Waiting for the Union Budget

Then and Now- What a Change! – 3

J. Chacko

A study of our Union Budget since Independence and the public reactions to it from time to time, could be an indicator  about some of   the changes which have come about in our society in the past over half a century.

The maiden budget of Independent India was presented on November 26, 1947 by our first Finance Minister Sir R.K. Shanmugham Chetty.  The deficit he left in this interim budget was- hold your breath, Rs 25 crores!  Thereafter, till now, we have had about 28 Union Finance Ministers presenting budgets, year after year.  Morarji Desai held this portfolio for the longest duration in two tenures, one from 1959 to 1963 and the next from 1967 to 1969 and hence he holds the distinction of having presented the maximum number of Budgets till now.

In the fifties and for that matter till the launch of economic liberalistion, Budget day used to be dreaded by the average Indian. Those days the Budget meant price rise, increased tax- both personal and corporate and at times, surcharge on tax, impounding of Dearness Allowance, introduction of compulsory deposit etc... Price of virtually every item used to go up due to Budget proposals as a result of hike in excise duty and tax. 

There used to be frenzied buying of items before the budget to escape the expected inevitable increase in prices.  Pre-Budget hoarding also used to be common as the traders who bought the items at pre-Budget prices could sell them at a higher price after the Budget and make a quick buck.  Except the very rich, all classes of people used to be in the grip of Budget phobia on the eve of its presentation.  This was because, year after year, the Budgets had only increased their burden in many ways, and the increased levies every time disrupted their family budgets.  Housewives used to be a particularly sad lot as they had to cut corners everywhere to keep the pots boiling.  Cooking Gas, Petrol, Toiletry Items, Food Articles- in fact every item used to become dearer after the Budget due to higher taxation, year after year.

Even the super rich had to bear the brunt of punitive taxation of those days.  In the early seventies, the marginal rate of income tax was raised to the ridiculously high level of 97% and if this was combined with the wealth tax, some of the tax payers had to pay over 100% tax!  The justification for all these was that such methods of revenue raising would help the Government to find resources to allocate for poverty alleviation.  In reality, it only led to widespread tax evasion.  The condition of the poor remained what it was or rather got aggravated, year after year, with the economy stuck in a groove. 

T.C.A. Srinivasa-Raghavan, one of our most perceptive commentators on economy and politics had chosen the following three as our worst Finance Ministers- Indira Gandhi (1970), Charan Singh (1979) and N. D Tiwari (1988) as they rightly share the dubious honour for sowing the seeds of the fiscal disasters of 1972, 1981 and 1991.

Along with the Budget, another eagerly awaited event used to be the analysis of the Union Budget by the late Shri N.A. Palkhiwala, the celebrated constitutional lawyer.  This used to be in a public meeting in Mumbai, soon after the Budget is presented in the Parliament, where massive crowds used to assemble to hear the dissection of the budget proposals by this formidable public spirited and erudite personality.  In some years he addressed such meetings in New Delhi and Chennai also.

A change in the approach started with the V.P.Singh Budget of 1985 and hence he can be credited with sowing the seeds of our present rather comfortable situation.  Though the nation relapsed into the recklessness of the olden days during the tenure of N.D.Tiwari, from the time P.V. Narasimha Rao became the Prime Minister, budget making was never the same again.  Instead of dread, people started looking to the presentation of  budget as something which would bring them cheer as price of items started falling after the Budgets due to reduction in various taxes.

Instead of frenzied buying before Budget to beat the hike in prices, people started postponing their purchases for after the budget as they expect the prices to fall. Liquor and cigarettes are probably the only items where prices go up even now but nobody complains about these items becoming expensive, year after year.

The story of a computer dealer, caught on the wrong foot, during the early nineties is interesting.  He was used to the olden days when Budget meant price rise.  In 1992 or so he was told that the Union Budget would see an increase in taxes and hence Computers would become dearer once the Budget was presented.  Some “well-wishers” advised him to stock up as many Computers as possible at pre-Budget rates so that he could make a killing by selling them at post-Budget prices.  He fell for this and borrowed heavily to stock a huge inventory of computers.  In the Budget that year duties on computers were reduced and the fellow suffered a huge loss from which he was never able to recover.  He had to wind up his business soon thereafter.

A subtle and symbolic change in the presentation of Union Budget is also worth mentioning.  Our Budgets used to be presented at 1700 hours on the last day of February every year.  The timing of 1700 hours was a colonial legacy as it was suited to the needs of the British as their day would start around IST 1700 hours.  The decision makers in the Empire, back in London, had the convenience of learning to the proposals early in the day for them so that they could take appropriate decisions during the day.  Indian Government continued with this timing till very recently though it made no sense to us.  It was only very recently, may be in 1998 or so that we started the presenting the Budget at 1100 hours.  This goes on to prove the old dictum that it is very difficult to change what gets into the rule book , even after it has lost its relevance!