News Excerpt:

Ahead of the 2024 general elections, the government is preparing to present its second interim budget on February 1.

• The Finance Minister will seek Parliament’s approval for the government’s expenditure for the first four months of this fiscal year as India is likely to go to polls in April-May this year.

Vote on Account and the Interim Budget:

• An interim budget contains both the revenue and expenditure details for the period until the new government takes over and presents a full budget. On the other hand, a vote on account includes only the government’s expenditures.
• Article 116 of the Constitution allows the Lok Sabha to make any grant in advance for the estimated expenditure for part of any financial year by voting and passing such a legislation, i.e. vote on account. The Lok Sabha is empowered to authorise withdrawal of required funds from the Consolidated Fund of India for such expenditure.
• A simple vote on account includes presenting the Centre’s fund requirements for salaries, ongoing projects and other expenditure for the transitional period, and is then passed via the Lok Sabha sans debate. It cannot make any changes to tax rates. It is also valid only for two months and can be extended up to four months.
•  However, it has been the trend for outgoing governments to present an interim budget instead of a simple vote on account.
• The interim budget is a 'stop-gap' arrangement presented in election years.
• In an interim budget, the Finance Minister will present the current state of the Indian economy, its fiscal status including India’s revised estimated growth in the next year (here FY’25 from April 2024-March 2025).

Reasons for presenting an Interim Budget:

• Constitutional Mandate under Article 112: As per Article 112 of the Indian Constitution, a statement of the estimated receipts and expenditure of the Government of India for a specific financial year— referred to as ‘annual financial statement’ — is laid before both Houses of Parliament.
• Approval Process in Both Houses: The Centre seeks both Houses’ approval to withdraw the necessary funds from the Consolidated Fund of India; this statement has to be passed by both Houses.
•  However, in an election year, the incumbent Government cannot present a full Budget as there may be a change in the executive after the polls. Hence, the need for an interim budget.
• Absence of Constitutional Provision for Interim Budget: As there is no constitutional provision for an interim budget, the Centre can choose to seek the Lower House’s approval for the funds required for the transition period (April - July) till the new government presents a full Budget— via the votes on account provision. 

Difference between an Interim budget and the Union Budget

• The Interim Budget is a temporary financial plan announced before a new government is set to come in after general elections. It can be understood as a provisional arrangement to meet the expenditure of the government for a short period till the new government comes in and makes the new full budget. 
• The full-year Union Budget is a comprehensive financial plan to cover all the aspects of government spending, revenue generation, policy reforms and more for an entire fiscal year.
•  An Interim Budget allocates funds for essential government operations, ongoing schemes and urgent requirements. Since it is not a budget for a full year, it refrains from policy reforms. 
• The Interim Budget also has lesser scrutiny and debate in the Parliament. Only approval for necessary expenditure if sought until the new government presents a comprehensive budget. 
•  The Union Budget takes into account all the revenues and expenditures, introduces new policies, schemes and reforms aimed at economic and social growth, as well as undergoes a strict examination and discussion in the Parliament. 

Prelims PYQ

Q. What is the difference between "vote- on-account" and "interim budget”? (UPSC 2011)

1) The provision of a "vote-on- account" is used by a regular Government, while an "interim budget" is a provision used by a caretaker Government.

2) A "vote-an-account" only deals with the expenditure in the Government's budget, while an "interim budget" includes both expenditure and receipts.

Which of the statements given above is/ are correct?

(a) 1 only

(b) 2 only

(c) Both land 2

(d) Neither 1 or 2