Finance Minister Arun Jaitley, speaks during the Bloomberg India Economic Forum in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

#BQDebates: What Government Can And Can’t Do In Interim Budget 2019 

With just two weeks to go before the Narendra Modi government tables the last budgetary document of its five-year tenure, speculation is rife whether the government will make any major policy announcement.

Traditionally, in the last budget before the end of a Lok Sabha’s term, the Finance Minister seeks the Parliament’s sanction for expenditure until the next government passes its own Finance Bill.

Can the Finance Minister make any other changes to government policy in this statement? Former Finance Minister Yashwant Sinha offers an unequivocal “no”. Advocates Arvind Datar and Rahul Unnikrishnan point to the distinction between an “interim budget” and a “vote on account”.

Meanwhile, Finance Minister Arun Jaitley, who has presented five union budgets starting July 2014, said that “the larger interest of the economy” always dictates what goes into the interim budget and that can’t be disclosed or discussed at this stage.

‘No Changes In The Income Tax Act’

Yashwant Sinha, Former Finance Minister

How Is An Interim Budget Different From A Full Budget?

It is completely different, in the sense that actually the interim budget is only a vote on account, which means that you present the 12-month expenditure figure taken from last year’s budget, without changes, generally, and then ask Parliament—through the Appropriation Bill—to sanction two or three months of expenditure. In this case, it could be three months until the end of June, because a new government will be sworn in by the end of May. So, they could ask for three months of expenditure.

It could be accompanied by a budget speech, in which the Finance Minister could make some routine announcements. He could also say what this government has done etc. etc. But nothing more than that. I must tell you that I am amazed at the illiteracy of some people in the media, who are saying that this can happen, that can happen.

Let me tell you that the Finance Bill... there is no Finance Bill in an interim budget. And therefore, the Income Tax Act stands as it is.

There can’t be any changes in the Income Tax Act.

I just saw one television channel say that they will amend the Finance Act. All this cannot happen unless the government completely violates the established norms of the Constitution, and the Constitution itself, by introducing a Finance Bill and presenting a full budget.

There is even talk of an Economic Survey to be presented on Jan. 31, which will also be completely unconstitutional because that is the responsibility and privilege of the next government.

Can A Government Announce New Measures In An Interim Budget?

No. There is no new service, which means no new expenditure, as I said, and there is no Finance Bill.

Is This Prohibited By The Constitution Or Only By Precedent?

No. The Constitution provides for a vote on account, and that says that you can approach Parliament to sanction expenditures for a part of the year. That is all.

By convention, it has been established that you will not present a full budget, you will not present an economic survey, you will not include any new service, and there will be no Finance Bill.

‘Interim Budget Offers Policy Room, Vote On Account Doesn’t’

Arvind Datar, Senior Advocate and Rahul Unnikrishnan, Advocate

How Is An Interim Budget Different From A Full Budget?

At the onset, it is important to point out that the Constitution of India does not use the word ‘budget’. Instead, under Article 112, it deals with “Annual Financial Statement”. Under Article 112(1), the President shall, in respect of every financial year, cause to be laid before both the Houses of Parliament, a statement of the estimated receipts and expenditure of the Government of India for that year. This annual financial statement is popularly known as “annual budget” of the Government of India. However, it should also be noted that it does not make any distinction between an “interim budget” and a “full budget”.

There are many parliamentary practices that do not find a place in the text of the Constitution of India but have been followed by successive governments over the years making them “constitutional conventions” that fill up the voids in the Constitution. An interim budget is a good example of such a constitutional convention. In an interim budget, though major policy decisions are not announced, the government would still present the complete set of accounts including for both expenditures and receipts. Ordinarily, the union budget, which comes with a Finance Act, contains several amendments to various legislation.

In the interim budget, the practice is to desist from making any such major changes in the legislative framework because of the imminent general elections.

In short, the main difference between an interim budget and a full budget is that the former will not contain any major policy/legal decisions that would affect the finances/expenditures of the government. Rule 213 of the Rules of Procedure and Conduct of Business in Lok Sabha states that a budget can be presented in two or more parts. When such presentation takes place, each part shall be dealt with in accordance with the rules as if it were the budget. Thus, an interim budget and the full budget that follows it are both treated as “budget” as per the rules governing the conduct of Business of Lok Sabha.

Can A Government Announce New Measures In An Interim Budget?

Nothing stops a government from announcing new measures in an interim budget. However, as pointed out above, ordinarily, and as a matter of convention, new measures are not announced in an interim budget.

If a government wishes to announce major policy decisions through the budget immediately before general elections, nothing stops it from doing so.

What Can and Can’t A Government Announce In An Interim Budget

In my opinion, there are no such limitations on the powers of the government. Such limitations come into force only after the election dates are announced and the model code of conduct comes into force.

If the interim budget is presented before the announcement of dates of the general election, the government is free to announce any policy decisions through it.

What Does The Constitution Say On This? Have Limits Been Set Only By Precedent?

As pointed out above, there are no express prohibitions in the Constitution of India against making major policy changes through an interim budget. On the other hand, if the government chooses to present a “vote on account” instead of an interim budget, there would be clear limitations on the power of the government. Article 116 of the Constitution deals with votes on account, which are grants in advance in respect of the estimated expenditure for a part of any financial year. It is seen that the system of “vote on account” has been borrowed from England. The Government of India Act, 1935 did not contain any provision for a vote on account.

Rule 214 of the Lok Sabha procedures states that a motion for a vote on account shall state the total sum required and the various amounts needed for each ministry, department or item of expenditure which compose that sum shall be stated in a schedule appended to the motion.

Thus, if the government decides to present a vote on account, instead of an interim budget, there is an express prohibition against making any major policy changes.

It should strictly adhere to the Lok Sabha procedures and restrict itself to procuring short-term funding for its immediate expenses.