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Home Economy and Finance Interim Budget vs Full Budget: All you need to know

Interim Budget vs Full Budget: All you need to know

Piyush Goyal will be presenting the last budget of the government on February 1, which will be an interim budget

For the last several weeks, speculation was going on in media that Modi government is considering a full budget in the budget session of parliament that started today, instead of an interim budget. Yesterday, the Finance Ministry clarified that the finance minister will be presenting an interim budget in Lok Sabha on February 1, not a full budget. But what is the difference between an interim budget and full budget? Let’s find out.

The underlying principle of presenting a budget is to ascertain the legislative approval on the annual expenditure made by the executive led by the incumbent government. The government needs money for its functioning. Even though the government receives finances through various means, it needs approval from the legislature to spend the money in various heads.

Article 266 of the Constitution of India mandates that Parliamentary approval is required to draw money from the Consolidated Fund of India. Besides, Article 114 (3) of the Constitution specifies that no amount can be withdrawn from the Consolidated Fund without the enactment of a law i.e appropriation bill.

On February 1, NDA government at the centre is set to present its last Budget ahead of the 2019 Lok Sabha elections. Conventionally, a government at the end of its term presents an interim budget rather than a full Budget. There is a divided opinion on the issue as few experts are in favour of a full budget, others oppose it on the ground that in an election year the ruling government cannot present a full budget as it has already presented five full budgets in the previous years, and it does not have the mandate to rule the country for the whole year.

 

What is an interim budget?

An interim budget in all practical sense is a full budget but made by the government during the last year of its term i.e. just before an election. However, an Interim Budget is not the same as a ‘Vote on Account’. As ‘Vote on Account’ deals only with the expenditure side of the government’s budget, an Interim Budget is a complete set of accounts, including both expenditure and receipts. An Interim Budget gives the complete financial statement, very similar to a full Budget. It is also important to note that the interim budget and full budget are not official names, it is simply called union budget in official documents.

 

What is the difference between an interim budget and a full budget?

  • An interim budget is the budget of a government that is going through a period of transition while full budgets are not only an annual financial statement of the government but also present the direction of economic policies of the incumbent government. Conventionally, no major policy decisions are taken during the interim budget. However, several governments in the past, including the Congress-led United Progressive Alliance had made major policy announcements while presenting interim budgets just before 2009 and 2014 general elections.
  • Even though interim budgets are quite similar to a full-budget in terms of presentation of expenditure for the ongoing fiscal and projections for the upcoming fiscal year, the ruling government have traditionally opted to present a vote-on-account for a four-month period to incur the cost of administrative expenses and day-to-day running of the government.
  • The Union government can also introduce tax changes but during an election year, successive governments have avoided making any major changes in tax laws during an interim budget. The reasoning is that it would be the prerogative of the new government to signal its policy direction, which is often reflected in the budget it presents soon after the formation of the new government.

In simple terms, a full budget deals with revenues and expenses for the whole financial year, interim budget deals with revenues and expenses for the remaining time for which the incumbent government will be in power, and Vote on Account is only for expenses for the remaining term of the government.

 

Is it mandatory for the government to present vote-on-account instead of a full budget in an election year?

No, technically it is not mandatory for the government to present a vote-on-account and the constitution does not impose any such rules on the incumbent government from presenting a full-fledged budget instead of a vote-on-account. However, it has become a practice to avoid full budgets as it would be inappropriate to impose policies that may or may not be unacceptable to the incoming new government taking over in the same financial year.

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OpIndia Staffhttps://www.opindia.com
Staff reporter at OpIndia

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