Union Budget – Exploring the History of Budget since Independence

Last Updated on January 31, 2024 by Pratiksha Medhane

The Union Budget of India holds the pulse of the nation’s financial health. It outlines the government’s fiscal policies and priorities for our vast and diverse population. It defines the planned expenses across various sectors while also laying down the guidelines through which the government earns money in the form of taxes and duties. Till date, India has witnessed 75 full-scale Union Budgets, along with 14 interim budgets and four special ones. 

Let us delve into the history of the Union Budget, since Independence, that is filled with economic transformations, policy shifts, and other significant milestones.

The First Budget – 1947:

The first Union Budget post-Independence was presented by the then Finance Minister, R.K. Shanmukham Chetty. This landmark budget laid the foundation for India’s economic policies, emphasising agrarian reforms and social welfare. Since, our nation had just gained independence after almost a century of British rule, and had massive upheaval including an armed conflict during partition, Defence was given one of the top priorities with an approximately 46% allocation for this sector.

Seeing the 40s Out:

Mr. Chetty first introduced the term ‘interim budget’ in 1948. Since then, 14 interim budgets have been introduced in the Parliament. Interestingly, 2024 will also see an interim budget footed by the Finance Minister, since the Lok Sabha elections will be held this year. Such a budget differs from a full Union Budget as it is temporary in nature and is aimed to provide a basic expense grant till the new government is formed. It is usually devoid of any major mplicy-related changes or announcement. Another highlight of the budget during this period was the removal of the Capital Gains Tax. 

Early Decades – 1950s – 1960s:

Under the leadership of Finance Minister C.D. Deshmukh, the budget during this era focused on industrialisation and the establishment of public sector enterprises. The period also witnessed the initiation of the Planning Commission to strategise our nation’s economic development. 

The Capital Gains Tax, which had been abolished a few years ago, was reinstated in 1956-57 and is in place till date. Individual taxation underwent changes as well with a raise in exemption limit and different limits for unmarried and married taxpayers. Wealth Tax and Gift Tax were also introduced during this decade. The Wealth Tax was removed after almost six decades in existence.

The Green Revolution Era – 1960s – 1970s:

Finance Minister Morarji Desai played a pivotal role in steering India towards self-sufficiency in food production. The budget during this phase emphasised agricultural growth, leading to the Green Revolution. The decade started off with a controversial start with the highest ever recorded income tax rate, without surcharge, of 72.5% in 1962-63. Another unpopular event was the introduction of a super-profits tax and an Expenditure Tax levied on corporations. One of the first measures to uncover black money and identify tax evaders was undertaken through the means of the Voluntary Disclosure Scheme.

The Turbulent Era – 1970s – 1980s:

The 70s was a turbulent decade that included the war with Pakistan, internal political tensions, and the Emergency. Amongst this, the focus of the Union Budget was largely on Defence spendings while also trying for reforms in personal taxation. A new tax regime was introduced and the maximum marginal tax rate was decreased. Moreover, the first demonetisation drive of independent India was carried out in 1978 that banned the use and circulation of Rs.1,000, Rs.5,000 and Rs.10,000 notes. 

Recovery and Beyond – 1980s – 1990s:

In the 1980s, India continued to face economic challenges. However, the policies initiated in this era laid the foundation of the resurgence of the Indian economy in the 1990s. The decade witnessed an emphasis on public sector enterprises, with the government playing a dominant role in economic activities. In the mid-80s, the Board for Financial and Industrial Reconstruction (BIFR) was set up to help manage under- or non-performing entities in the industrial and financial sectors. The Modified Value Added Tax (MODVAT) was first proposed during this decade, and eventually went on to take the form of GST. Kisan Vikas Patra (KVP) and Equity Linked Savings Scheme (ELSS) were introduced to encourage citizens to invest in financial tools to save tax and generate wealth.

