By Swarnendu Biswas, Asst Editor

THE Union Budget of 1965-66 was the First Budget of the post-Nehruvian era, and the budget was presented in the backdrop of an economy plagued by severe food shortage. From the study of the budget speech of 1965-66, delivered by T.T. Krishnamachari, we can easily come to the realization that even more than four decades ago, retrieval of unaccounted incomes and wealth was a big headache for the Union Government, and voluntary disclosure schemes were floated across as effective solutions to address this menace.

“I now come to my proposals in regard to unaccounted incomes and wealth which, as I have already mentioned, are a source of considerable mischief in the economy. The question of how to mitigate this evil is a baffling and difficult one. We have already taken a number of measures, apart from intensification of searches and the like, to encourage voluntary disclosures. Amounts so disclosed are being exempted from penalty. These measures have had some success in encouraging voluntary disclosures particularly from people who have comparatively small and medium incomes to disclose,” stated the then Finance Minister in his budget speech. The Minister also went on to propose a pragmatic plan to unearth black money.

“My proposal in brief is this. Those persons who have undisclosed income to declare can make a declaration with relevant particulars and at the same time deposit in cash at the Reserve Bank of India sixty per cent of the income declared. The remaining 40 per cent of the income so declared can be taken to the assessee's books under intimation to income tax authorities. No further question of assessment in regard to the income so disclosed by this process will arise and the identity of the persons will not be revealed,” proposed T.T Krishnamachari.

He went on to add, “This offer will be open only for three months from now, till the end of May. In order to induce people to come out quickly a rebate of 5 per cent of the tax on all incomes declared and tax paid thereon in the month of March will be given. In other words, in such cases the effective tax rate will be 57 per cent. Those who feel that their tax liability in respect of amounts to be disclosed would be less than 57 or 60 per cent would be free to resort to normal disclosure and have the income so disclosed taxed at the appropriate rates by income tax authorities after proper assessment. Appropriate provisions are being made in the Finance Bill to give effect to the scheme I have just outlined.”  

Of course, he complemented the carrot with a stick, when he asserted in his Budget Speech, “I need hardly add that we propose to continue with-our searches. It is incumbent upon the Government to use all the legal weapons at its command to deal with those who spurn this particular opportunity of making voluntary disclosures.” One can say that such a pragmatic measure can reap rich dividends even in the present day and age, to check the ever growing chimera of black money that happens to be increasingly polluting the Indian economy.

The State of Control  

Now let us take an excerpt from the budget speech of the 1971-72 Union Budget, which was delivered by the noted mandarin of yesteryears, Y.B. Chavan. The statement reflects nothing but a high degree of state audacity and control in matters, where a democratic nation, under normal circumstances, should have nothing to do with.

”I am firmly of the view that the fiscal instrument must be deployed to discourage payment of high salaries and remunerations which go ill with norms of egalitarian society. I accordingly propose to impose a ceiling on the remuneration of company employees which would be deductible in the computation of taxable profits. The ceiling is being set at Rs.5, 000 per month. Together with the existing ceiling of Rs 1, 000 per month in the case of perquisites, the allowable overall ceiling on remuneration and perquisites, for purposes of taxation, will be at Rs.6, 000 per month. In addition, I am proposing to reduce the tax deductible limits of daily allowance to employees while on tour,” firmly declared the then Finance Minister, in his budget speech.

This excerpt reveals how deep-rooted the tentacles of state control had spread during those years of licence permit and Inspector Raj, which over the period of three decades had almost managed to throttle the spirit of enterprise within India .

Can today, the Finance Minister, unless the country is facing a protracted war or any serious adverse economic situation, even dream of fixing the salary of senior corporate honchos to say Rs. 1 lakh per month (approximate equivalent of Rs.6000 per month in 1971) and still avoid a huge and widespread outcry from the service and industrial sectors?  No, he cannot, and neither can he propose such an audacious step in today's comparatively much freer economy of India . We can say that less government interference in matters of private enterprise since 1991 is one of the contributing factors in India 's growth story.  

Still Crawling at Thirty!

