The History of Union Budget in India

India gained its independence from the British regime in 1947. India has had 78 union budgets and 15 interim budgets since then. The Union Budget informs us about how much money the Indian government is likely to earn and spend in the next financial year. 

This article will examine a brief history of union budget and how they’ve changed over time and describe the conventions around budget.

First Budget

In India, the government gave budgets long before the country became free. James Wilson, a Scottish economist, gave the first budget in 1860. This was when income tax first came to the government.

India achieved its independence from British colonial rule on August 15, 1947. Shortly after, on November 26, 1947, R.K. Shanmugam Chetty, who was India’s finance minister at that time, introduced the first budget, which spanned from August 1947 to March 1948. The country faced tough times with money and politics after the partition. The first budget had total revenue expectations of Rs. 171.15 crores and an expenditure expectation of Rs. 197.39 crores. 

Evolution of Budgets 

Since the first budget, the size and focus of budgets have changed substantially. The focus of budgets have evolved with time. The history of budget of various time periods are as follows:

• 1950s Budget – 1950s marked the early phases of development in the country. The period saw the formation of the planning commission which initiated the first five-year plan that mainly concentrated on irrigation and food production. This was at a time when food security was a significant issue.
• 1960s Budget – The 1960s was a decade marked by political instability and wars with neighboring countries for India. Budgets had a heavy focus on defense spending during the period, apart from the first green revolution aimed at making India self-dependent in agriculture and food production.
• 1970s Budget – In 1970, Indira Gandhi was the first woman finance minister of India. She was also the prime minister during that period. This period was marked by economic turbulence, inflation shocks, and internal emergencies. The 1970s period saw the nationalization of banks and an increase in government control over various critical sectors. The budgets focused more on social welfare and poverty alleviation. 

The 1973-74 budget was also referred to as the ‘The Black Budget’ since it had a fiscal deficit of Rs. 550 crores that was significant at that time. 

• 1980s Budget – This was a time when budgets started encouraging the involvement of the private sector by deregulation. This was also when the government introduced Minimum Alternate Tax (MAT) on companies so that they could not defer their tax liability.
• 1990s Budget – The 1991 budget in the 1990s brought the era of liberalization, privatization, and globalization policy by Dr. Manmohan Singh. It was executed to give India an economic boost. Custom and excise duties were slashed, and private companies were freed from excessive licence requirements. The 1991 budget is also called the ‘Epochal budget’ for transforming the Indian economy. 
• 2000s Budget – In 2003, the Fiscal Responsibility and Budget Management (FRBM) Act was passed in order to implement measures to curb the deficits. The 2000s was a phase when the government had invested in all angles of the Indian economy. This era also witnessed major foreign investment in India. 
• 2010s Budget – This time period saw significant shifts in the Indian economy. This was the decade of the introduction of the Goods and Services Tax (GST). The 2010s era also witnessed increased government focus on new-age startups, technology, and heavy infrastructure spending. In 2017, the government slashed the 92-year-old practice of presenting the General Budget and Railway budget separately and merged them both into a single budget. 
• 2020 – present – The budgets in 2020 and 2021 focused on reviving the Indian economy that was badly hurt by the Covid-19 pandemic. Since 2022 budgets focused on heavy spending on infrastructure, AI, green energy, roadways, etc

Structural Changes in Budget

In 2017, the government advanced the budget date from the last working day of February to the 1st of February every year. In 1999, then Finance Minister Yashwant Sinha set the time of budget presentation from 11am to 1 pm.

Ceremonies Surrounding the Budget 

• Halwa Ceremony: There is a tradition of ‘halwa ceremony’ one week before the presentation of the budget. In this ceremony, the finance minister serves ‘Halwa’ to ministry officials as it is an Indian tradition to start off important work by eating something sweet. This ceremony marks the lock-in period where the Budget officials lock themselves in the North Block of the Finance Ministry when the final draft of the Budget is being printed. This is done to avoid any leaks before the official presentation. 

Since 2021, the budget has been presented through a digital print rather than a physical print, which has helped in shortening the lock-in period to just five days. 

• President’s accent and cabinet meeting: On the day of the budget presentation, the Finance Minister seeks an accent from the president and there is a cabinet meeting after which the budget is presented in the parliament. After the presentation, the Finance Minister and other officials answer questions from the press. 

Conclusion

The history of government budget is an interesting one. The budget is one of the most important economic documents in India. The budget has been presented in the parliament since Independence. The budget has evolved in size and focus area and it will keep evolving with the changes in the economy. The budget impacts all the citizens and businesses in the country.