- Date : 01/02/2019
- Read: 5 mins
It is necessary to keep aside adequate funds for the government to run the administration, which is done through a way of vote on account.
The interim budget will be presented on February 1, a day after the budget session of Parliament begins. According to media reports, Piyush Goyal, who has been given the interim charge of the Ministry of Finance and Ministry of Corporate Affairs in the absence of Arun Jaitley, will table the budget. Union minister Arun Jaitley is away in the US for medical treatment.
Reports suggest that the NDA government could deviate from norms to make key announcements relating to farmers, who are angry over low agricultural income under the current dispensation, and also address small and medium businesses and the middle class by raising the tax exemption limit to Rs 5 lakh.
Speculations and reports quoting ‘sources’ indicate that the finance minister, in an address at a function over video link from the US on January 18, had said the upcoming budget was likely to take on issues critical to the economy. “Convention has always been that election year Budget is an interim budget. The larger interest of the nation dictates what will be a part of that interim budget,” he said.
However, at least two former finance ministers – Yashwant Sinha and P Chidambaram – have said it would be ‘unconstitutional’ if the interim budget did not have fresh taxes and new expenditure heads, especially as this was in an election year.
Chidambaram, a UPA finance minister, has said that any move to present a full budget instead of a vote-on-account would be inappropriate, while Sinha, ironically a finance minister in an earlier BJP-led coalition government, talked of constitutional provisions to be followed for a vote-on-account. Both spoke of a vote-on-account, so what is it? Is it not a budget?
What is a vote-on-account?
Sometimes, like now when general elections are round the corner, the Parliament does not have enough time on hand to pass the full annual budget before the new financial year begins on April 1, as it is a long-drawn process. For such situations, it is necessary to keep aside adequate funds for the government to run the administration.
In view of this, the Indian Constitution requires the Central Government to deposit all its revenues and loans that it raises into the Consolidated Fund of India, excluding only the amount that is put into a Contingency Fund. The Consolidated Fund is the government’s source of finances to run the government till such time the Parliament can ratify a full budget.
The government obtains the Parliament’s vote under a special provision for withdrawal of funds from the Consolidated Fund to cover expenses on various items, for a part of the year, till the full annual budget can be passed. This parliamentary sanction is generally known as a vote-on-account.
How is it different from an interim budget?
So, is a vote-on-account the same as an interim budget? No. An interim budget is a complete set of accounts in itself, and specifies both expenditure and receipts. A vote-on-account, on the other hand, addresses only the expenditure side, and presents the estimate of expenditures to be sanctioned by the exchequer till the full budget is passed.
As stated earlier, it is generally tabled between governments (in India) – during the run-up to an election, and is in place till the time the new government tables a full budget for the remaining part of that year. Its main objective is to span the transition period.
Normally, a vote-on-account is in force for two months, but during an election year such as the current year, it may be valid for a period up to six months but not exceeding it; this is the maximum gap allowed between two sittings of Parliament. It is in operation till the full Budget is passed.
If the sole aim of the vote-on-account is to seek approval for funds to navigate the transition period between governments, why not have an interim budget for the same? This is not done for two reasons: first, it is considered improper for an outgoing government to introduce policies that may not be acceptable to the incoming government; and second, it is the new government’s job to formulate ways and means to raise and spend money.
This is why a vote-on-account does not envisage any long-term financial restructuring, or tinker with direct taxes, as in a full budget; it is the latter that introduces new programmes, estimates the public expenditure for the remaining portion of the fiscal year, and announces new taxes and indirect taxes or direct taxation measures such as relief for income tax payers.
Incidentally, the current government’s critics (including Yashwant Sinha) fear this is exactly what is sought to be done via Jaitley’s interim budget, keeping the upcoming parliamentary elections in mind. Ideally, voters should ‘reward’ a government for what it did in the first four years rather than what it did in the last few days; critics fear that is what the Modi-led NDA may attempt to do with the vote-on-account.
So can interim Finance Minister Goyal not make any policy statements while presenting his vote-on-account on February 1? The answer is, of course he can – as long he refrains from making any announcements on taxation and only talks of his plans on economic policy.
For instance, Yashwant Sinha, in an earlier stint as Finance Minister in the Chandra Shekhar ministry, spoke of his government’s plan to divest equity in state undertakings when he tabled a vote-on-account in 1991.
With Budget 2019-2020 around the corner, it is a good idea to arm yourself with these budget terms.