INTERIM BUDGET
2. What is the interim budget?
An interim budget is a financial statement presented by the government of a country for a short period, typically covering the immediate needs and expenses until a full budget is presented. In many countries, including India, the government follows a fiscal year from April 1 to March 31. An interim budget is usually presented when the government's term is coming to an end, and elections are around the corner.
Key features of an interim budget include:
- Interim budgets are temporary and serve as a stopgap arrangement until a newly elected government can present a full budget.
- The focus of an interim budget is on essential expenditures, such as day-to-day expenses, salaries, and ongoing government schemes. It typically avoids introducing new policies or making major changes in taxation.
- Governments presenting interim budgets generally refrain from introducing major policy decisions or long-term fiscal measures, as those are usually reserved for a full budget.
- The interim budget seeks parliamentary approval for necessary spending to ensure the continuity of government operations until a new government can present a comprehensive budget.
In India, the Finance Minister typically presents an interim budget in the Lok Sabha (the lower house of Parliament) ahead of general elections. The interim budget is meant to ensure the government's financial continuity until a new government is formed, and it outlines estimates for government revenue and expenditure for the short term. It is important to note that the interim budget is distinct from the full budget, which is presented by the newly elected government after the elections.
3. Difference between the Interim Budget and Union Budget
| Feature | Interim Budget | Union Budget |
| Scope | Temporary; for a few months until new government takes over | Comprehensive; for the entire fiscal year |
| Purpose | Ensure continuity in government spending | Outline government's financial plan and introduce new policies |
| Timing | Presented before general elections or when there's a government transition | Presented annually on February 1st |
| Content | Focuses on essential expenditures; avoids major policy announcements | Comprehensive; includes revenue and expenditure estimates, policy initiatives, and tax proposals |
| Limitations | Cannot introduce new schemes or projects | Can introduce new schemes and alter existing ones |
| Policy Announcements | Generally refrains from major policy changes |
Introduces new policies, schemes, and tax proposals |
4. The difference between an interim budget and a vote on account
While an interim budget and a vote on account are both financial mechanisms used by governments, they serve different purposes and are distinct.
| Feature | Interim Budget | Vote on Account |
| Purpose | Complete budget presented during government transition, often in an election year. | Provision seeking parliamentary approval for essential spending to ensure government continuity for a specific period. Part of the interim budget. |
| Coverage | Covers entire government expenditures and receipts for the specified period. Includes routine expenditures, new policy announcements, and financial allocations. | Covers only routine and essential expenditures for a short duration. Does not include major policy changes or new long-term schemes. |
| Scope of Policy Changes | May includes policy changes, new schemes, and announcements, albeit minimised during a transitional period. | Typically does not include major policy changes or the introduction of new long-term schemes. Aimed at securing funds for routine functioning. |
| Timing | Presented during the year of a general election, often a few months before elections, to cover the transition period until a new government is formed. |
Specific provisions within the interim budget, are sought for a short period to cover immediate financial needs until a full budget is presented. |
5. Who presented the first interim budget in India?
- R. K. Shanmukham Chetty presented the first interim budget in India on November 26, 1947.
- At the time, India was still in its early months of independence and the budget covered only a period of seven months, from August 15, 1947, to March 31, 1948. This was due to the need to adjust to the partition of the country and the formation of a new government.
- Chetty, who was also the first Finance Minister of Independent India, played a crucial role in laying the foundation for India's economic development. His first budget focused on rebuilding the devastated economy after the partition and laying the groundwork for long-term growth.
6. The Way Forward
India can modernize interim budgets, ensuring their effectiveness in navigating financial transitions while adhering to responsible fiscal principles. This will pave the way for sustainable economic development and a smooth handover of responsibilities to the incoming government.
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For Prelims: Interim Budget, Union Budget, Vote on Account,
For Mains:
1. Critically analyze the role of interim budgets in a democratic system like India. Do they maintain financial stability amidst elections, or are they susceptible to populism and short-term gain? (250 Words)
2. Compare and contrast the key features of interim budgets with regular union budgets. How does this distinction impact long-term economic planning and policy implementation? (250 Words)
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Previous Year Questions
1. What is the difference between "vote-on-account" and "interim budget"? (UPSC 2011)
1. The provision of a "vote-on-account" is used by a regular Government, while an "interim budget" is a provision used by a caretaker Government.
2. A "vote-on-account" only deals with the expenditure in the Government's budget, while an "interim budget" includes both expenditure and receipts.
Which of the statements given above is/are correct?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: B
2. Vote on Account is meant for (BPSC 2016)
A. Vote on the report of CAG
B. To meet unforeseen expenditure
C. Appropriating funds pending the passing of the budget
D. Budget
E. None of the above/More than one of the above
Answers: 1-B, 2-C
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