The Modi government is set to present an interim budget in the first week of February.
New Delhi: With Finance Minister Arun Jaitley hinting that the interim budget could see measures in the ‘larger interests of the economy’, speculation is rife that the budget to be presented on 1 February will see some big announcements.
The Union budget to be presented in the first week of February, ahead of the Lok Sabha elections due in April-May, is an interim budget. A new government, after the election results are declared in May, will present a full budget in July.
Difference between full budget, interim budget & vote on account
A full budget presents proposals for an entire year. An interim budget is only for a short period and basically for the transitionary period between two governments.
Typically, an interim budget does not have any tax measures.
However, there have been instances when some indirect tax changes have been introduced by outgoing finance ministers for a few months citing the urgent need for the sops — the last two outgoing UPA governments did so in 2014 and 2009 under finance ministers P. Chidambaram and Pranab Mukherjee, respectively.
A vote on account deals only with expenditure side of the budget. It is crucial for the regular functioning of the government in a new financial year. For instance, payment of salaries or interest payments cannot be halted till a full budget is presented.
Although the terms ‘interim budget’ and ‘vote on account’ are used interchangeably, a vote on account occurred each year when the government took permission from Parliament to meet its expenditure for the initial few months of the new financial year till the new budget is passed.
With the government advancing the budget date from February-end to the first week of the month in 2017, the entire budget exercise will now be completed before the start of the new financial year in April so a vote on account is no longer necessary.
Also read: Lame duck or populist? Here’s how India’s interim budget works
What happened in last two election-year budgets?
2014: Then finance minister P. Chidambaram presented an interim budget in February 2014. He announced excise duty cuts for the manufacturing sector, including capital goods and automobiles effective till 30 June so that it could be reviewed at the time of the full budget. He also made some minor changes to service tax.
2009: Then finance minister Pranab Mukherjee also presented an interim budget. He did not tinker with the tax rates, but did extend the interest subvention scheme to allow exporters to receive pre- and post-shipment credit from banks at two percentage points lower interest rate. This was to help them battle global recession after the financial crisis in sectors like textiles, carpets, leather, gem and jewellery and small- and medium-sized enterprises (SMEs).
What to expect in interim budget
This time, the interim budget is likely to lay down the government’s vision for the next five years — if it is voted back to power. With the Goods and Services Tax (GST) Council handling the majority of indirect taxes and the impact of direct tax proposals typically spanning the whole year, there is room for the government to manoeuvre only on custom duties.
A vision for the next five years brings up images of a shower of rose petals, marigold garlands, the special glow that belongs to the victor of a general election. The interim budget should be a simple, workman like affair, mindful of convention and parliamentary propriety.