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Contingency Fund of India, Meaning, Corpus and Benefits

Contingency Fund of India

The Indian Constitution’s Article 267(2) established the Contingency Fund of India. This fund is made available to the president, who may use it to make loans while waiting for Parliamentary approval to cover unforeseen expenses, such as those associated with catastrophes, wars, natural disasters, riots, etc. The Finance Secretary is in charge of managing the President’s funds.

The Contingency Fund of India is an important part of Indian Polity which an important subject in UPSC Syllabus. Students can also go for UPSC Mock Test to get more accuracy in their preparations.

Contingency Fund of India Meaning

According to the Constitution, Parliament has the authority to establish the “Contingency Fund of India,” into which periodically monies that have been duly constituted are paid. As a result, Parliament created the India Contingency Fund Act in 1950. In accordance with Article 267 of the Constitution, an advance with a corpus of 500 crores rupees is known as the Contingency Fund of India.

The fund’s total value increased from Rs. 5 crore to Rs. 500 crore in 2005. After conferring with the Union Cabinet and receiving approval from Parliament, the President of India has the power to distribute funds from the Union government’s Contingency Fund of India. A vote must be held in Parliament. The financial secretary is in charge of managing the President’s funds. It is administered by executive order, same like the Public Account of India.

Each State Government is required by Article 267(2) of the Constitution to establish a contingency fund. The Governor has access to this money in the form of an advance, which enables them to make advances to cover sudden, unanticipated costs while they await consent from the State Legislature.

Contingency Fund of India Optimum Size

Maintaining 3 to 6 months’ worth of living expenses in your emergency fund is a good general rule of thumb. However, this sum will need to be further streamlined in accordance with the size of your family, the amount and consistency of your family’s income, your standard of living, and any existing medical conditions.

Contingency Fund of India Power Holder

Under the “Contingency Fund of India Act, 1950,” Parliament established the contingency fund of India in 1950 to cover any unforeseen financial needs. It is, in essence, a rainy day fund. The contingency fund is held by the finance secretary (Department of Economic Affairs) on behalf of the President of India, and it is managed with the President’s approval. But the government is unable to withdraw funds without the consent of the legislature.

Contingency Fund of India Corpus

According to Article 267 of the Indian Constitution, a corpus must be established under the contingency fund of India to manage emergency situations. The permanent money held for the costs necessary for the management and survival of the country is referred to as the corpus. This sum may occasionally increase.

The initial capital for India’s contingency fund was Rs 5 crore; in 2005, it was raised to Rs 500 crores, or Rs 5 billion. The finance bill 2021 was recently recommended as a way to increase India’s contingency reserve from Rs 500 crore to Rs 30,000 crore. Additionally, the government changed the contingency fund of India’s regulations so that the finance secretary could access 40% of the total corpus.

To preserve the corpus, any spending or withdrawal from the contingency fund needs to be approved by the legislature. The state legislature must also approve all expenditures from the state contingency fund. Additionally, the state legislature of each Indian state determines the amount of the state contingency fund corpus, which varies.

Contingency Fund of India Benefits

Making an emergency fund is the best strategy to handle monetary difficulties. Here is the list a few advantages of maintaining a contingency fund below.

Protects Against New Debt

Without a contingency fund, country will be forced to borrow money—possibly at high interest rates—to cover these unforeseen costs. This could drastically jeopardize your financial strategy while also forcing you to make enormous interest and principle payments that would take years to repay.

Reduces Stress

Sudden cash outflows due to an emergency can have a significant negative psychological and emotional impact in addition to messing up your budget. Add insult to injury by capping it off with a high-interest loan to pay for unforeseen costs. With a contingency fund Country can rest assured of paying up any unforeseen expenses.

Better Decision Making

The ideal scenario is to keep a separate emergency account from your primary banking account. It becomes simpler to determine whether to indulge on those few occasions if you have properly designated your cash for covering living expenses, savings, and contingencies.

Meet Financial Goals

You can cover unforeseen expenses with the help of a contingency fund without jeopardizing your capacity to pay your living expenses. As a result, you can carry out your long-term investment plans and continue working towards your financial objectives. As and when your emergency fund is depleted due to unforeseen expenses, you can also make plans for how to replenish it.

Difference between Consolidated Fund and Contingency Fund of India

Consolidated Fund of India Contingency Fund of India
Article 266 (1) of the Indian Constitution covers it. While each state government’s contingency fund was established under Article 267 (2) of the Indian constitution, the central contingency fund was established under Article 267 (1).
It is the most significant of the three funds and accounts for all of the government of India’s revenue, both taxable and non-taxable. During a crisis, the money is maintained on hand to cover unforeseen expenses.
Consolidated finances include things like all loans obtained, cash or interest earned on loan repayment, the president’s allowances, legislators’ salaries and pensions, etc. The contingency fund is used when a natural disaster or armed conflict occurs.
Prior to making any purchases, it needs parliamentary approval. Although the President may withdraw money in times of emergency, post-expenditure approval from the parliament is necessary. Similar to this, the state governor can withdraw money from emergency funds, but doing so later requires approval from the state legislature.


Contingency Fund of India UPSC

The Consolidated Fund of India (Article 266), the Contingency Fund of India (Article 267), and the Public Accounts of India (Article 266) are the three funds established under the Indian Constitution and are crucial parts of the Indian government’s financial management. One of these is the contingency fund, which is used for catastrophe management by both the federal government and state governments. Students can read all the details related to UPSC by visiting the official website of StudyIQ UPSC Online Coaching.

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Contingency Fund of India FAQs

Who controlled Contingency Fund of India?

The fund is held by the Finance Secretary (Department of Economic Affairs) on behalf of the President of India and it can be operated by executive action.

What is Contingency Fund example?

Contingency Fund of India, meant for meeting expenses in case of emergencies, such as wars, natural disasters, riots, etc.

What is the amount of Contingency Fund of India 2023?

The corpus of the Contingency Fund as authorized by Parliament presently stands at 30,000 crore.

What is Contingency Fund amount?

The exact amount of a contingency is typical 10% to 15% of the total budget.

Who holds Consolidated Fund of India?

The Secretary to the Government of India, Ministry of Finance, and Department of Economic Affairs holds the Fund on behalf of the President of India.

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