Arun Jaitley presented his 3rd budget as Finance Minister on 29th February 2016. While you wait for the Parliament to pass it, let’s revisit 4 Union Budgets that changed the course of India’s economy.
1. Union Budget 1950: India’s First Union Budget
Presented by: John Mathai (Congress)
This Budget was instrumental in establishing the Planning Commission of India in 1951. It laid the foundation of a planned economy where the state allocated resources and directed the economic development of the country. It imposed an incredibly high-income tax rate of 78% on the wealthy. One can infer that the “Hindu rate of growth” (ie: slow growth rate typical of a planned economy) is the long lasting legacy of this budget.
2. Union Budget 1973: The “Black Budget”
Presented by: Yashwantrao Chavan (Congress)
This was the year the Government nationalized coal mines. This, along with many other reasons, was responsible for a budget deficit of Rs. 550 crores, a huge amount at that time. Nationalization of coal mines turned India into a net importer, which it has remained since then. With little incentive to improve and with weak market competition, the sector is still languishing behind even in the post-liberalization era. Does the Coalgate Scam ring a bell?
3. Union Budget 1991: The New Economic Policy
Presented by: Dr. Manmohan Singh (Congress)
The India that we see today is all thanks to this budget, which was presented on 24th July 1991. The Indian economy was in deep trouble with falling foreign exchange reserves and a high current account deficit. The Government had to keep its gold reserve with foreign banks in order to pay for its imports.
In one stroke, this budget rescued the economy – opening up the economy to foreign investment, allowing Indian private firms to produce after scrapping the notorious “License-permit Raj” (elaborate bureaucratic processes for acquiring business licenses) and integrating the country with the rest of the world.
4. Union Budget 1997: The “Dream Budget”
Presented by: P. Chidambaram (Tamil Manila Congress)
This Budget laid down the 1st major tax reforms in the post-1991 era. In the socialist era, India was infamous for its exorbitant tax rates which encouraged large scale tax-evasion. This budget not only reduced income tax for individuals but also drastically brought down the rate of corporate tax. Thanks to these reforms, income tax collections got a boost – from Rs. 18,700 crores in 1997-98 to over rs. 1 Lakh crores in 2010-11. The significant cut in corporate tax improved foreign investment by manifolds.
This budget not only reduced income tax for individuals but also drastically brought down the rate of corporate tax. Thanks to these reforms, income tax collections got a boost – from Rs. 18,700 crores in 1997-98 to over rs. 1 Lakh crores in 2010-11. The significant cut in corporate tax improved foreign investment by manifolds.