Explained: Interim Budget

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Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Interim Budget

Mains level:  Difference between normal and interim budget


News

  • Union finance ministry is all set to discuss its interim budget ahead of the general elections.

Lets have a look over what is:

Interim Budget

  1. The budget for the year approved by Parliament gives the government spending rights only till the end of the financial year ending March 31.
  2. If for any reason the government is not able to present a full budget before the financial year ends, it will need parliamentary authority for incurring expenditure in the new fiscal year until a full Budget is presented.
  3. Through the interim Budget, Parliament passes a vote-on-account that allows the government to meet the expenses of the administration until the new Parliament considers and passes the Budget for the whole year.

Vote on Account

  1. Through the interim Budget, Parliament passes a vote-on-account that allows the government to meet the expenses of the administration until the new Parliament is elected.
  2. It is a grant in advance to enable the government to carry on until the voting of demands for grants and the passing of the Appropriation Bill and Finance Bill.
  3. This enables the government to fund its expenses for a short period of time or until a full-budget is passed.
  4. Normally, the Vote on Account is taken for two months only.
  5. The sum of the grant would be equivalent to one sixth of the estimated expenditure for the entire year under various demands for grants.
  6. As a convention, a vote-on-account is treated as a formal matter and passed by Lok Sabha without discussion.

How does the interim budget differ from a regular budget?

  1. In an interim Budget, the vote-on-account seeks parliament’s nod for incurring expenditure for part of a fiscal year.
  2. However, the estimates are presented for the entire year, as is the case with the regular Budget.
  3. The incoming government has full freedom to change the estimates completely when the final Budget is presented.

Can the government levy new taxes and propose new policies?

  1. Constitutionally, the government can make tax changes in the interim budget.
  2. However, the 12 interim budgets since Independence have respected the fact that the government is a custodian for a few months and have refrained from announcing big-ticket changes or new schemes.

Significance

  1. The government cannot present a full budget because in such a short session, there’s no time to debate proposals in Parliament.
  2. Expenditure for new schemes will have to form part of the new budget, which can be approved only after April 1.
  3. The newly formed government cannot be burdened by the previous government’s budgetary allocations.
  4. While these are the technicalities, many look upon the vote on account as election rhetoric.
  5. Many look at it as a window where the government highlights its achievements ahead of elections.
Government Budgets
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