What is Budget?
The Union Budget of India, also referred to as the Annual Financial Statement in the Article 112 of the Constitution of India, is the annual budget of the Republic of India. The Government presents it on the first day of February so that it could be materialized before the commencement of new financial year in April. Till 2016 it was presented on the last working day of February by the Finance Minister of India in Parliament. The budget, which is presented by means of the Finance bill and the Appropriation bill has to be passed by both the Houses before it can come into effect from April 1, the start of India’s financial year.
What is an interim budget?
An interim budget is the budget of a regime or administration that is going through a period of transition. It is very much similar to a full budget as the government presents expenses for the current fiscal and makes projections for the upcoming fiscal year through it. An interim budget is also a detailed set of accounts that includes expenditure and receipts and also the complete financial statement.
When is an interim budget presented?
The government presents an interim budget if it does not have time to present a full Budget or if the general elections may be in the near future. So usually, in an election year, the outgoing government presents an interim budget and the task of framing the full budget is left for the next government.
Why do we need an interim budget?
The government needs Interim Budget to work during the time it takes for a new government to make its own fiscal plan. The budget for the year permitted by Parliament gives the government spending rights only till 31st March i.e. end of the financial year.
If for any reason the government is unable to present a full budget before the fiscal year ends, it will require parliamentary authority for incurring expenses in the new financial year until a full Budget is presented. The Parliament, via interim Budget, passes a vote-on-account that permits the government to meet the expenses of the government until the new Parliament passes the Budget for the whole year.
What is the difference between interim and regular budget?
In an interim budget, the vote-on-account asks for Parliament’s approval for incurring expenditure for part of a financial year. The estimates are presented for the whole year, as is the case with the regular Budget. The new administration has the full right to change the estimates fully when the final Budget is presented.
Can the government declare new taxes and policies?
The government can make changes in tax in the interim budget under the Constitution. The 12 interim budgets since India’s Independence have refrained from declaring big-ticket changes or new schemes.
At the same time, numerous governments, including the Congress-led UPA in 2009, have not shied away from making policy statements in interim budgets.
Difference between Interim Budget and Vote on Account
An Interim Budget is not the same as a ‘Vote on Account’. While a ‘Vote on Account’ deals only with the expenditure side of the government’s budget, an Interim Budget is a complete set of accounts, including both expenditure and receipts.
Highlights of interim Budget 2019-20
1. Pradhan Mantri KIsan SAmman Nidhi
New Scheme- namely “Pradhan Mantri KIsan SAmman Nidhi (PM-KISAN)” to extend direct income support at the rate of Rs. 6,000 per year to farmer families, having cultivable land upto 2 hectares is announced. The estimated outlay for the scheme is Rs.75,000 crore.
Under this Government of India funded Scheme, Rs.2,000 each will be transferred to the bank accounts of around 12 crore Small and Marginal farmer families, in three equal installments. This programme would be made effective from 1st December 2018 and the first installment for the period upto 31st March 2019 would be paid during this year itself.
2. Separate Department of Fisheries
To provide sustained and focused attention towards development of Fisheries, the Government has decided to create a separate Department of Fisheries. Finance Minister said that through the measure, the Government wants to promote further growth over 7% to promote livelihood of about 1.45 crore people dependent on the sector.
3.The Finance Minister announced 2% interest subvention to the farmers pursuing the activities of animal husbandry and fisheries, who avail loan through Kisan Credit Card. Further, in case of timely repayment of loan, they will also get an additional 3% interest subvention.
4. Rashtriya Kamdhenu Aayog
Setting up of “Rashtriya Kamdhenu Aayog” to upscale sustainable genetic upgradation of cow resources and to enhance production and productivity of cows has also been announced. The Aayog will also look after effective implementation of laws and welfare schemes for cow.
5. Pradhan Mantri Shram-Yogi Maandhan
To provide pensionary benefits to at least 10 crore labourers and workers in the unorganised sector a new Scheme called ‘Pradhan Mantri Shram-Yogi Maandhan’ is announced. The Finance Minister said that within next five years it would be one of the largest pension schemes of the world. A sum of Rs.500 crore has been allocated for the Scheme. Additional funds will be provided as needed, Shri Goyal added. The scheme will also be implemented from the current year, he said.
1. Individual taxpayers having taxable annual income up to Rs.5 lakhs will not be required to pay any income tax. Tax benefit of Rs. 18,500 crore is proposed to be provided to an estimated 3 crore middle class and small taxpayers comprising self employed, small business, small traders, salary earners, pensioners and senior citizens.
2. For salaried persons, Standard Deduction is being raised from the current Rs.40,000 to Rs.50,000. This will provide additional tax benefit of Rs. 4,700 crore to more than 3 crore salary earners and pensioners.
3. Exemption on levy of income tax on notional rent on a second self-occupied house is also now proposed. Currently, income tax on notional rent is payable if one has more than one self-occupied house.
4. TDS threshold on interest earned on bank/post office deposits is being raised from Rs.10,000 to Rs.40,000.
5. TDS threshold for deduction of tax on rent is proposed to be increased from Rs. 1,80,000 to Rs.2,40,000 for providing relief to small taxpaye
The Finance Minister said that the Government has been successful in bringing down average inflation to 4.6% over last five years, which is lower than the inflation during the tenure of any other Government. In fact Inflation in December 2018 was down to 2.19% only. The average rate of inflation during previous five years 2009-2014 was a backbreaking 10.1%, he pointed out.