Economic Liberalisation – 1990s – 2000s:

The 1990s marked a significant departure from the past as India actively embraced globalisation. 1991 witnessed a landmark budget in which Dr. Manmohan Singh, the then Finance Minister, introduced reforms to liberalise the Indian economy. The focus shifted to globalisation, privatisation, and attracting foreign investments, fundamentally transforming the economic landscape leading to increased foreign direct investment (FDI) and economic growth. Other notable events during this decade include the formation of the National Stock Exchange (NSE), and the Insurance Regulatory Development Authority (IRDA) of India. Introduction of State Bank of India’s (SBI’s) Resurgent India Bonds and Unit Trust of India’s (UTI) India Millennium Scheme were vital tools to encourage the participation of NRIs in the Indian economy and attract their investments.

Recent Budgets 2000s – till date:

The IT sector experienced a boom in the late 1990s, with India becoming a global hub for software services. The 2000s witnessed robust economic growth, driven by sectors like IT, telecommunications, and services. A large-scale demonetisation was carried out in 2016. One of the most significant tax reforms in independent India was the implementation of the Goods and Services Tax in 2017. This unified indirect tax system simplified taxation and fostered economic integration. The Unique Identification Authority of India (UIDAI) was set up during this period to issue a unique identification card to each eligible citizen – Aadhaar Card. Economies the world over, including India, grappled with economic challenges, including the COVID-19 pandemic. Recent budgets have emphasised infrastructure development, healthcare, and digital initiatives to propel India into a new era of growth. 

Must read – Budget 2024: Budget highlights and it’s impact

In Summation:

Understanding the government’s sectoral allocations provides a clear view on its priorities and the prevalent issues of the era. A comprehensive exploration of the budgets reveals sector-specific policies, from education and healthcare to defence and infrastructure. As we navigate through the decades, it is crucial to understand the challenges faced by successive governments and the strategies employed to overcome them. From the controlled deficits of the early years to strategic fiscal expansions during economic crises, examining the history of Union Budgets reveals the evolving nature of fiscal deficit management.

Lately, Union Budgets have increasingly focused on social welfare programs and inclusive growth. Schemes like MGNREGA, PM-KISAN, and Swachh Bharat reflect a commitment to uplift the underprivileged and enhance the quality of life for all citizens. To know what the new Union Budget has in store, stay tuned to this page for all the updates and relevant insights.

Frequently Asked Questions

Who presented the first Union Budget of independent India?

The inaugural Union Budget after Independence was presented by R.K. Shanmukham Chetty, the Finance Minister, in 1947.

Which Finance Minister introduced economic liberalisation in 1991?

Dr. Manmohan Singh, serving as the Finance Minister in 1991, spearheaded economic liberalisation, marking a monumental shift in India’s economic policies.

What is the significance of the Goods and Services Tax (GST) introduced in 2017?

The GST, implemented in 2017 under Finance Minister Arun Jaitley, streamlined taxation, fostering economic integration by replacing multiple indirect taxes with a unified system.

How many budgets have been presented in India so far?

In post-independence India, a total of 75 Union Budgets have been presented. Moreover, there have been 14 interim budgets and four special budgets as well. 

Who was the first woman to present a Union Budget in independent India?

In 1970-71, the then Prime Minister, Mrs. Indira Gandhi – who was also acting as the Finance Minister – became the first woman to present a Union Budget of independent India. Mrs. Nirmala Sitharaman was the next woman to do so.

How have recent budgets addressed economic challenges, especially during the COVID-19 pandemic?

Recent budgets, led by Finance Minister Nirmala Sitharaman, have focused on healthcare, infrastructure, and digital initiatives to mitigate the impact of the pandemic and spur economic recovery.

What role has fiscal deficit played in the evolution of Union Budgets?

The management of fiscal deficit has evolved over the years, reflecting changing economic priorities. From controlled deficits to strategic expansions during crises, fiscal prudence has been a dynamic aspect of budgetary planning.

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