But, where is this money kept or from where funds are drawn to meet government expenses? To meet its different expenditure requirements, the Indian government keeps the money under three main funds - Consolidated Fund of India, Contingency Fund of India and Public Account.

Apart from the Consolidated Fund, the government maintains a contingency fund to meet any unexpected expenses in the event of national or state emergencies. The amount set aside for this purpose is maintained under the Contingency Fund of India.

Any amount withdrawn from the Contingency Fund is transferred into the fund from the Consolidated Fund. The Contingency Fund has been established as per Article 267 of the Constitution of India.

The government every year presents the Annual Financial Statement or the Union Budget which gives details of the estimated income and expenditure for the coming financial year.

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Types of government funds

Accounts are a major part of the financial management of an entity or a government. The accounts of the Indian government are kept under three Funds:

1. Public Account

2. Contingency Fund of India

3. Consolidated Fund of India

The Public Account

Constituted under Article 266 of the Constitution of India, all the funds held by the government in trust are kept in this account.

Small Savings collections, Provident Funds, receipts of the government marked for expenditure on particular programmes like primary education, road development, and other special funds are kept in the Public Account.

The government does not own the money kept in the Public Account and it is finally paid back to authorities or persons who deposited it. The government does not need Parliament’s approval for withdrawals.

Contingency Fund of India 

The Contingency Fund of India has been established as per Article 267 of the Constitution of India. The Fund facilitates the financing of unforeseen expenditures by the Government for which Parliament approval is yet to be taken. The approval of Parliament is taken at a later stage after the use of the required money from this fund for an emergency.  It is at the disposal of the President of India.

An equivalent amount of money is withdrawn from the Consolidated Fund of India to compensate the Fund. The Corpus of the Contingency Fund currently stands at around Rs 30,000 crore.

While the Consolidated Fund of India is the main reservoir of the resources to meet planned public expenditures, another account under the Contingency Fund of India helps the government meet its unforeseen or emergency expenses.

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Consolidated Fund of India

Consolidated Fund of India is the main account of the government and it has been established as per Article 266 of the Constitution of India. All the revenue from direct taxes such as income tax, corporation tax, and wealth tax; indirect taxes such as the GST; loans and non-tax revenues are accrued to the CFI.

The Consolidated Fund of India has mainly five parts: Revenue Account – receipts, Revenue Account - disbursements, Capital Account for receipts, Capital Account for disbursements) and  Disbursements on consolidated funds.

All the expenditure of the government is obtained from the CFI. However, the government cannot withdraw funds from the Consolidated Fund without approval from the Parliament. The government moves the Appropriation Bill to obtain Parliament’s consent to withdraw funds from the CFI in the financial year.