5 min read • Published 28 Jan 25
What is Interim Budget? Meaning and Importance
Table of Contents
A temporary fiscal budget presented during the transition of the government is known as an interim budget. It is usually presented during the election year when there are chances of change in government. In order to maintain the continuity, this budget is presented. Despite being temporary, it plays an important role in the country’s overall governance.
However, the interim budget meaning is not restricted to constitutional norms. It is crucial to plan for the overall fund allocation, governance and policies for the upcoming financial year. Understanding its aspects in detail can help individuals evaluate the fiscal setup in the country.
What is Interim Budget?
An interim budget is a temporary financial statement indicating potential expenditures, allocations, policies, and performance of an economy in the upcoming financial year. It differs from the regular budget as after the transition of government, the new authorities may change these aspects.
After this interim budget, a union budget is presented and followed for the rest of the financial year. In India, the union budget is presented on February 1 every year. Therefore, in the general election year, the interim budget is presented on this day, and the union budget is presented after the election.
Key Features
The interim budget is not a frequent event in the country. Some of its unique characteristics are as follows:
- Temporary – After the interim budget, a final union budget is presented. The announcements in this budget can be changed in the union budget.
- Applicability tenure – It is applicable from the announcement to the final presentation of the union budget. The concerned government presents if any announcement from the interim budget is to continue.
- Focus on low-intensity policies – Due to its short duration and possibility of changes, this budget is made with extreme care as it can affect the overall governance setup. The policies are designed such that it catalyses the current process without making major changes.
- Vote of account – It is a bill passed during the budget by the existing government to withdraw an amount from the funds for its operation up to the start of the next financial year.
How is the Interim Budget Different from the Regular Budget?
The main difference between the interim and union budgets is as follows:
| Point of Difference | Interim Budget | Union Budget |
| Meaning | It is a temporary annual statement, announced in the year of a government transition like a general election. | It is an annual financial statement that announces data regarding past performance, allocations, policies and estimations. |
| Frequency | It is announced only in the years of government transition, like general national elections. | It is an annual permanent event for the country. |
| Changes | No major change in policies are observed due to its temporary nature. | Its changes are implemented for the next financial year. |
| Applicability | It is valid only till the announcement of the union budget. | It is valid for the next financial year and policies continue till they are changed or results are achieved. |
Significance of Interim Budget
Understanding what an interim budget is may not help individuals determine its necessity in a broad view. The interim budget is crucial because:
- It helps maintain continuity in the economy, as even a minor stoppage can have a potential impact.
- General elections can hinder the budget cycle, which is reduced by the interim budget.
- The existing government seeks approval from the parliament members (by vote of account) to withdraw some funds for expenses up to the new financial year.
- It acts as a shield against the volatility during the transition period.
Interim Budget 2024 in India
The last interim budget was presented in India on February 1, 2024, as 2024 was the general election year. It was the 15th interim budget in India. After this, the union budget was presented on July 23, 2024. Due to no change in the central government, many announcements were continued in the later budget. Moreover, tax norms for FY 2025 were made applicable from July 23, 2024. Overall, many policies were kept unchanged in the final budget.
Pros and Cons
Analysing the benefits and drawbacks of an interim budget can help individuals understand its overall impact on the economy.
| Pros | Cons |
| Provides continuity for economic stability. | This budget has limited scope in terms of new initiatives. |
| It helps governments transit smoothly in crucial periods, without adversely affecting the economy. | There can be uncertainties regarding upcoming financial policies. |
Individuals can get a rough idea of how the economy is expected to function in the next financial year.
Conclusion
An interim budget is a crucial financial announcement regarding probable allocations, performance estimations, policies, etc. It is announced during the year of government transition to facilitate continuity in the governance. After this, the union budget is announced. In India, 15 interim budgets have been presented since independence. Budgets crucially affect the economy, and individuals should understand its aspects in detail.
Are you willing to stay updated about such crucial aspects? Log in to PowerUp Money or download its financial management app today!
Q: When is the interim budget presented in India?
Usually, when the government is transitioning, the interim budget is presented. Therefore, in the general election years, it is presented on February 1. Apart from this, it depends on the situation.
Q: Are interim budget policies final for the upcoming financial year?
No, interim budget policies are temporarily implemented up to the final or union budget. The government in charge may continue the same or implement new policies. Only the policies in the union budget are final for the next financial year.
Q: What is the vote of account?
In the budget, the functional government presents a bill regarding the estimated amount to be withdrawn from the country’s reserves for overall management up to the next financial year. This bill is known as a vote of account, which is then passed by the parliament members.
Q: What is the budget deficit?
The excess of expenses over the income is known as the state of deficit. Therefore, when the government spends more than its income, it is a budget deficit.
Q: How can the interim budget affect the salaried class?
No significant changes are introduced in the interim budget. Therefore, it does not affect the taxation or its slabs to affect the salaries class income. However, introduction or change of a general policy may have a low-to-moderate effect on the salaried class.
