Everything you should know about Interim Fiscal Budgets in India!

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An interim fiscal budget, often referred to as an interim budget, is a temporary financial plan presented by the government to meet the expenses of the country for a short period until a new full-fledged budget is introduced. In the context of India, an interim budget is typically presented by the ruling government when the tenure of the current government is coming to an end, especially in an election year.

Here’s why interim budgets are significant, particularly in election years:

Continuity of Government Operations: Interim budgets ensure that the government can function smoothly even during the transition period between one government’s term and the next. It allows for the continuation of essential services and government expenditures until a new government is formed and a full budget is passed.
Approval of Essential Expenditures: The interim budget authorizes the government to withdraw funds from the Consolidated Fund of India to meet necessary expenses such as salaries of government employees, ongoing projects, and other essential expenditures. Without an interim budget, the government would lack the legal authority to spend money from the treasury.
Policy Direction: Interim budgets also provide an opportunity for the outgoing government to outline its policy direction and priorities, setting the stage for the incoming government to consider and possibly build upon.
Political Implications: In election years, interim budgets hold significant political weight. They offer the ruling party an opportunity to showcase its achievements and provide sops or incentives to garner public support ahead of elections. It serves as a platform for the government to highlight its accomplishments and address pressing issues.

Now, let's delve into why interim budgets are presented specifically in election years:

Timing: In India, general elections are typically held every five years. As the term of the current government nears its end, presenting an interim budget becomes imperative to ensure the continuity of government functioning until the new government takes charge.
Political Strategy: An interim budget in an election year allows the ruling government to make populist announcements and offer benefits to various segments of the population, potentially influencing voter sentiment in its favor during the upcoming elections.
Public Perception and Impact: Interim budgets are closely watched by citizens, policymakers, and investors alike. The announcements made in the interim budget can have significant implications for the economy, public sentiment, and the outcome of the elections.

CONCLUSION

In conclusion, interim fiscal budgets play a crucial role in maintaining financial stability and government operations during transitional periods, especially in election years. Understanding their significance and implications is essential for informed citizenship and active participation in the democratic process.

About Author

Vinayak Savanur

Founder & CIO at Sukhanidhi Investment Advisors, a SEBI registered equity investment advisory firm. He has nearly a decade of experience in the stock markets and has been a holistic financial planner.