Since 1957-58, the Economic Division of the Ministry of Finance has been preparing an economic classification of the Central Government budgetary transactions to make the budget a more useful tool of economic analysis. In brief, this classification involves arranging the expenditures and receipts of the Central Government including those of railways and posts by significant economic categories distinguishing current from capital outlays, spending for goods and services from transfers to individuals and institutions, tax receipts from other receipts, and from borrowing and inter-governmental loans and grants etc. Reclassified in this manner, the flows into and out of the Central Government can be related to important categories of transactions influencing the behaviour of the other sectors of the economy. Since the national income type of government account is the most prevalent form of an economic classification, the methodology and concepts used in this analysis are those used in the national income accounting system.
In view of the economic planning in the country, annual plan outlays have been integrated with the budgetary outlays which called for a further analysis of budgetary outlays into functional categories. Such a functional classification helps in analysing how much the Central Government is allocating to different functions or purposes in accordance with the priorities laid down in the Plan. Accordingly since 1967-68, an economic-cum-functional classification of the Central Government transactions is being prepared.
The figures of total expenditure of the Central Government as per economic and functional classification do not tally with figures given in the Budget documents. In the economic and functional classification, interest transferred to Departmental Commercial Undertakings (DCUs), loans written off etc, are excluded from the current account. In the capital account, expenditure financed out of Railways and Posts own funds etc, are included.
The economic-cum-functional classification of the Central Government Budget 2012-13 presented in the following pages broadly conforms to the pattern of the earlier years. The salient features of this analysis (i)are summarised in Sections I and II, and the rationale for the derivation of various items used in this classification has been explained in the Technical Appendix at the end.
For more details download the document attached here.
