The Union budget is perhaps the most important annual document which articulates the direction, concerns and special interests of the government of the day. It provides the context in which the decisions have been made and proposals that reflect the multiple interests any government caters to.
As a first draft of independent India’s economic history, finance ministers’ budget speeches are perhaps unmatched. They capture the prevailing mood of the time and show how the broad aims of governments have remained almost unchanged for decades, while the manner in which changewas sought to be brought about was tailored to prevailing ideas.
Indira Gandhi’s budget speech almost 30 years ago broadly had growth and fairer distribution as key concerns, issues which still remain. Taxation policy, her primary tool to equalize income across societies,was used in an entirely different way with the passage of time.
A sample of some of the more important budget speeches over the last three decades and their backdrop are being presented here to provide a sense of the country’s economic concerns and the measures used to tackle them.
Indira Gandhi presents the budget on 28 February 1970 against the backdrop of bank nationalization begun in the previous year
Banking reforms: Former prime minister Indira Gandhi
• The broad thrust of proposals aimed to drive growth and reduce income disparity. The proposals used tax as a tool to raise revenue, reduce disparity and also limit consumption of handpicked commodities.
• “Any severance of the vital link between the needs of growth and of distributive justice will produce stagnation and instability.”
• The budget speech highlighted moves such as bank nationalization and the Monopolies Act as measures to achieve the twin goals of growth and social justice.
• The budget speech identified taxation as a tool to equalize income and wealth. Tax incidence on higher levels of income was enhanced, tax on wealth and gifts increased and taxation of urban land and buildings raised to “restrain speculative increases in urban land values and individual holdings of urban property”.
• The peak income rate was 93.5% for income exceeding Rs2 lakh.
• Excise duty on air conditioners was raised from 40% to 53.75%.
• Tax was used to check domestic consumption of tea to release larger quantities for export.
Focus on deficit: Pranab Mukherjee reviewing the budget.
Pranab Mukherjee presents the budget on 28 February 1982, after India signed an agreement with IMF for a $5 billion loan
• Balance of payments (BoP) to be stabilized through increase in domestic production of petrol, fertilizers and steel.
• “My major concern is to keep the budgetary deficit as low as feasible.”
• Policy framework designed to boost saving and investment.
V.P. Singh presents the budget on 16 March 1985 on the heels of an improvement in the economy. India had voluntarily terminated its agreement with IMF in May 1984
Delicensing moves: V.P. Singh in Parliament.
• Trend of nonPlan expenditure growth outstripping current revenue growth flagged as concern.
• A shortlist of industries to be identified for delicensing.
• Measures to deepen stock market announced.
• Legislation promised to allow companies to contribute to political parties.
• BIFR proposed to deal with sick industrial units.
• Promises to formulate longterm fiscal policy.
Manmohan Singh presents the budget on 24 july 1991 in the wake of a balance of payments crisis and double digit inflation
Begining reforms: Manmohan Singh giving an interview after presenting the budget on 24 July 1991.
• Solution has to be essential reforms in policy and management.
• Majority foreign ownership allowed in select industries.
• Disinvestment in select public sector companies, but only to public sector mutual funds and workers.
• Lending rates deregulated for termlending institutions.
• Securities and Exchange Board of India made a statutory body.
• Private sector mutual funds allowed.
• Tax on dividend and longterm capital gains cut.
• Tax concession for software industry to make it internationally competitive.
Photo op: P. Chidambaram on 27 February 1997, ahead of the budget speech.
• Corporate tax rates raised, maximum rate being 50%.
P. Chidambaram presents the budget on 28 February 1997 after average growth of 7% for three years
• Raises limit of holding by foreign institutional investors to 30% from 24%.
• Allows buyback of shares by companies.
• Partial opening up of the insurance sector proposed.
• Phases out ad hoc treasury bills to finance deficit.
• Maximum income tax lowered from 40% to 30%.
Facing sanctions: Yashwant Sinha heading to Parliament to present the budget.
• Corporate tax rate for domestic companies fixed at 35%.
Yashwant Sinha presents the budget on 27 February 1999 amid the fallout of the asian financial crisis and economic sanctions on India for conducting nuclear tests
• For the first time, the budget is presented in the morning, discarding the British Raj tradition of an evening presentation.
• Tax concessions to make mutual funds attractive
• Huge increase in tax concessions on home loans for individuals aiming to use housing boom as a catalyst for growth
• Banks encouraged to clean their books through tax breaks for bad loan provisions.
• Compressed 11 excise duty rates to three, with 16% as central rate.
P. Chidambaram presents the budget on 28 February 2005 soon after the economy begins its highest ever growth phase
• Removes standard deduction on personal income tax.
• Introduces fringe benefit tax.
Photos by PIB
BIFR: Board for Industrial and Financial Reconstruction;
IMF: International Monetary Fund