Budget 2024: Understanding India's Two Budgets

When is Budget 2024?

The exact date of Budget 2024 remains unknown, with discussions ongoing about whether to have one or two budget sessions. The government may opt to split the session into two parts: a motion of thanks and a budget presentation in the latter half. This uncertainty highlights the unique fiscal scenario India faces this year, with two budgets being presented due to the general elections.

Two Budgets in One Year

In February, Finance Minister Nirmala Sitaraman presented an Interim Budget, adhering to tradition by doing so on February 1. This was the last budget of the BJP government elected in 2019 without the support of NDA allies. The February Interim Budget was kept concise, with no Economic Survey and no major decisions, serving as a temporary measure until the elections.

Why Two Budgets?

In election years, the incumbent government cannot present a comprehensive budget before the general election. Therefore, the finance minister presents an interim budget to cover government expenses until a new administration takes office. This interim budget, presented on February 1, serves as a financial statement to fund operations until the new government assumes power, ensuring continuity without making significant policy pronouncements or revisions.

Interim Budget

Purpose: The Interim Budget is a temporary financial statement used to fund government operations until a new administration is established post-elections.

Content: It focuses on essential expenditures and allocations, avoiding major policy changes or long-term economic strategies.

Approval: Parliament can pass it without a formal debate, primarily enabling the government to withdraw funds from the Consolidated Fund of India to cover expenses from April to July.

Example: On February 1, 2024, Finance Minister Nirmala Sitaraman presented the Interim Budget, which included no significant policy announcements or changes to tax structures.

Full Budget

Purpose: The Full Budget is a comprehensive financial plan for the entire fiscal year, reflecting the new government’s economic policies and goals.

Content: It details revenue sources, planned expenditures across sectors such as education, healthcare, infrastructure, and defence, and includes new policies, schemes, and reforms aimed at driving economic growth.

Approval: The Full Budget is scrutinised and debated by both Houses of Parliament, allowing modifications before final approval. It remains valid until the end of the financial year on March 31.

Upcoming Presentation: The Full Budget for the fiscal year 2024-25 will be presented in July 2024 by Nirmala Sitaraman, marking her seventh consecutive budget presentation.

Key Differences:

- Scope: The Interim Budget addresses short-term needs, while the Full Budget outlines a long-term economic strategy.

- Duration: The Interim Budget is temporary, lasting until the new government’s Full Budget is approved. The Full Budget is valid for the entire fiscal year.

- Content: The Interim Budget avoids major policies, while the Full Budget includes detailed economic plans and policy measures.

Expectations for the Full Budget 2024

Economists and analysts anticipate that the July 2024 Full Budget will provide further policy clarity and outline the government’s 100-day plan. Key focus areas might include technological advancements, particularly in AI, to maintain India's competitive edge in the IT sector, which significantly contributes to the GDP.

Historical Context

- Change in Tradition: In 2017, the budget presentation date was moved from the last working day of February to February 1.

- Notable Figures: Nirmala Sitaraman follows the legacy of finance ministers like Morarji Desai, Arun Jaitley, and others who have significantly shaped India's budgetary processes.

Looking Ahead

Garima Kapoor, Senior Vice President, Economist at Elara Securities, suggests that the final Budget in July 2024 will offer further policy clarity and direction for growth. Key risks to India’s growth outlook include potential global economic slowdowns, delayed rate cuts in the US, and volatile food inflation. DD Mishra, VP Analyst at Gartner, emphasises the need for policies that accelerate AI growth to protect India’s unique position in the IT sector, which accounts for 7-8% of the GDP.

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