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What is Interim Budget?

What is Interim Budget?

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An important feature of public finance is the idea of an interim budget, especially in democracies where governments are responsible for the distribution and use of public funds. A temporary financial plan known as an interim budget is presented to cover government spending during a transitional phase, usually in the run-up to elections. It is an essential part of financial governance that guarantees stability and continuity, not just a band-aid solution. In this blog let’s examine the meaning of interim budget, the contents, importance, and workings of an interim budget.

How does the Interim Budget Distinguish Itself from the Final Budget?

Here are the key differences between the Interim Budget and the Final Budget:

  • The interim budget India is Presented when a government is transitioning, typically just before general elections. It covers government spending for a short period (usually a few months). On the other hand, the final budget provides a comprehensive financial statement for the entire fiscal year, detailing revenues and expenditures.
  • The interim budget generally covers the financial requirements for a few months until a new government is in place. The final budget covers the financial planning and allocations for the entire fiscal year.
  • Interim budget is limited in scope, focusing on essential and ongoing expenditures without introducing major new policies or schemes. The final budget is broad and detailed, including new policies, schemes, and long-term financial planning.
  • Interim budget requires a vote on account, which allows the government to meet necessary expenses for a short period without detailed scrutiny. In the final budget, the approval process takes place with discussions, debates, and detailed examination by various committees.
  • Major tax changes or new financial proposals are avoided in the interim budget. It mainly focuses on continuing existing schemes and essential expenditures. The final budget includes new tax proposals, fiscal policies, and a detailed roadmap for the government's financial strategy for the year.

Vote-on-account

In parliamentary democracies, a Vote-on-Account is a financial tool that gives the government the power to spend money for a set amount of time, usually until the entire budget is approved. When the budget cannot be presented or approved promptly. For example, before general elections or in the face of unforeseen events that cause the budgetary process to be delayed, this tool is very helpful.

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Table of Content

  1. How does the Interim Budget Distinguish Itself from the Final Budget?
  2. Key Aspects of an Interim Budget

Key Aspects of an Interim Budget

The following are some of the main elements of the interim budget: 

  • Distribution of Spending: Generally, an interim budget sets aside money for continuing projects, any pressing requirements, and essential government activities. It stays away from implementing new laws or initiatives that might have a big financial impact.
  • Policy Restraints: Because an interim budget is only temporary, it does not carry out policy changes or reforms that require long-term planning or financial commitments. Up until a new administration assumes power, the major priority is preserving stability and continuity in governance.
  • Procedure for Approval: The temporary budget is not subject to the customary examination and discussion in the legislature. It is put up for a vote on account to obtain approval for necessary spending until a new government can provide a comprehensive budget.

Conclusion
The interim budget is an essential instrument for financial management since it helps to preserve continuity and stability by making sure the government can pay its bills until a new administration takes office.  The interim budget definition underscores its role in ensuring ongoing government operations during transitional periods. Anticipations are raised by the impending interim budget, which emphasises fiscal consolidation and may include measures for farmers, highlighting the budget's importance in managing economic complexity.

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FAQs on Interim Budget

The main difference between a budget and an interim budget is that a budget is a comprehensive financial plan for the entire fiscal year, including new policies and tax proposals. Where an interim budget is a temporary financial plan presented before elections, covering essential expenditures without new policies

No, an interim budget includes both revenue and expenditure estimates for the entire year, while a vote on account only covers short-term essential expenditures.

The first interim budget of independent India was presented by R. K. Shanmukham Chetty in 1947.

The Interim Budget is usually presented before general elections or when there is a transition between governments. It is commonly delivered a few months before the completion of the government's term or in the absence of a full-term government.

The primary purpose of an Interim Budget is to meet the essential financial needs of the government during a transitional period. It ensures the continuity of government functions and essential expenses until a new government takes office and can present a comprehensive budget.

An Interim Budget typically focuses on maintaining continuity and stability rather than introducing new policy measures. It generally avoids major announcements or commitments that could influence the upcoming government's policy direction.

In general, an Interim Budget does not propose significant changes in the tax structure. It aims to maintain financial stability without introducing major fiscal adjustments. Any substantial changes in tax rates or exemptions are usually reserved for the full-fledged budget.

A Vote on Account is a provision made within an Interim Budget that grants the government permission to incur expenses during the transition period until a full budget is passed. It allows for the continuation of essential government functions without parliamentary approval for detailed expenditure estimates.

The key differences lie in the timing, duration, and policy direction. An Interim Budget is presented during a transitional period, covers immediate financial needs for a few months, and focuses on continuity. In contrast, a full Union Budget is presented for the entire fiscal year, introduces new policies, and outlines the government's comprehensive financial plan.