India flirted with the so called ‘Hindu' rate of growth even after thirty years after independence. The statement from the budget speech of H.M. Patel during the presentation of the 1977-78 Union Budget, amply exemplifies that. “The most fundamental problem of the Indian economy continues to be its inadequate rate of economic growth. In 1976-77, the rate of our economic growth was less than 2 per cent. In the seventies thus far, our growth rate has averaged about 3.5 per cent per annum, far too short of our Plan targets. And yet, while it would be wrong to assert that our country has not made significant progress since independence, the fact remains that, even after twenty-five years of planning, we are unable to sustain an average growth rate of 5 per cent,” lamented the former Finance Minister, while adding, “Clearly, a fresh examination of our planning priorities and techniques is called for.” Unfortunately India had to wait for another thirteen years before a paradigm shift in India 's economic model was envisaged.  

It seems that the legacy of sluggish economic growth passed from successive Congress governments at the centre through three decades to create a headache for the Janata Party in the later half of seventies, when its government presented its maiden Union Budget in 1977.  

Restoring Price, Maintaining Balance

In the last few years of Indira Gandhi's regime, India managed to successfully tame the forces of inflation, which is attested by the budget speech of the Union Budget 1984-85, that was presented by then and even today's Finance Minister , Pranab Mukherjee. “The years 1981-82 and 1982-83 were characterised by exceptionally low rates of inflation. The annual rate of inflation, which had reached a high of 21.4 per cent in 1979-80 was brought down to 16.7 per cent in 1980-81 and further to only 2.4 per cent at the end of 1981-82. The annual rate of inflation at the end of 1982-83 was 6.2 per cent, which is unusually low for a drought year,” read Pranab Mukherjee. It is an enigma that why he is struggling to address the problem effectively in this present day and age. Could it be because the economy has become much more globalised over the next two-and-a-half decades, or are the myopic policies in the North Block to be blamed?

The country's situation in terms of foreign exchange reserves was also satisfactory in 1984, which make one fail to understand the economic reasons behind the impending economic doom in terms of foreign exchange reserves that necessitated the first phase of liberalization, just seven years later.

The position of our healthy balance of payments situation during the last years of Indira Gandhi's regime gets amply clear from the Union Budget speech of 1984-85. “I had informed the House of the improvement that had taken place in our balance of payments in 1982-83. I am happy to say that this improvement has gained strength in 1983-84. The trade gap, which declined from Rs.5800 crores in 1981-82 to about Rs.5500 crores in 1982-83, is expected to decline further in the current year. Receipts on invisibles account have remained buoyant and the incentives for non-resident deposits have been highly successful. Our foreign exchange reserves, inclusive of IMF drawings, have increased by Rs.662 crores in the current financial year up to 10th February,” said a confident Pranab Mukherjee; his words resonating with indications of economic sustainability of India .  

He further added, “Our strategy for bringing the balance of payments under control, after the sharp deterioration that occurred in 1979-80, has paid rich dividends. In view of the improvement in our payments position, the Government has voluntarily decided not to avail of the balance of 1.1 billion SDR under the Extended Fund Facility of the IMF.”

Salvaging a Financial Crisis

Just seven years later, the situation in terms of foreign exchange seemed to have changed in its entirety. “Honourable Members would recall that when the new Government assumed office eight months ago, we inherited an economy on the verge of collapse. Inflation was accelerating rapidly. The balance of payments was in serious trouble. The foreign exchange reserves were barely enough for two weeks of imports. Foreign commercial banks had stopped lending to India. Non-Resident Indians were withdrawing their deposits. Shortages of foreign exchange had forced a massive import squeeze, which had halted the rapid industrial growth of earlier years and had produced negative growth rates from May 1991 onwards,” narrated our former Finance Minister and the present Prime Minister, Manmohan Singh as he began his 1992-93 Union Budget speech; that is barely eight fiscals later than the Pranab Mukherjee's budget speech of 1984-85.   

And who says global recession in the modern times occurred only in the 1930s and in 2008-2009. According to our learned former Finance Minister and the present Prime Minister, recessionary conditions were present in the world markets even in the early nineties.  He went on to add in his 1992-93 budget speech that, “Next to inflation, our major problem in the short term is the management of the balance of payments. We have averted collapse and gained some flexibility, but a sustained improvement in our external payments position requires much more. Our export earnings have suffered badly this year, mainly because of the disruption of trade with the former Soviet Union , and also because of recessionary conditions in world markets. As a result, we have not been able to finance our normal import requirements.”

