What is an Interim Budget

An interim budget is a temporary financial statement presented by the government when general elections are around the corner or when there is a transition of power due to the completion of the government's term. It serves as a stop-gap arrangement to meet the government's expenditure requirements until a new government assumes office and presents a full-fledged budget. Here are a few important points related to the interim budget:

• Vote on Account: The interim budget typically includes a "Vote on Account," which allows the government to withdraw funds from the Consolidated Fund of India for a limited period, usually a few months, to meet essential expenses such as salaries, pensions, and ongoing projects. 
• No Major Policy Changes: Since an interim government is expected to refrain from making significant policy decisions or introducing new schemes that could bind the incoming government, the interim budget usually maintains continuity with the previous budget's allocations and policies.
• Limited Tenure: An interim budget is in effect only until a new government is formed and presents a full-fledged budget. Once the new government assumes office, it has the authority to revise, modify, or discard the interim budget and present its own budgetary proposals based on its policy priorities.

How is an interim budget different from a regular budget?

Now that you have a fair understanding of the interim budget, let us look at how it is different from the regular:

• Timing and Occasion: The Interim budget is presented by the incumbent government when general elections are imminent. The regular budget is presented annually by the government to outline its revenue and expenditure plans for the upcoming fiscal year.
• Scope and Duration: The Interim Budget focuses primarily on routine expenditures and essential functions of governance. On the other hand, the Regular Budget covers all aspects of government finances, including revenue generation, expenditure allocations, taxation policies, borrowing plans, and sector-wise allocations.
• Policy Changes and New Initiatives: The interim budget refrains from introducing major policy changes or new schemes that could bind the incoming government. A regular budget provides an opportunity for the government to announce new policy initiatives, welfare schemes, tax reforms, etc.
• Legislative Approval: The Interim budget is subject to parliamentary scrutiny and approval, although its provisions are often less contentious and receive expedited approval to ensure continuity in government operations. Regular one undergoes thorough examination and debate in the legislature, with various parliamentary committees scrutinizing its provisions. It requires formal approval by the legislature before it can be implemented.

What are the limitations and constraints associated with an interim budget?

An interim budget, despite its significance in ensuring continuity and stability in governance during transitional periods, is subject to several limitations and constraints. These constraints arise from its temporary nature and the restrictions imposed on the government during an electoral transition.

Also, as mentioned in the previous section, the approval process is fast. Therefore, the accelerated approval process may lead to reduced scrutiny from parliament compared to regular budgets. It could potentially compromise the thoroughness of financial evaluation. This constrained timeframe often prioritizes continuity over innovation, hindering the government's ability to implement comprehensive solutions.

After presenting the interim budget, when does the government typically present the full budget?

As you know, this year, the Finance Minister will present the interim budget because this is an election year. After presenting the interim budget, the government typically presents the full budget once a new government assumes office or when the general elections have been completed, and the incumbent government continues its term. The exact timing of the full budget presentation varies depending on the electoral cycle.