India’s budget has seen various phases of economic changes since it was first drafted by the independent government in 1947. Its evolution from a simple record of income and spending into a powerful tool for reform, crisis response, and institutional transformation has shaped India’s growth.
India’s budget from independence to the present times has seen wars, rise of tech, and more.
India’s budget has seen various phases of economic changes since it was first drafted by the independent government in 1947. Its evolution from a simple record of income and spending into a powerful tool for reform, crisis response, and institutional transformation has shaped India’s growth. Every year the budget takes another face, structure and for almost eight decades has been influenced by various factors economic and other factors like wars, shortages, balance-of-payments crises, liberalisation, technological change, and the more recent, governance and compliance reform.
Here’s a look at key events in the Union Budget’s journey
1947-48- Free India’s first Budget
After India attained freedom the first budget was presented by RK Shanmukham Chetty on November 26, 1947. At the time, the revenues were estimated at Rs 171 crore and expenditure at Rs 197 crore, while the sector that received the largest allocation was defence, almost half of the total. The Budget was special as it focused on the priorities of a newly born nation, security, administration and economic stabilisation.
1973-74- The Black Budget
Yashwantrao B. Chavan presented what was described as the ‘Black Budget’ as the country was facing economic stress, high inflation and global oil shocks. It got its title because of the fiscal deficit of Rs 550 crore, massive in those times. It underlined the restrictions of a tightly controlled economy.
1983-84- Public spending linked to accountability
Pranab Mukherjee, one of India’s most influential economic decision-makers, and the finance minister at that time presented a breakthrough idea- allocating union government’s grants to states based on performance ignoring the usual factors like population or negotiation. This was one of the first budget event wherein public spending was directly linked with accountability.
1985-86, 1986-87- Tax reform and removing the Licence Raj
Under VP Singh, budgets simplified personal income tax, reduced slabs, lowered peak rates and introduced MODVAT to reduce snowballing taxes. It was termed as the ‘Carrot and Stick Budget’, that on one hand offered incentives and on the other acted harsh against tax evasion and black money, preparing the environment for liberalisation in the next decade.
1987-88- Coming up of market institutions
Under Prime Minister Rajiv Gandhi, the budget priorotised institutional capacity instead of short-term fiscal changes. Education spending was massively raised, it set the groundwork for SEBI and finished the dominance of UTI by opening doors for other mutual funds, which strengthened capital market development.
1991-92- Liberalisation and revolution in Indian economy
This budget was both phenominal and historical for the landmark decisions taken by one of India’s most distinguished economists, Manmohan Singh (Finance Minister at the time). As India was struggling under a severe balance-of-payments crisis, Manmohan’s decision to introduce Liberalisation, Privatisation and Globalisation (LPG) marked a revolution in Indian economic history.
As part of the budget, industrial licensing was destroyed, trade controls loosend, foreign investment welcomed, and public sector reform initiated. As it took India to a new level, it remains the most transformative Budget in the counrty’s history.
1996-97- Financing infrastructure
Finance Minister P Chidambaram, another notable economist, responded to a crucial issue of India’s lack of long-term infrastructure finance by creating the Infrastructure Development Finance Company (IDFC). The Budget also improved funding for highways and formalised the disinvestment process by establishing a dedicated commission.The Budget also enhanced funding for highways and formalised the disinvestment process by establishing a dedicated commission.
1997-98- India’s IT boom
In his second budget, Chidambaram took help of the Laffer Curve logic to reduce personal and corporate tax rates, rationalise excise and customs duties, and reform capital market laws. It openly acknowledge information technology (IT) as a growth engine, helping catalyse India’s IT boom.
