Can a Government Make Changes in Interim Budget after Getting Elected?

The recent interim budget presented by Finance Minister Piyush Goyal on February 1, 2019, marks an important but often complex milestone in India's economic calendar. Understanding the nuances of this document, particularly in comparison to the full budget, is crucial for staying informed and engaged with national economic policy. Let's delve into what an interim budget is, how it differs from a full budget, and whether a newly-elected government can make significant changes to it.

Understanding the Union Budget and Interim Budget

The Union budget, also known as the national budget, is a document that outlines the government's expenditure and receipts for the upcoming fiscal year. It is mandatory for this document to be displayed by the government according to Article 112 of the Constitution. The complete budget statement is a key element of the government's financial plan and must be presented before the parliament to be ratified by the time period for which it is prepared. Any spending without this approval is not legally permissible.

On the other hand, the interim budget is a more flexible version that is typically presented in the last year of the incumbent government’s term. This budget serves as a bridging document, displaying budget estimates for the fiscal year until the full budget can be presented and approved by the incoming government. If the existing government is re-elected, it can seek approval to present a full budget. However, if the government changes due to new elections, the new administration can either accept the interim budget as is, make minor adjustments, or propose a completely new budget for the full fiscal year.

Interim Budget Details and Practices

Since no significant policy changes have been made in the previous twelve interim budgets, former finance minister Yashwant Sinha emphasized that the current government should avoid deviating too much from the established practices. The Union financial ministry has clarified that any spending during this period is labeled as an interim budget, despite ongoing media speculation that a full budget might be presented. Union finance minister Arun Jaitley stated that the decision to present a full budget or continue with an interim one hinges on pressing financial issues.

Sinha, who has presented seven budgets, also mentioned the government's legal restrictions. If an interim budget is presented, the government is only authorized to prepare a budget plan for a part of the year. In the context, he highlighted that an interim budget is most often presented when the government does not have time for a full budget or if elections are imminent. Historically, in election years, the current government typically presents an interim budget, while the forthcoming government is responsible for the final budget formulation.

Upcoming Changes and Policy Shifts

With general elections expected in April-May, the incumbent government is considering making provisions for cheap loans and free accidental insurance for businesses, which were significantly affected by the 2016 demonetization drive. Additionally, the GST Council has increased the exemption threshold for businesses from Rs 20 lakh to Rs 40 lakh, and the limit for qualification under the GST Composition Scheme has been raised to Rs 1.5 crore from Rs 1 crore, to take effect from April 1, 2019.

Investment expert Ashok Desai, who served as Chief Consultant to the Finance Ministry from 1991 to 1993, noted that the incumbent government cannot introduce significant changes or tax proposals through an interim budget. However, some governments, including those led by the Congress, have not hesitated to make policy announcements in interim budgets.

Conclusion

Understanding the difference between an interim budget and a full budget is crucial for comprehending the economic policies in place, particularly in the context of elections and changes in government. Whether a newly-elected government can make significant changes in an interim budget depends on the specific time frame and financial planning required for the next fiscal year. As always, staying informed and engaged with the economy is key to gauging the effectiveness of these policies.