Roshan is a regular class 8th student. Every year, in the month of February, he watches his parents sit in front of the T. V for hours watching discussions on the Union Budget. He always wondered why the government budget was so important to his parents.
A budget means a plan for spending your money. It is a document or a written plan that lists the money you earned and the money you will spend in the near future.
“We have our own budget at home. Why do we need to know what the governments’ budget is?” he thought. During this year, when his parents were again sitting in front of the T.V. for the budget presentation, he asked his dad the importance of the budget.
His dad told him that we have our own budget at home in the same way the government has a budget. Roshans’ father told him, just like how parents are the caretaker of the house, the government is the caretaker of the entire country. His parents require income to run the house, and the government also needs income to run the country.
Now, Roshan had some idea about the budget. His dad further said that the governments’ budget affects the common man in many ways. The government can decide the tax on our income, and they can decide the prices of goods and services we buy and if we require any new schemes for our well-being.
This is why the Union Budget, presented by India’s central government, is so important to the common man. It is the one financial event during the year that draws the attention of everyone in the country. People get to know various things from a budget. The prices of goods, services, taxes, new schemes by the government, etc.
Most people know about the Union Budget, but there are many hidden terms in budgetary language that we do not know about. One such term is called the Interim Budget. Let us understand what an Interim Budget means.
Annual Budget or Union Budget Of India: Facts
For us to understand the meaning of the Interim Budget, we first need to know what is an Annual or a Union Budget.
In India, a new financial year begins on 1st April and ends on 31st March of the next year. It is widely believed that since the Hindu festival of Vaishaka (Hindu New Year) falls in April, the government decided to mark it as the start of the financial year.
Another reason for the start of the financial year in April is because India is an agrarian economy. The income that it gets is through crops. These crops are harvested in the month of February. The two months from February gives the government enough time to know whether the revenue from crops will increase or decrease. The budget is applicable for the entire fiscal year (1st April to 31st March).
We can think of the Union Budget as the financial report card of the government. The Central Government presents the budget in parliament. It is passed only after discussion in the Lok Sabha. The Union Budget is said to be divided into two parts.
The first part details all the expenses and income of the government in the previous year. The second part talks about the future plan of the government for the coming financial year.
This future plan includes the ways in which the government is planning to raise money and where the government is going to spend its money.
Before explaining the meaning and importance of an interim budget, we will need to know a few terms that we are going to use. We will refer to the government currently in power and present the budget as the outgoing government. We will also refer to the party that might come into power as the incoming government.
Interim Budget: What is the need?
In India, we have General Lok Sabha elections every once in 5 years. The General Lok Sabha elections allow adult citizens in India to select their representatives from their constituencies for the lower house in India, which is also called Lok Sabha.
It becomes difficult for the outgoing government to come up with a fully detailed Annual Budget in such a scenario. The outgoing government could be voted out, and the incoming new government might not approve the budget presented by them. Hence, the Interim Budget helps in filling this gap.
Interim means temporary, for a short period or the time between two particular events. It allows the outgoing government to have a system in place for the transition period to fulfill the country’s economic needs.
The government is also careful when presenting the Interim Budget. They try not to announce any major reforms or announcements during the interim budget. This step is taken so that the incoming government does not have to face any issues.
However, the outgoing government needs the approval of the parliament to use the money from The Consolidated Fund of India to sponsor its budget expenses.
The Consolidated Fund contains all the revenue of the government.
The government also needs the vote on account for its expenditure. Vote on account means that the government needs the approval of the parliament to spend money on various things mentioned in the Interim Budget. This approval is taken in the form of votes from the members of parliament.
The Interim Budget is a documentation of the expenses and earnings of the government. The outgoing government plans to make all these expenses and earnings are valid for not more than 6 months.
How is the Interim Budget different from the Annual Budget?
Like we have mentioned above, an Annual Budget is divided into two parts. The first part contains the expenses and income of the government during the previous year, and the second part contains the future plan of the government for the upcoming financial year.
In the Interim Budget, the first part is kept the same. The second part is where the outgoing government makes some changes. The government mentions only basic expenses to be made for the future till the time the incoming government introduces the new budget.
