Finance Minister Nirmala Sitharaman will present the Union Budget for the Financial Year 2024-25 on February 1. Because of the forthcoming Lok Sabha elections in April-June, this budget is considered an interim budget.

What Is an Interim Budget?

Understanding Interim Budgets: A Quick Overview

An interim budget serves as a temporary financial plan presented by the government in anticipation of upcoming elections. This strategic move allows the government to manage the country's financial needs until a new administration is in place and a comprehensive budget is formally introduced.

Given that the validity of a Union Budget extends only until March 31, the current government holds spending authority up to that specific date. However, for expenses incurred between March 1 and the establishment of a new government, the existing administration requires Parliament's approval to cover these costs during the interim period. Hence, the presentation of an interim budget becomes a crucial step in this transitional phase.

In general, an interim budget outlines predictions for spending, revenue, fiscal deficit, financial performance, and forecasts for the upcoming fiscal year. However, significant policy announcements are restricted by the Election Commission's Code of Conduct to prevent influencing voters. Additionally, the presentation of the Economic Survey is not allowed in conjunction with the interim budget.

It's crucial to recognize that an interim budget varies from a vote on account, which permits the government to request parliamentary approval for covering expenses over a brief period, usually two months before elections and extendable up to six months.

Understanding the Difference Between Interim Budget and Full Budget

The key contrast lies in the extent and timeframe. A full budget details the government's financial strategies for the entire fiscal year, covering diverse sectors such as education, healthcare, and infrastructure. On the other hand, an interim budget functions as a temporary solution, addressing the immediate financial needs of the country until a new government devises a comprehensive budget.

The Purpose of an Interim Budget

In election years, the regular budgeting process may encounter disruptions during the power transition. To ensure the seamless continuation of essential services and government operations until the new government takes charge, the outgoing government presents an interim budget.

Key Takeaways:

  1. Timing: Interim Budgets are presented in election years, while full budgets are presented annually.
  2. Duration: Interim Budgets serve a brief purpose, bridging the financial gap until a new government is formed. On the other hand, full budgets provide a comprehensive roadmap for the entire fiscal year.
  3. Function: The Interim Budget serves as a stopgap measure to maintain financial stability during the election transition.