Budget 2026: All about an interim budget, why it matters, what are its advantages and limitations

With the Union Budget 2026 for the financial year 2026–27 scheduled to be presented in Parliament on Sunday, 1st February 2026 at 11 AM, focus also shifts to how the government manages finances during periods of transition. An interim budget serves as a temporary financial plan, ensuring that essential services, salaries, subsidies, and ongoing programs continue smoothly until the full Union Budget is rolled out.

What is an interim budget?

An interim budget is presented when there isn’t enough time to prepare a full annual budget, usually during an election year or when a new government is about to assume office. It is a temporary financial plan that helps manage income and expenditure for a short period. Unlike a regular budget, it does not include major policy changes, new taxes, or large initiatives. Its main purpose is to ensure continuity in government operations and maintain stability in essential programs and public services.

It allows the outgoing government to present revenue estimates and planned expenditure for core areas like salaries, pensions, subsidies, and interest on loans, while leaving room for the incoming government to introduce changes in the full Budget. Essentially, it acts as a bridge between two governments or between the end of a financial year and the preparation of a full budget.

When is an interim budget presented?

An interim budget is generally presented when:

• There is a transition between governments, especially in an election year.
• A new government is about to take charge, or more time is needed for the full budget.
• Essential services and administrative functions require uninterrupted financing.
• Short-term economic or political developments demand financial continuity.

By presenting an interim budget, the government ensures that funds remain available for salaries, pensions, subsidies, and welfare schemes without disruption.

Advantages of an interim budget:

1. Supports continuity in government operations and economic stability.
2. Helps manage essential expenses smoothly.
3. Provides citizens and stakeholders with a preliminary view of government finances, aiding short-term planning.

Limitations of an interim budget:

1. Scope is limited, with no major policy reforms or new initiatives.
2. Can create uncertainty about future financial priorities.
3. Decisions are temporary and may be revised by the incoming government.
4. Major projects or new schemes are deferred until the full budget.