Interim Finance Minister Piyush Goyal, in all likelihood, will present the Budget on 1 February – the final one by the Prime Minister Narendra Modi-led NDA government – ahead of the 2019 Lok Sabha elections.
However, unlike the last four years, this will be an interim Budget 2019 and not a full Budget. Confused about what it is and why it is different from a regular Budget?
The Quint breaks down the scope of the interim Budget 2019 and what is likely to be on the Modi government’s agenda.
What is An Interim Budget? And What Will Modi Govt Do in Theirs?
1. What is An Interim Budget?
Ahead of every financial year, which begins on 1 April in India, the government presents the Union Budget. Through the annual Budget, the government states the sources from where it is likely to earn money from and how it plans on spending it.
However, an interim budget is slightly different.
It is presented by the incumbent government in its last year in office, with the general elections due to be held during the upcoming financial year.
Therefore, this Budget is not for the entire year but for a short period of time, that is, the transitory period between two governments.
On 1 February, Goyal will present an interim Budget which will be in place till the new government is formed and presents its Budget for rest of the year.
Expand2. Is Interim Budget Same As Vote-on-Account?
Not at all.
Even though the words interim Budget and vote-on-account are used interchangeably, they are not the same.
A vote-on-account is an estimate of expenses required by the government during the transition period. The interim Budget, on the other hand, is an estimate of both revenue and expenditure and can contain certain policy measures.
The government needs approval from the Parliament to draw money from the Consolidated Fund of India (CFI) to meet the day-to-day expenses. The CFI is the place where the government puts in all the revenue.
Therefore, if the incumbent government presents vote on account, it will only be given permission to withdraw money from the CFI to meet day-to-day needs.
Expand3. Cans & Cannots of Interim Budget
1. There is no Finance Bill in the interim Budget – so there can be no changes made to the Income Tax Act. Therefore, the slabs stand as it is.
2. There will be no Economic Survey during the presentation of interim Budget.
3. By practice, the interim Budget does not contain major policy decisions that is likely to affect the expenditure of the next government.
Expand4. Can Govt Announce Policy Decisions in Interim Budget?
Constitutionally, yes. There is no provision in the Constitution that prohibits the government from making policy changes in the interim Budget.
Senior Advocate Arvind Datar, speaking to BloombergQuint, said:
“If the interim Budget is presented before the announcement of dates of the general election, the government is free to announce any policy decisions through it.”
However, there is another school of thought.
Former Finance Minister Yashwant Sinha, speaking to BloombergQuint, has said:
“By convention, it has been established that you will not present a full Budget, you will not present an economic survey, you will not include any new service, and there will be no Finance Bill.”
Expand5. Likely Focus of Modi Govt's Interim Budget
Earlier, on 17 January, speaking at CNBC-TV18’s Indian Business Leader Awards, the then Finance Minister Arun Jaitley said the “government could break with convention and make the 1 February exercise more significant...”
"The convention has always been that the election year budget normally is an interim Budget and ordinarily there should be no reason why we should move away from that convention. But then the larger interest of the economy always dictates what goes into the interim Budget and that is something which cannot be discussed or disclosed at this stage," Jaitley said, reported MoneyControl.com.
- The Modi government is likely to use the interim Budget as a platform to list its vision for the next five years, if it comes to power.
- The government is also expected to announce an income support scheme for farmers.
- Taking cue from Jaitley’s statement, it also remains to be seen whether the Modi government will offer direct tax relief, breaking convention.
(With inputs from LiveMint, MoneyControl.com, BloombergQuint)
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)
Expand
What is An Interim Budget?
Ahead of every financial year, which begins on 1 April in India, the government presents the Union Budget. Through the annual Budget, the government states the sources from where it is likely to earn money from and how it plans on spending it.
However, an interim budget is slightly different.
It is presented by the incumbent government in its last year in office, with the general elections due to be held during the upcoming financial year.
Therefore, this Budget is not for the entire year but for a short period of time, that is, the transitory period between two governments.
On 1 February, Goyal will present an interim Budget which will be in place till the new government is formed and presents its Budget for rest of the year.
Is Interim Budget Same As Vote-on-Account?
Not at all.
Even though the words interim Budget and vote-on-account are used interchangeably, they are not the same.
A vote-on-account is an estimate of expenses required by the government during the transition period. The interim Budget, on the other hand, is an estimate of both revenue and expenditure and can contain certain policy measures.
The government needs approval from the Parliament to draw money from the Consolidated Fund of India (CFI) to meet the day-to-day expenses. The CFI is the place where the government puts in all the revenue.
Therefore, if the incumbent government presents vote on account, it will only be given permission to withdraw money from the CFI to meet day-to-day needs.
Cans & Cannots of Interim Budget
1. There is no Finance Bill in the interim Budget – so there can be no changes made to the Income Tax Act. Therefore, the slabs stand as it is.
2. There will be no Economic Survey during the presentation of interim Budget.
3. By practice, the interim Budget does not contain major policy decisions that is likely to affect the expenditure of the next government.
Can Govt Announce Policy Decisions in Interim Budget?
Constitutionally, yes. There is no provision in the Constitution that prohibits the government from making policy changes in the interim Budget.
Senior Advocate Arvind Datar, speaking to BloombergQuint, said:
“If the interim Budget is presented before the announcement of dates of the general election, the government is free to announce any policy decisions through it.”
However, there is another school of thought.
Former Finance Minister Yashwant Sinha, speaking to BloombergQuint, has said:
“By convention, it has been established that you will not present a full Budget, you will not present an economic survey, you will not include any new service, and there will be no Finance Bill.”
Likely Focus of Modi Govt's Interim Budget
Earlier, on 17 January, speaking at CNBC-TV18’s Indian Business Leader Awards, the then Finance Minister Arun Jaitley said the “government could break with convention and make the 1 February exercise more significant...”
"The convention has always been that the election year budget normally is an interim Budget and ordinarily there should be no reason why we should move away from that convention. But then the larger interest of the economy always dictates what goes into the interim Budget and that is something which cannot be discussed or disclosed at this stage," Jaitley said, reported MoneyControl.com.
- The Modi government is likely to use the interim Budget as a platform to list its vision for the next five years, if it comes to power.
- The government is also expected to announce an income support scheme for farmers.
- Taking cue from Jaitley’s statement, it also remains to be seen whether the Modi government will offer direct tax relief, breaking convention.
(With inputs from LiveMint, MoneyControl.com, BloombergQuint)
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)