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HomeEconomyLame duck or populist? Here's how India's interim budget works

Lame duck or populist? Here’s how India’s interim budget works

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India watchers are waiting to see if Modi will betray convention and announce tax concessions to win votes.

New Delhi: As Prime Minister Narendra Modi’s government prepares to present its last spending plan on 1 February before India’s general election, the main question on people’s minds is: will it be a lame duck budget or a populist one?

Convention demands that the outgoing administration present an interim budget to secure parliament’s approval for expenses for a part of the financial year starting April until a new government is in place. The rules also allow for the spending plan to be passed by parliament’s lower house without any discussion.

India watchers are waiting to see if Modi will betray convention and announce tax concessions to win favor with voters after shock defeats for his Bharatiya Janata Party in key provincial polls last month. Given those risks, here’s a look at how the last three interim budgets panned out:

Interim Budget, Fiscal Year 2015

Then Finance Minister Palaniappan Chidambaram didn’t give in to the temptation of increasing spending to boost economic growth before elections, and stuck to the budget deficit goal. He, however, slashed excise levies on capital goods, the automobile industry and some other items.

Interim Budget, Fiscal Year 2010

Finance Minister Pranab Mukherjee refrained from making any major announcements, saying “constitutional propriety requires that new government formulates the tax and expenditure policies for 2009-10.”But that was only after the government had already announced a nationwide farm loan waiver, which eventually helped the Indian National Congress party-led alliance in elections that followed, giving it a successive second term in office.

Interim Budget, Fiscal Year 2005

Finance Minister Jaswant Singh widened coverage of some of the existing programs to take the benefits to more people. While he didn’t introduce any new tax concessions, he did extend the scope of some of the existing ones and simplified tax procedures. One measure that directly benefited the rising middle-class was an increase in free baggage allowance at airports and a reduction in customs duty on that.-Bloomberg

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  1. FM Pranab Mukherjee struck the right note. Fiscal year 2019 – 20 is the responsibility of the newly elected government.

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