The fiscal deficit has been brought down to 3.4% in 2018-19 Revised Estimates from the high of almost 6% seven years ago, the Finance Minister mentioned. He said, the Current Account Deficit (CAD), against a high of 5.6% six years ago, is likely to be only 2.5% of GDP this year.
Enhanced allocations for major Schemes
1. Announcing an allocation of Rs.60,000 crores for MGNREGA for Budget Estimates 2019-20, the Finance Minister said that additional allocations will be made, if required.
2. Pradhan Mantri Gram Sadak Yojana (PMGSY) is being allocated Rs.19,000 crore in BE 2019-20 as against Rs.15,500 crore in RE 2018-19. During the period 2014-18, a total number of 1.53 crore houses have been built under the Pradhan Mantri Awas Yojana, he announced.
3. By March, 2019, all households will be provided with electricity connection. Till now, 143 crore LED bulbs have been provided in a mission mode which has resulted in saving of Rs.50,000 crore for the poor and middle class.
4. He said through the world’s largest healthcare programme, Ayushman Bharat, to provide medical treatment to nearly 50 crore people in the country, around 10 lakh patients have already benefited through free treatment for medical treatment which would have otherwise cost them Rs. 3,000 crore. Lakhs of poor and middle class people are also benefiting from reduction in the prices of essential medicines, cardiac stents and knee implants, and availability of medicines at affordable prices through Pradhan Mantri Jan Aushadhi Kendras, the Finance Minister added.
5. Shri Goyal also said that 14 of the 21 AIIMS operating or being established in the country presently have been announced since 2014. He also announced setting up of a new – the 22nd AIIMS in Haryana.
6. Allocation for Integrated Child Development Scheme (ICDS) is being increased from Rs.23,357 crore in RE 2018-19 to Rs.27,584 crore in BE 2019-20.
7. A substantial increase is proposed in the allocation for welfare of the Scheduled Castes and Scheduled Tribes. The allocation of Rs.56,619 crore made in BE of 2018-19 for Scheduled Caste, further increased to Rs.62,474 crore in RE is proposed to be enhanced to Rs.76,801 crore in BE for 2019-20, an increase of 35.6% over BE of 2018-19. For the Scheduled Tribes also, proposed allocation in 2019-20 BE is Rs.50,086 crore as against Rs.39,135 crore in BE 2018-19, an increase of 28%.
8. The Finance Minister said that a Welfare Development Board to frame special strategies for the benefit of the hard-to-reach De-notified, Nomadic and Semi-Nomadic communities will be set up under the Ministry of Social Justice and Empowerment. He said that a Committee under NITI Aayog will also be set up to complete the task of identifying De-notified, Nomadic and Semi-Nomadic communities not yet formally classified.
9. Shri Goyal said under the Ujjwala Yojana aiming delivery of 8 crore free LPG connections, more than 6 crore connections have already been given and the remaining will get free gas connections by next year.
10. The Finance Minister announced that a National Artificial Intelligence Portal will also be developed soon as a part of the National Programme on ‘Artificial Intelligence’.
11. The Department of Industrial Policy and Promotion will now be renamed as the Department for Promotion of Industries and Internal Trade.
12. The Finance Minister stated that the Government e-Marketplace (GeM), created by the present Government two years ago, resulted in average savings of 25-28% and the platform will now be extended to all CPSEs. Transactions of over Rs. 17,500 crore have taken place so far.
13. The Finance Minister announced that for the first time, the country’s Defence Budget will be of over Rs.3 lakh crore.
14. The Finance Minister, Shri Piyush Goyal pointed-out that domestic air traffic passengers have doubled during the last five years, leading to large number of jobs also being created. The number of operational airports has crossed 100 with the commissioning of the Pakyong airport in Sikkim. Arunachal Pradesh came on the air map recently and Meghalaya, Tripura and Mizoram have come on India’s rail map for the first time.
15. Capital support from the budget for Indian Railways is proposed at Rs.64,587 crore in 2019-20 (BE). The Railways’ overall capital expenditure programme is of Rs. 1,58,658 crore. The Finance Minister, who is also holding the portfolio of Railway Ministry, announced that the Operating Ratio is expected to improve from 98.4% in 2017-18 to 96.2% in 2018-19 (RE) and further to 95% in 2019-20 (BE).
16. In all the total expenditure is to increase from Rs.24,57,235 crore in 2018-19 RE to Rs.27,84,200 crore in 2019-20 BE. A rise of Rs.3,26,965 crore or approximately 13.30%. This reflects a high increase considering low inflation. The fiscal deficit of year 2019-20 is estimated to be 3.4% of GDP.
17.The Finance Minister pointed out that after completion of the fiscal deficit consolidation programme, the Government would now focus on Debt consolidation. He said “We have maintained the glide path towards our target of 3% of fiscal deficit to be achieved by 2020-21. India’s Debt to GDP ratio was 46.5% in year 2017-18. The FRBM Act prescribes that the Debt to GDP ratio of the Government of India should be brought down to 40% by 2024-25. “Along with completion of the fiscal deficit consolidation programme, we will now focus on Debt consolidation”, he added.
(Source: Medium Term Fiscal Policy cum Fiscal Policy Strategy Statement)