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This year, Nirmala Sitharaman, the Finance Minister of India, will release the sixth budget on the first day of February. However, there will not be a full-year budget in 2024. Since the Lok Sabha elections are about to take place early in the following year, the government has decided to release a temporary budget.
If the current administration does not have enough time to deliver a full-year budget, or if elections are also due that year, they propose the interim budget to Parliament.
To understand why there won’t be a usual budget in 2024, let’s examine what an interim budget is.
What is the interim budget?
When general elections are approaching or a new administration is about to take place, the government presents a temporary budget, commonly termed an interim budget. It is a temporary solution to cover government spending requirements until a new administration creates and publishes a comprehensive budget.
The budget document is put together via an extensive process that begins almost six months before it is approved to be released. The Annual Finance Statement (AFS), the Demand for Grants (DG), and the Finance Bill are some of the fourteen papers that collectively create the main budget file.
The main document also covers supplementary statements like expenditure budget, budget at a glance, and more that explain specific points. The Finance Minister now delivers a Green Budget, which is in electronic format as opposed to the past practice of printing documents.
Key aspects of the interim budget of India
Expenditure allocations: Funds typically go aside in an interim budget for ongoing projects, immediate requirements, and necessary government activities. It doesn’t propose any new programmes or policies that may impact the overall economy.
Policy restrictions: An interim budget does not propose modifications to policies or reforms that call for long-term planning or budgetary commitments due to its short-term nature. Up until a new administration takes control, the focus will continue to be on preserving continuity and stability in the system of governance.
Approval procedure: The interim budget is not subject to regular scrutiny and discussion in Parliament. It is put up for a vote on account to get permission for the necessary expenditures until a new administration can offer a full-year budget.
A vote on account is the process of taking the parliament’s vote to access funds from the Consolidated Fund of India in advance to meet the short-term expenses until the start of the next fiscal year.
Importance of interim budget
An interim budget is necessary for a nation because:
- It maintains government activities and essential services, including defence, health, and education.
- It helps the next administration create a budget based on last year’s performance and the economic situation.
- It prevents significant policy or tax changes that could negatively impact the public or economy, especially before elections.
- It allows the government to handle pressing situations like natural catastrophes and pandemics during the interim period.
Difference between budget and interim budget
|It is released by a full-term government for the entire financial year.
|It is presented temporarily to meet immediate financial needs before a transition in governance or elections
|It contains expenditures and receipts for the current and next fiscal years.
|It contains only a summary of income and expenses from the previous year and the basic expenses for the next few months.
|It may include significant policy changes or tax proposals, as it provides a vision for the government’s plans and priorities.
|It does not include any significant policy announcements or tax revisions, as it ensures the continuity of the government’s operations.
|It is subject to debate and voting in the parliament as a comprehensive financial statement of the government.
|It is passed without discussion in parliament as a temporary grant to the government.
Difference between vote on account and interim budget
|Vote on account
|It is a request for funds to cover the government’s expenses until a new government is formed.
|It is a financial plan for the government during a transitional period or before elections.
|It contains only the government’s expenditures, providing a focused overview.
|It contains the government’s expenditures and receipts, encompassing the financial aspects.
|It is passed without discussion in the Lok Sabha as a formal procedure.
|It is subject to debate and voting in the Lok Sabha as a comprehensive financial statement.
|It cannot alter direct taxes under any circumstances.
|It can modify the tax system even in the interim budget.
|It can be approved within the framework of the interim budget.
|It serves as the framework for the vote on account.
As a curtain call before the next act, the interim budget keeps the government functioning without stealing the show. The interim budget supports the present while deferring to the future, smoothly bridging the old and new regimes before the people decide at the ballot box.
There are three main types of budgets in India: balanced, surplus, and deficit. A balanced budget is when the government’s revenue and expenditure are equal. A surplus budget is when the revenue exceeds the expenditure. A deficit budget is when the expenditure exceeds the revenue.
The first woman to present the budget in India was former Prime Minister Indira Gandhi. She presented the Union Budget for 1970-71 after she took over the finance portfolio following the resignation of Morarji Desai as finance minister.
An interim budget is a short-term measure covering the fiscal year’s initial months. It outlines the government’s income and expenditures, enabling it to manage expenses until the formation of a new government post-election. It is presented during the transition period when a new government is due to take over.
The interim budget is usually for three to four months until the new government presents a full-year budget. For instance, the interim budget for 2024-25 will be presented on February 1, 2024, and will cover the expenses until May or June, when the general elections are expected to be held.
There are many phases when preparing a budget that start in August or September. After that, the budget is presented in parliament and approved by the president. On February 1, every year, the Indian government releases the Union budget.