For the outgoing government, it is better to come up with an Interim Budget for 4-6 months. This is because the Union Budget is applicable for the entire fiscal year.
Is the Vote On Account and the Interim Budget the same?
No, the Vote On Account and the Interim Budget are two different terms. We can think of this in terms of a pizza. The Interim Budget is the entire pizza, and then the vote on account is just a slice of the pizza.
The Interim Budget is a complete financial statement of the government. It includes all the expenses, earnings, and policy changes of the outgoing government.
Whereas the Vote on Account includes only the expenses of the budget. The outgoing government requires the approval of the parliament to finance its expenses. This approval is given in the form of votes.
Hence, we can say that the Vote on Account is the permission given by the parliament to spend money.
Detailed List of the 14 interim budgets presented in India
Now, we will mention all the Interim Budgets that were implemented in India till date. Here, we will write the year in which it was presented and by whom it was presented. An Interim Budget is usually introduced once in 5 years before the General Lok Sabha Elections. The outgoing government presents the Interim Budget.
1. The 1st Interim Budget was presented in 1947 by R K Shanmukham Chetty.
2. The 2nd Interim Budget was presented in 1952 by CD Deshmukh.
3. The 3rd Interim Budget was presented in 1957 by T T Krishnamachari.
4. The 4th Interim Budget was presented in 1962 and in 1967 by Morarji Desai.
5. The 5th Interim Budget was presented in 1971 by Y B Chavan.
6. The 6th Interim Budget was presented in 1977 by Haribhai M Patel.
7. The 7th Interim Budget was presented in 1980 by R Venkataraman.
8. The 8th Interim Budget was presented in 1991 by Yashwant Sinha.
9. The 9th Interim Budget was presented in 1991 by Dr. Manmohan Singh.
10. The 10th Interim Budget was presented in 1998 by Yashwant Sinha.
11. The 11th Interim Budget was presented in 2004 by Jaswant Singh.
12. The 12th Interim Budget was presented in 2008 by Pranab Mukherjee.
13. The 13th Interim Budget was presented in 2014 by P Chidambaram.
14. The 14th Interim Budget was presented in 2019 by Piyush Goyal.
Interim Budgets are usually presented when there is an upcoming election in the country. Just like the Annual Budget, it is a financial report card of the government. However, it is different from an Annual Budget in certain ways. The Interim Budget is not valid for more than 6 months, as opposed to the Annual Budget. The Annual Budget is applied to the entire upcoming financial year. Interim Budgets allow for a smooth transition between governments.
Frequently Asked Questions Related To The Interim Budget:
1. Can the State Government introduce an Interim Budget?
Yes, the option to present an Interim Budget is open to the State Governments as well. When State Elections are held, the interim budget is helpful to fulfill the needs of the economy during the transition of power between the incoming and the outgoing government.
2. How many Interim Budgets have been presented in India?
Since 1947, a total of 14 interim budgets have been presented in India. The most recent interim budget was presented before the General Elections of 2019 on 1st February 2019 by the acting Finance Minister, Piyush Goyal.
3. Under which article of the Indian Constitution is the Vote On Account present?
Vote on account is mentioned under Article 116 of the Indian Constitution.
4. In what situation is the Interim Budget presented?
An Interim Budget is presented when there is an upcoming election in the country. The Interim Budget fills the gap during the transition period of the outgoing and incoming government.
5. Does the Interim Budget include the policies and plans of the government?
Yes, if necessary, the interim budget can change or introduce policy measures. However, all the Interim Budgets presented till date in India have avoided announcing any major changes or schemes as it could be a burden for the incoming government.
6. Where does the word budget came from?
The word Budget comes from the French word ‘bougette,’ which means leather bag in French!
7. What is the difference between an Annual Budget and an Interim Budget?
An Annual Budget is valid for the entire fiscal year, whereas the Interim Budget is valid for only a few months till a new government takes charge.
8. Is the Interim Budget presented only before an election?
Yes. An Interim Budget is presented only before an upcoming election in the country.
Samridhi holds a Bachelor’s degree in Economics. Her research interests lie in examining the intersection of the social sector with poverty and inequality,
Along with this she is keen in understanding the systemic and structural issues that governs growth and development with an interdisciplinary focus.