Union Budget 2023: Finance Minister Nirmala Sitharaman will present the Union Budget 2023 on February 1. The Government is expected to support capex, infrastructure creation and import substitution to ensure a high GDP.

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At a time when the country is talking about the Union Budget 2023, there is a budgetary term that not many know about — contingency fund.

Union Budget 2023: What is contingency fund?

The contingency fund in simple words is a reserve of money set aside to cover possible unforeseen future expenses.

The contingency fund of India is established under Article 267(1) of the Indian Constitution.

The contingency fund of India is used during the time of crisis in the nation — for instance, a natural calamity — and money is required to deal with it. 

The Government of India had proposed to enhance the Contingency Fund of India from Rs 500 crore to Rs 30,000 crore through Finance Bill in the Budget 2021-22.

Union Budget 2023: How can contingency fund amount be increased?  

The central government can increase the contingency fund through a Finance Bill when the Parliament is in session. The withdrawal from the fund takes place with the approval of the Secretary of the Department of Economic Affairs, in terms of the Contingency Fund of India Act, 1950.

Union Budget 2023: Contingency fund of states  

Indian states can also have their own contingency funds. The contingency fund of the Union government is at the disposal of the President of India, who releases the funds on request of the Union Cabinet, which later gets approval from Parliament. Parliament approval is mandatory in this regard.

Also, the spending norms for the Contingency Fund of India were tweaked to allow 40% of the total corpus to be placed at the disposal of the Expenditure Secretary. The notification in this regard read: "An amount equivalent to 40 per cent of the Fund corpus shall be placed at the disposal of the Secretary, Ministry of Finance, Department of Expenditure for the purpose of meeting unforeseen expenditure, and beyond this limit, all further Contingency Fund releases shall be made with the approval of Secretary to the Government of India, Department of Economic Affairs, after the approval of Secretary to the Government of India, Department of Expenditure.”

When the emergency has been dealt with, the fund is reimbursed to its full capacity. This required money comes from the Consolidated Fund of India.