Difference between Interim Budget & Union Budget
- 27 Jan 2024
- By: BlinkX Research Team
The financial scene is anticipating a turning point as Finance Minister Nirmala Sitharaman gets ready to unveil the next interim budget on February 1, 2024, against the backdrop of imminent general elections in India. Unlike full-year fiscal statements, which are the norm, interim budgets are important because they provide short-term financial plans that are necessary to continue government spending until a new government takes office. This essay explores the core differences between interim and full-year budgets, illuminating their ramifications, essential elements, and the strategic factors that influence their creation. Furthermore, a review of budget day market data spanning the previous 20 years is provided, providing information about the characteristics that can be anticipated for Budget 2024.
Key Difference Between Interim Budget & Union Budget
Here are the differences between interim and union budget:
Aspect | Interim Budget | Union Budget |
|---|---|---|
| Timing | Presented before general elections or during a transition period with an interim government. | Presented by a government with a clear mandate and full-term tenure. |
| Duration | Covers immediate financial needs for a few months until a new government can present a full budget. | Encompasses the entire fiscal year (April 1 to March 31 of the following year). |
| Policy Direction | Focuses on maintaining the continuity of government policies and programs. | Sets new policies and financial allocations for the upcoming fiscal year in line with the government’s vision. |
| New Schemes/Projects | Usually avoid significant announcements to prevent commitments for the upcoming government. | Introduces new schemes, projects, and allocations for various sectors to drive economic growth. |
| Tax Changes | Generally, no significant changes in tax structure are introduced. | Includes proposals for changes in tax rates, exemptions, and fiscal measures to boost revenue. |
| Vote on Account | A provision for a Vote on Account is made for spending during the transition period. | A full budget is presented, including detailed estimates of revenue and expenditures, with parliamentary approval. |
| Parliament’s Role | Parliament’s approval is sought only for the Vote on Account. | Parliament debates and approves the Union Budget, and its proposals become law once passed. |
| Economic Survey | The Economic Survey is not usually presented with the Interim Budget. | Typically released a day before the Union Budget, providing an analysis of the economy’s performance and outlook. |
| Purpose | Serves as a temporary budget to meet essential expenses during transitional periods. | Forms the comprehensive financial plan for the fiscal year, outlining government’s revenue and expenditure. |
| Government’s Status | Often presented by a caretaker government during transitional periods. | Presented by a stable government with a full mandate to govern. |
| Importance | Essential for maintaining financial stability during transitional periods. | Paramount, outlining the government’s fiscal priorities and economic policies. |
| Long-term Planning | Lacks long-term planning as it is a stop-gap arrangement. | Includes provisions for long-term planning and the execution of government policies throughout the fiscal year. |
| Pre-election Populism | Often avoids major populist measures to prevent influencing election outcomes. | May include populist measures to appeal to the electorate, especially if presented close to elections. |
Conclusion
Overall, the Interim Budget and Union Budget play distinctive roles in India's financial landscape. While the Interim Budget serves as a temporary financial plan during transitional periods, the Union Budget is a comprehensive blueprint outlining the government's fiscal priorities and policies for the entire fiscal year. Understanding these differences is crucial for investors, policymakers, and the public alike, as they navigate the intricate dynamics of India's economic trajectory.
