Interim Budget 2024: Explaining The Reasons Behind India's Temporary Financial Plan

Finance Minister Nirmala Sitharaman is gearing up to present her 6th consecutive budget next month, outlining the concluding fiscal roadmap for the BJP-led government in this term. The upcoming general elections are adding a layer of elation to this year's budget outlook. However, this year's budget will initially take the form of an interim budget, resembling a Vote on Account.

A Vote on Account is a pre-allocated fund from the Consolidated Fund of India, provided in advance to the government to meet short-term expenditure needs.

In the transition period of an outgoing government, either an interim budget is presented, or a request for a Vote on Account is made. The subsequent administration will be tasked with presenting the complete budget. It's important to note that a Vote on Account does not have any influence on the existing tax structure. While an interim budget has the authority to suggest modifications to the tax system, a vote-on-account, under any circumstances, lacks the capacity to alter the existing tax regime.

What is an Interim Budget?

As elections draw near, it is not possible for the government to announce a full-fledged budget. Instead, an interim budget is presented, acting as a transitional financial plan for the remaining months in power. Upon the arrival of the new government, it has the flexibility to either endorse or modify the projections according to its discretion.

An interim Budget undergoes discourse and approval in the Lok Sabha. However, in the case of a vote-on-account, it receives approval without undergoing any formal discussion.

What this fiscal year will be witnessing?

Last year, during the Global Economic Policy Forum 2023 in New Delhi, the Finance Minister conveyed, "I don’t want to be a spoilsport, but the February 1st Budget is essentially a vote on account; a budget to meet expenditure till the next government comes to power. No spectacular announcements, you will have to wait till after the general election."

However, amid the prevailing anticipation surrounding elections, there might be unforeseen surprises. Despite India's optimistic outlook for this year, the persistent elevation in retail inflation cannot be overlooked, given that the figures continue to surpass the upper limit set by the RBI.