Introduction
The Union Budget is one of the significant events at the start of the New Year. The finance minister (FM) presents the union budget that outlines the government’s vision and expenditure plans for the new financial year for different sectors. The announcements made in the Union Budget impact everyone - from the common man to corporate honchos. It prepares a blueprint for the economy in the upcoming fiscal.
However, things are different in an election year where the FM doesn’t present a full-fledged union budget but an interim budget. If you are wondering what an interim budget is and why the FM doesn’t present a full-fledged budget, read on.
What is an interim budget?
An interim budget includes financial statements of all expenses incurred by the incumbent government in the previous year. It also consists of the income earned in the last year, along with the likely expenses in the next few months until the formation of the new government.
In other words, an interim budget is a provisional financial report introduced by the Government of India during an election year. The interim budget acts as a vital tool for maintaining fiscal stability in the face of political changes.
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Why can’t the FM present a full-time budget?
Now comes the question of why the FM can’t present a full-time budget in 2024. This is because 2024 is an election year. The elections, which will be held across India, will decide the next government that will come into power. The current government can’t prepare a full-year budget as there could be a power shift. No government can predict election results.
If the government changes hands, the interim budget gives the next ruling government time to draw the full-time union budget for the remaining months of the next financial year. The interim budget allows the continuation of essential financial operations. It is a bridge between political transitions, thus allowing the next incoming government to craft a full-time budget that aligns with its vision and priorities. By adopting this approach, the Government of India acknowledges the democratic nature of the electoral process. It recognises that the people’s will can usher in changes necessitating a responsive and adaptable fiscal policy.
While there’s no constitutional mandate for the finance minister to present an interim budget, it has now become a standard norm for the incumbent government to do so before the general elections held every five years. Like every year, the finance minister tables the interim budget on February 1.
Inclusions and exclusions in an interim budget
In an interim budget, the finance minister can include the following things:
- Government’s expenditure and revenue
- Fiscal deficit
- Financial projections for the coming months
That said, the interim budget can’t include any major policy announcements that could burden the next government. As per the code of conduct of the Election Commission of India, the interim budget can’t have any announcement of any major scheme that could influence the potential voters.
Also, before presenting a full-fledged union budget, the Chief Economic Advisor presents the economic survey. This survey reviews the development of the Indian economy in the last 12 months. However, the ruling government cannot present the economic survey in the interim budget. Through the interim budget, the Indian Parliament passes a vote on account. Through this, the ruling government gets approval for essential government spending, which is valid for up to two months and can be extended.
In conclusion
During elections, it’s hard to predict which party will win and form the government accurately. There have been several instances in the past where election results have sprung surprises. So, it’s hard for the current government to plan a full-time budget. With the interim budget, the current government keeps things running until the new government takes charge and prepares a budget that aligns with its vision. An interim budget is a practical way to deal with the uncertainties of elections. It ensures responsible financial management during this transitional period.
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