Accounting Training

Blog

Blog Archive


2014

Economy Updates – Jan-2014

Interim Budget and Vote on Account

  • This year, there won’t be an annual full length budget but there will be a Vote on Account popularly known as interim budget.

Need For Budget

  • It is not that the Government can tax, borrow and spend money the way it likes, since there is a limit to the resources. An annual budget is an exercise through which the government puts forth provisions to raise money and spend money. In doing that, it seeks the parliament’s approval to spend the requisite amount of money. The Parliament then Votes for or against the proposals and the finance bill gets passed. This whole process begins on 28th Feb When the Finance Minister makes the budget speech and goes on till 31st March, When the bill is passed in the parliament.

Vote On Account

  • It is essential that all the stages of the debate on the budget presented to Parliament are completed before March 31, as in India Financial year ends on 31st day of March.
  • However, in a democratic set-up, Government is anxious to give parliament full opportunity to discuss the budgetary provision and the various proposals for taxation and hence, the whole process beginning with the presentation of the Budget and ending with discussions and voting on the Demands for Grants requires sufficiently long time.

  • The Indian Constitution says that all revenues received by the Union government and the loans raised by it are to be put into the Consolidated fund of India.
  • All expenditure of Government is incurred from the Consolidated Fund of India and no amount can be drawn from the Consolidated Fund without authorization from parliament.
  • Since Parliament is not able to Vote the entire budget before the commencement of the new financial year, the necessity to keep enough money at the disposal of Government in order to allow it to run the administration of the country. A special provision is, therefore, made for Vote on Account by which Government obtains the Vote of Parliament for a sum sufficient to incur expenditure on various items for a part of the year.
  • The Vote on Account is obtained from Parliament through an Appropriation (Vote on Account) Bill. The Convention is that such a Vote-on-account is accepted in Parliament without division.
Why Vote on Account this year?
  • This year General Election will be held in the month of April or may. Hence, Parliament will not have enough time to vote the entire budget.
  • This ruling government will present a shorter version of the Budget and will have Vote on account.
    A few months after the elections, the new government will take charge and present a budget for the rest of the financial year.
Interim Budget
  • Though Vote on Account is popularly known as interim budget but both are different. 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.
  • The interim budget will include a report card on the income and expenses made last year and the proposed expenses likely to be made in the next few months until the new government takes over. Through the interim budget, Parliament passes a Vote-on-account that allows the government to meet the expenses of the administration until the new Parliament considers and passes the budget for the whole year. But a full Budget just the elections make a mockery of the whole exercise.
  • Further, during an election year it is not practical for the ruling government to prepare or debate on the full budget and pass it before the new financial year begins. Further, it is regarded improper for an outgoing government to impose on its successor changes that may or may not be acceptable to the incoming government.
  • Hence, the outgoing government would announce an interim budget or Vote on account in February which will be followed by a full budget by the new government in a few months time after the elections.
Financial Management