Day 8 – Q 2. How is a state budget different from the national budget? Explain with the help of suitable examples. (10 Marks)

  • IASbaba
  • February 7, 2022
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GS 2, Indian Polity, TLP-UPSC Mains Answer Writing
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2. How is a state budget different from the national budget? Explain with the help of suitable examples. (10 Marks)

राज्य का बजट राष्ट्रीय बजट से किस प्रकार भिन्न है? उपयुक्त उदाहरणों की सहायता से स्पष्ट कीजिए।


Students are expected to write about the difference between state budget and union budget. Also try to give examples and explain it. 


Budget is the government’s blueprint on expenditure, taxes it plans to levy, and other transactions which affect the economy and lives of citizens. Meanwhile Understanding of state government finances is becoming more and more important.


Difference between state and central budget:

  • The receipt of the state budget is different from the Union budget. This budget consists of tax and non-tax revenues collected by the state, which is then shared with the share of central taxes. For example Sale of lotteries. 
  • Under Article 202 of the Constitution of India, a statement of the estimated receipts and expenditure of the State for each financial year has to be laid before the State Legislature. This Statement is known as the “Annual Financial Statement” (AFS) or “Budget”.
  • It should be noted here that States have some degree of autonomy with regard to their budgets. So, there can be differences across States in many aspects. 
  • For example States opt for their own presentation formats as per practice and convenience. Also, sources of revenues may vary from State to State and similar variations van be seen in expenditure profiles.
  • Similar to Union Government, State governments are also required by constitution to present a few essential documents for budget process. 
  • State Governments also present a number of other documents which helps explaining the budget, as well as can be used to highlight specific details of the budget. For example Gender Budget Statement, Child Budget Statement, Outcome/Performance Budget Statement, Statement on Allocation for Welfare of Scheduled Castes and tribes. 
  • Article 203 of the Constitution mandates that the estimates of expenditure from the Consolidated Fund of the State are voted by the Legislature.
  • A word transcript of the speech that the finance minister makes while presenting the budget in the State legislature or Vidhaan Sabha. 
  • The information required to be presented and voted by the Parliament and the State Legislatures remains the same.
  • The severe strain on state finances over the past year seems to have led state governments to be much more cautious than the centre in budgeting additional spending.
  • In contrast to the expansionary stance of the Union government, state governments seem to have taken a more conservative approach in planning their budgets. 
  • Together the states are more important than the Centre in increasing India’s GDP. But RBI finds states cutting down expenditure and getting more indebted in its report which will hurt India’s growth and job creation.


The trouble is states have found it difficult to raise revenues. They are confronted with low tax buoyancies, shrinking revenue autonomy under the GST framework and unpredictability associated with transfers of IGST and grants. Unrealistic revenue forecasts in budget estimates thereby leave no option for states than expenditure compression in even the most productive and employment-generating heads.

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