“Sir, I rise to present the Budget of the Central Government for the year 1962-63. The main purpose of this Budget is to place before Parliament an account of the finances of the Central Government for the current year and to obtain from the House a vote on account to meet the expenditure of the Government until the new Parliament considers the Budget again.” (Shri Morarji R. Desai, Minister of Finance, introducing the interim budget for the year 1962-63)
Tomorrow, the union finance minister will present an interim budget for the fiscal year 2024-25. An interim budget is necessitated due to the impending general elections, which ought to be completed by the end of May 2024. The union budget for the current fiscal year 2023-24 authorized the expenses of the union government till 31 March 2024. The incumbent government has the mandate to be in power only till the general elections are completed and a new government is sworn in. It is a convention of parliamentary ethics that the incumbent governments make policies and programs only for the period they are mandated by the electorates to be in power.
Therefore, conventionally, governments have avoided making any policy announcements in the budgets, if general elections are to be held within 2-3 months of the due date for the budget. The finance minister usually seeks a vote on account to get parliamentary sanction for the government expenses to be incurred between the beginning of the new fiscal year (1 April) and the presentation & approval of the normal budget by the newly elected parliament. Though ‘Vote-on-Account’ has been referred to as an “interim budget” by many finance ministers, it may not be the correct description of this exercise.
I considered this introduction necessary to put the discussions and narratives being run in media and markets, in right context. Even industry associations and professionals are making suggestions to the government and fueling speculations about tax reliefs, industry-specific incentives, tax-rate restructurings, etc. The whole narrative appears to be based on assumptions that the incumbent government does not care about the established conventions of parliamentary ethics and it may make populist announcements ahead of the general elections.
These assumptions are based on the breach of convention by Shri Piyush Goyal, the extant finance minister, in the interim budget of 2019. The government announced ₹6,000 direct cash transfer to farmers having up to 2 hectares of land. under Pradhan Mantri Kisan Samman Nidhi; ₹3,000 per month pension after 60 years of age to unorganized sector labor under Pradhan Mantri Shram Yogi Mandhan; hike in the standard deduction for salaried people, and some relief in TDS. These schemes entailed an additional fiscal burden of approximately rupees one trillion.
I would like to consider the 2019 interim budget as an exception rather than a norm. I am therefore not expecting any breach of parliamentary ethics in the 2024 interim budget. I shall watch the interim budget only for two data points –
(i) Fiscal deficit for FY24, considering it was the first complete normal year post-Covid and Ukraine war-led disruptions.
(ii) Nominal GDP projection for FY25, since this is used as a denominator for calculating fiscal deficit as a percentage of GDP; Tax to GDP ratio; corporate profit to GDP ratio, etc.
More on this tomorrow…
No comments:
Post a Comment