Mint analyses the scope of an interim budget and what could be on the agenda for the National Democratic Alliance (NDA)
An interim budget is presented by a government in its last year in office when general elections are due after the start of a fiscal year
New Delhi: Finance minister Arun Jaitley will present the interim budget, the final one by the Narendra Modi government ahead of general election, on 1 February. Mint analyses the scope of an interim budget and what could be on the agenda for the National Democratic Alliance (NDA).
What is an interim budget?
An interim budget is presented by a government in its last year in office when general elections are due after the start of a fiscal. During the transition period for meeting day-today expenses, the government needs the approval of Parliament to draw money from the Consolidated Fund of India, which is where the government puts in all its revenue. While a vote-on-account is an alternative to an interim budget, the latter has full estimates of both revenue and expenditure and can contain policy measures unlike the former, which is only an estimate of expenses required during the transition period.
What are the dos and don’ts in an interim budget?
The incumbent finance minister does not usually announce major tax breaks that could financially burden the next government. But populist sentiment ahead of polls usually gets the better of the minister. P. Chidambaram, while presenting the 2014-15 interim budget for the United Progressive Alliance government, announced the One Rank One Pension scheme for the armed forces. Jaitley later criticized him for providing only ₹ 500 crore under the scheme in his interim budget, a pittance compared to the annual financial implication of the scheme at around ₹ 7,500 crore.
Will an Economic Survey be presented along with the interim budget?
No. The Economic Survey will be published only with the full budget to be presented by the next government sometime in June or July.
Watch: Interim Budget 2019: What to expect from Arun Jaitley
What could be the focus of the interim budget this time?
It could outline the government’s five-year vision if the NDA returns to power. With opposition parties raising issues related to agrarian distress, unemployment and problems faced by small businesses, the government may announce an income support scheme for farmers and the poor. With GST enforcement, a major part of the indirect tax is outside the remit of the interim budget. Whether the government breaks tradition to offer direct tax relief in a poll year remains to be seen.
What are the economic challenges?
Apart from sops the government may announce in the interim budget, analysts will watch how it has managed its finances in the fiscal ending 31 March. With GST collections below estimates and lacklustre disinvestments of public sector enterprises, the government may find it tough to meet the fiscal deficit target of 3.3% of GDP. In the first eight months of this fiscal, the government exhausted 112% of its full-year fiscal deficit target. It may shift a major part of the subsidy burden to the next fiscal to meet the fiscal deficit target.