Things To Know About Interim Budgets

Unlike the last few years, the 2019 budget is going to be an interim budget instead of a full budget.

What Is An Interim Budget?

An interim budget is a temporary budget announced in the run up to a general election. The government presents this budget during the election year to meet its various expenses until the new government is formed. After the election results are announced, the incoming government announces a full budget during the month of July. With only a few months remaining before the NDA government’s term ends, the Finance Ministry is set to announce an interim budget on 1 February. And with the current Finance Minister Arun Jaitley on medical leave in the US, the budget would be presented by railway and coal minister Piyush Goyal who was given a temporary charge of the Finance Ministry.

• How Is It Different From A Full Budget?

A full budget details out the receipts and expenditure of the government for a period of 12 months, i.e. the financial year. But an interim budget presents only the government’s income and expenses for a period of 2-4 months. In a full budget, the government presents its budget for the year and asks approval from the Parliament. This is because the government has to seek approval from the Parliament to withdraw any amount from the Consolidated Fund of India. The Indian Parliament approves the budget and confers spending rights on the government for the entire financial year. But in the case of an interim budget, the government obtains a vote from the Parliament to withdraw a certain amount to meet its expenses until the full budget is passed.

• Expectations From The Interim Budget

The government can constitutionally make tax related changes during the interim budget but none of the 12 outgoing governments chose the option since Independence. And while there were talks of a full budget presentation for 2019, the government ultimately opted for the interim budget. This is due to the fact that the government acts as a custodian for the last few months. It avoids major tax reforms and does not introduce any new policies or schemes.

However, fiscal consolidation could be in focus during the interim budget. Government revenues experienced a shortfall of nearly Rs. 1.4 lakh crore due to low GST collections in FY19. The government could possibly amend the rules to use unutilized portion of the compensation cess fund in addition to an aggressive rollover of FY19 expenditure to consolidate fiscal deficit.

• Potential Relief For Farmers

In a surprise move, the Finance Minister Arun Jaitley during a recent interview hinted at a relief package for famers as part of the Interim budget. The farm sector is overwhelmed by problems such as overemployment, limited warehousing facilities, inadequate public investment and fragmentation of land holdings. And record productions in the recent times have only complicated the matter further because of low crop prices and income for farmers. While not divulging many details, he said that the budget could address the challenges faced by farmers while working within the parameters of the interim budget. Depending on the scheme and coverage the fiscal cost could be around 0.4-0.8% of the GDP according to a report by Kotak Institutional Equities.

Read More

• Possible relief package for farmers Read more

• What to expect from interim budget 2019 Read more

Also Read:

• 5 things to do when markets turn volatile

• Stock Recommendations for you