DH Deciphers: Full Budget? Interim Budget? VoA?

DH Deciphers: Full Budget? Interim Budget? VoA?

What’s all this speculation about a routine thing like the Union Budget?

It is routine to present a Union Budget for the coming fiscal, but in an election year, outgoing central governments are expected to present only a Vote on Account (VoA) or, at most, an Interim Budget. The speculation is over whether the Modi government will present a VoA or a full budget.

What is VoA? What’s Interim Budget?

A VoA is a statement of government expenditure for its day-to-day functioning beyond the end of the current financial year on March 31, 2019. The government requests Parliament to allow it to draw money from the Consolidated Fund of India to meet its expenditure until a new government is formed and a full budget is passed. An Interim Budget is a full statement of revenue and expenditure but is not expected to contain any new major proposals.   

Is it mandatory for the government to present only a VoA in view of elections?

It’s not mandatory. It’s an ethical convention for outgoing governments to follow so that they do not burden the new government by announcing sops and spending to woo voters.

So, what’s the signal from the Modi government?

Finance Minister Arun Jaitley has indicated that the government will present an Interim Budget and invoked “the larger national interest” to indicate that there will be major proposals in it. The Finance Ministry’s own daily explainer on twitter is tagged ‘Budget2019’. The government has also gone out of its way to solicit budget recommendations from industry associations. Everything points to a full budget being presented on February 1.

What should we expect from the budget then?

There is plenty of speculation on what all the government is planning to announce in the budget -- raising the income tax exemption limit to Rs 5 lakh; a new scheme of cash transfers to farmers (costing about Rs 70,000 crore); perhaps even a full-blown Universal Basic Income scheme; hike in MNREGA and Ayushman Bharat allocations, etc. Some of it could be done outside the budget. The constraining factor will be the ballooning fiscal deficit, which is already over 120% of the target. But hey, is that more important than winning an election!

Can Parliament stop the government from going overboard with new schemes and sops to woo voters?

Well, this happens in America regularly. In fact, the US Congress has forced the US government to shut down since December 22 by not passing President Trump’s budget appropriation bill -- specifically a proposal to spend $5.7 billion to build a wall on the border with Mexico.  

But the Indian Parliament has never taken on the government of the day. Under Article 266 of the Constitution, the government needs Parliament’s approval to withdraw funds from the Consolidated Fund of India (CFI). Under Article 114(3), the government cannot draw any money from the CFI without Parliament passing an Appropriation Bill. The Appropriation Bill is drawn up after the Lok Sabha discusses the budget proposals. Since the ruling party or coalition always has a majority in the Lok Sabha (and the NDA has a brute majority), the Appropriation Bill sails through it smoothly. The Bill then goes to the Rajya Sabha, where the NDA does not have a majority. But the Rajya Sabha cannot stop the Appropriation Bill, because it is sent as a Money Bill. It has to return the Bill within 14 days, else it is deemed passed by both Houses. It can recommend amendments, but the Lok Sabha can accept or reject them.