As India gears up for the general elections in 2024, the spotlight is once again on the financial roadmap that the government will follow. In the pre-election period, the Finance Minister is set to present an Interim Budget, a temporary financial statement that plays a crucial role in maintaining fiscal stability during the transition of power. This article delves into the concept of an Interim Budget, its differences from a full budget, and why it becomes necessary in an election year.
What is an Interim Budget?
An Interim Budget is a temporary financial statement presented by the government of India during an election year. Unlike the comprehensive Union Budget, it covers the government’s expenses and revenues for a short period until a new government is elected and assumes office.
Features of Interim Budget
Here are the features of the Interim Budget:
- Time Constraint or Election Proximity: Presented when full budget time is constrained or elections are near.
- Incoming Government’s Responsibility: Incoming government is expected to frame the full budget.
- Spending Rights Until End of Financial Year: Full budget grants spending rights for the entire fiscal year.
- Parliamentary Approval for New Fiscal Year: Requires approval for expenditure in the new fiscal year until a new budget is passed.
- Vote-on-Account: Vote-on-account in interim budget allows essential expense coverage.
- Limited Time Horizon: Addresses financial needs until a new comprehensive budget is passed.
- Continuity in Government Operations: Ensures continuity in public administration and essential services.
- Avoidance of Major Policy Changes: Typically refrains from major policy changes due to the short tenure.
- Flexibility for Incoming Government: Incoming government can concur with or modify estimates in the full budget.
- Constitutional Authority for Tax Changes: Retains authority for tax changes if needed.
- Adherence to Election Commission Guidelines: Adheres to guidelines to avoid undue influence on voters during elections.
Difference Between Interim Budget and Full Budget
The Union Budget, often referred to as the full budget, is an annual financial statement outlining the estimated costs and expenses for the upcoming financial year. In contrast, the Interim Budget provides projections for a shorter duration, typically a few months, to ensure the government can function smoothly until a new administration takes charge.
When is the Interim Budget Released?
The Interim Budget follows the same schedule as a regular Union Budget and is ideally presented on February 1. This timeline aligns with the beginning of the financial year in April, allowing for the effective implementation of financial measures.
When is the Full Budget Released?
The full budget is presented by the new government after general elections or Lok Sabha elections. In 2019, for example, Finance Minister Nirmala Sitharaman presented the complete Union budget on July 5, following the elections.
Why is an Interim Budget Presented?
An Interim Budget becomes necessary as the Union Budget is valid only until the end of the financial year on March 31. To cover expenses between March 1 and the formation of a new government, parliamentary approval is required. The Interim Budget serves this purpose, ensuring the smooth functioning of the government during the interim period.
What Can be Included in the Interim Budget?
The Interim Budget includes estimates for government expenditure, revenue, fiscal deficit, and financial projections for the upcoming months. It serves as a snapshot of the government’s financial performance and outlines plans for the immediate future.
What Cannot be Included in the Interim Budget?
Major policy announcements that could burden the next government are prohibited in the Interim Budget. The Election Commission of India’s code of conduct restricts the inclusion of major schemes, and the presentation of the Economic Survey is also disallowed.
The Parliament passes a vote-on-account through the Interim Budget, allowing the government to obtain approval for essential spending like salaries and ongoing expenses. It does not encompass major policy changes or new long-term projects, which are typically addressed in the full Budget post-election.
Difference Between Vote-on-Account and Interim Budget
While an Interim Budget includes projections for a short period, a vote-on-account specifically deals with obtaining approval for essential expenditures. The latter can be passed by Parliament without a formal discussion and is usually valid for up to two months, extendable if necessary.
Why is an Interim Budget Necessary?
Though there is no constitutional provision for an Interim Budget, it has become a common practice for outgoing governments ahead of elections. The Interim Budget, or alternatively, the vote-on-account, ensures that the government has the necessary funds for essential expenses during the transition period.
Important Questions Related to Exams
Q1. What is an Interim Budget?
Q2. Why is the Interim Budget presented?
Q3. When is the Interim Budget released?
Q4. What is a Vote-on-Account?
Q5. When is the Full Budget released?
Check your knowledge and try to answer the questions in the comment section.