Finance Minister Nirmala Sitharaman on Thursday, February 1, presented an interim Budget for the new fiscal, FY25. The full Budget for the mentioned fiscal will be be introduced in July, after a new government would be formed following the general elections in the first half of 2024.
What is an Interim Budget?
The interim budget is a significant concept frequently featured in the news on an annual basis. Distinguishing itself from a regular government budget, the interim budget serves as a short-term financial plan to support central government expenditures until elections are conducted and a new central government assumes office.
- It meticulously outlines projected expenditures and revenues for the upcoming months until the new government takes charge.
- During the interim budget presentation, the incumbent government is restricted from incorporating major schemes, as such actions could potentially influence voters, aligning with the Election Commission's Code of Conduct.
- Additionally, the government in power is prohibited from presenting the Economic Survey alongside the interim budget.
What components are encompassed in the interim budget?
The interim budget incorporates estimates for government expenditure, revenue, fiscal deficit, and financial performance for a specific duration but refrains from including major policy announcements.
What time frame does an interim budget cover?
An interim budget typically addresses the immediate financial requirements and allocations for the next few months until the new government can present a comprehensive budget covering the entire fiscal year.
What is the timeline for the Interim Budget 2024?
The effectiveness of the Interim Budget 2024 is limited to March 31, 2024, signifying a restriction on the spending authority of the current government beyond this date.
Who is responsible for presenting the interim budget?
The interim budget is commonly delivered by the finance minister of the incumbent government before the conclusion of their term.
Purpose Of Interim Budget
"To guarantee that vital government operations carry on without disruption until the new administration takes charge."
Why is the Interim Budget referred to as a 'Vote on Account'?
The term 'vote-on-account' is commonly associated with an interim budget as it serves as an authorization for incurring specific expenditures necessary until a new government assumes power.
Vote-on-account
- The vote-on-account is an integral part of the interim budget, providing authorisation for the government to meet its expenses during the short period leading up to elections.
- It is passed as a convention without discussion, distinct from a full budget, where discussions precede its passing.
- The vote-on-account can be likened to a grant-in-advance, enabling the government to function until the voting on demands for grants, as well as the passing of the Finance Bill and the Appropriation Bill.
- The granted amount usually constitutes 1/6th of the estimated expenditure for the entire year under various demands for grants.
- Typically valid for two months, the vote-on-account covers only government expenditure, while the interim budget addresses both receipts and expenditure.
Effective Period and Extension
A vote-on-account generally remains effective for two months and may be extended if necessary, in contrast to the full budget, which is valid for a year.
Constitutional Basis
Article 116 of the Constitution establishes the basis for a vote-on-account, allowing an upfront allocation of the budget from the 'Consolidated Fund of India' to the incumbent government.
What occurs to the interim budget once the new government assumes office?
Following the inauguration of the new government, it has the flexibility to either adhere to the allocations and proposals specified in the interim budget or make adjustments in accordance with its priorities and policies. The interim budget functions as a provisional guideline until the presentation of the full budget.
• This marks Sitharaman's sixth budget within the administration led by Prime Minister Narendra Modi. In the budget for 2023-24, a proposed total expenditure of Rs 45,03,097 crore was outlined, with the highest allocations directed towards sectors such as defence, road transport and highways, railways, health and family welfare, and jal shakti.
Union Budget
In accordance with Article 112 of the Indian Constitution, the Union Budget, also known as the annual financial statement, is a presentation of the government's anticipated receipts and expenditures for the upcoming financial year.
• The term 'Budget' is not explicitly mentioned in the constitution.
• The Union Budget period spans from April 1 to March 31.
• Prepared by the Department of Economic Affairs, the Ministry of Finance is the primary body responsible for formulating the Budget.
• The Union Budget is categorised into Revenue Budget and Capital Budget.
Revenue Budget
- Revenue Budget encompasses the government's revenue receipts and expenditures.
- Revenue Receipts consist of tax and non-tax revenue.
- Revenue Expenditure includes costs associated with the day-to-day functioning of the government and various services provided to citizens.
- A Revenue Deficit occurs when expenditure surpasses receipts in this category.
Capital Budget
- Capital Budget covers capital receipts and expenditures.
- Capital Receipts predominantly include loans from the public, foreign governments, and the RBI.
- Capital Expenditure pertains to investments in machinery, equipment, buildings, health facilities, education, etc.
Fiscal Deficit arises when the government's total expenditure exceeds its total revenue.
Difference between Interim Budget vs Full Fledged Budget
| Aspect | Interim Budget | Full Fledged Budget |
|---|---|---|
| Timing | Presented by the outgoing government before elections. | Presented by the newly elected government. |
| Scope | Covers expenditures and receipts for a short period. | Encompasses all aspects of government finances for the fiscal year. |
| Purpose | Ensures continuity of essential functions temporarily. | Serves as a strategic guide for the entire fiscal year. |
| Policy Announcements | Limited major policy announcements. | Allows for comprehensive policy declarations. |
| Economic Survey | No presentation before the Interim Budget. | Usually presented a day before the Full Budget. |
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