Financial Turmoil…Once More

The presentation of 1999-2000 Union Budget marked a break from the colonial tradition of presenting the budget at 5pm. “For the first time after Independence with the enthusiastic support of all political parties in Parliament, it has been possible for me to discard the long standing tradition of British Raj of presenting the budget at 5 PM,” began the then Finance Minister, Yashwant Sinha, as he began the presentation of the 1999-2000 Union Budget.

In fact, in the early part of his budget speech, the evil shadow of global recession was again rearing up. He read, “The decade of the nineties has witnessed extraordinary changes. It began with the collapse of the centrally planned economies; it is ending with market economies facing a serious crisis.”   We can realize from this statement that ill health in global finance and its market economies may have a fairly long legacy, which our policy makers and corporates have failed to give its due importance in the beginning.   

Yashwant Sinha also pointed out that, “The year 1998 particularly has been a year of unprecedented global turmoil. The East Asian financial crisis took a heavy toll of important economies in the region and spread to other countries. Japan continued in recession and in August 1998 severe crisis afflicted Russia . By January 1999, the contagion had spread to Brazil , triggering massive capital flight and a steep depreciation of the currency. World output growth dropped below 2%, the growth of world trade decelerated sharply, commodity prices fell steeply, currencies were savaged and capital flows to developing countries declined sharply.” Yes, the tumultuousness in global finance and its possible impacts on the Indian economy was not only a phenomenon of the very recent times or from a pre World War II era.  

Plans and Outcomes

The 2009-10 Union Budget presented in the backdrop of global recession, was the first Union Budget in India to be addressed to a woman speaker. Yes, it is sad that India got a woman Lok Sabha speaker after more than 60 years of independence. The incident doesn't reflect empowerment of women or for that matter of Dalit women in India in any significant way, although it again reminds us of the grossly unequal dynamics of our society, which thankfully, is improving ever so slowly.

In the Union Budget 2009-10, the Finance Minister Pranab Mukherjee, among a plethora of announcements and developmental schemes, also called for enhancement in the budgetary allocation of the Commonwealth Games 2010.  He said, “The Commonwealth Games present the country with an opportunity to showcase our potential as an emerging Asian Power. I propose to substantially enhance the allocations for the Commonwealth Games from Rs.2,112 crore in the Interim Budget to Rs.3,472 crore in the Budget for 2009-10.” It evokes nothing but sarcasm and laughter when we all know the total estimated expenditure in the Commonwealth Games was close to Rs.60,000 crore! The final version of the Union Budget 2009-10 was presented on July 2009, and within 15 months, the expenditure for Commonwealth Games increased manifolds over its perceived figure, leaving a deep stench of corruption and governmental malpractice with public money.

However, apart from the popular direct tax concessions, and enhancing the proposed budgetary allocation for NREGA by a whopping 144 percent over that of the 2008-09 budget estimates, the budget of 2009-10 did a good turn towards common India 's healthcare too. “On influenza vaccine and nine specified life saving drugs used for the treatment of breast cancer, hepatitis-B, rheumatic arthritis, etc. and on bulk drugs used for the manufacture of such drugs, I propose to reduce the customs duty from 10 per cent to 5 per cent. They will also be totally exempt from excise duty and countervailing duty,” informed the Finance Minister, while adding, “ C ustoms duty will also be reduced from 7.5 per cent to 5 per cent on two specified life saving devices used in treatment of heart conditions. These devices will be fully exempt from excise duty and CVD also.”

The Union Budget 2009-10 also talked about the National Food Security Act, which was a poll promise of the present UPA government and the brain child of none other than Sonia Gandhi - the most powerful person of India .  “I am happy to announce that the work on National Food Security Act has begun in right earnest. This will ensure that every family living below the poverty line in rural or urban areas will be entitled by law to 25 kilos of rice or wheat per month at Rs.3 a kilo,” noted the Finance Minister. However, even two years after such a noble proposal, the bill is yet to get the requisite legal teeth. NREGA too has been a mixed success story till date, at best, with news of failures in its proper implementation cropping up here and there. The massive exercise is often plagued by corruption and delayed payments.