Budget presentation is often seen as one of the most important events in the Indian economy. Announcements made by the Finance Minister directly affect the common man’s household budget, whether he or she will spend more or save more this year.
Here are the Finance ministers who made an impact not only on the economy then, but whose policies helped shape the Indian economy to its current status.
R.K.Shanmukham Chetty (1947-1948)
R.K.Shanmukham Chetty became the first finance minister of India after it became independent in 1947. Chetty, presented the first Finance Budget of independent India on November 26, 1947, which was a review of the economy and no new taxes were proposed. Rehabilitation of refugees and payment of subsidies for food grains created a large burden on the first Budget. The Budget revenue was Rs 171.15 crore and expenditure Rs 197.39 crore.
C D Deshmukh (1950-1956)
Chintaman Dwarkanath Deshmukh was the first Indian to be appointed as governor of Reserve Bank of India in 1943.
A big change that was made during Deshmukh’s tenure was the preparation of Budget papers in Hindi as well. The first such Budget was the one he presented in 1955.
GDP had grown by 18% between 1950 and 1955, due to a sharp turnaround in food production imports were lower, export demand for tea and jute were booming, current account had shown a surplus of Rs 25 crore and sterling balances peaked at Rs 735 crore.
T T Krishnamachari (1957-1958, 1964-1966)
Tiruvellore Thattai Krishnamachari held the office of India’s Finance Minister for two terms, first from 1956-1958 and the second from 1964-1966. During his first stint as the FM, Krishnamachari found that calculations made in the previous budget had gone awry. So, on November 30, 1956 in a 5000 word speech, he warned the nation about the changed economic situation and emphasised on the need to levy fresh taxes even before the next budget was presented.
His most famous Budget was the one he presented in 1957, called The Krishnamachari-Kaldor Budget. He put severe restrictions on imports through an import licensing system; withdrew budgetary allocation for non-core projects and set up Export Risk Insurance Corp to protect exporters against payment risks.
He was also responsible for introducing a wealth tax, a tax on expenditure and a tax on railway passenger fee. Krishnamachari also raised peak excise to 400%, and made the first attempt to distinguish between active income (salaries or business) and passive income (interest or rent).
He was instrumental in building the economic and industrial infrastructure of the country from the ground up and also left his mark on the Constitution of India as a member of its Drafting Committee.
Focussing on measures needed for providing social security, Krishnamachari expanded the existing pension scheme, to cover family members of deceased government servants, by introducing a new Family Pension Scheme in 1964.
Krishnamachari was forced to resign when he was linked to the the Mundhra scandal, Independent India’s first major financial scam.
Morarji Desai (1959-1964, 1967-1969)
With eight annual and two interim budgets, Morarji Desai is the Finance Minister who has presented the maximum number of budgets so far.
In Desai’s 1968 Budget did away with stamping and assessment of goods by excise department right at the factory gate. In a boost to manufacturing, he introduced a system of self-assessment for manufacturers. The reform reduced the administrative burden on the excise department.
In his 1968 Budget, he withdrew the “spouse allowance” where both a husband and wife were income tax payers. He said in his budget speech: “it would be improper for any outsider to decide as to who is dependent on whom… to eliminate this unintended strain on the relationship of marriage.”
Desai resigned in 1969 to protest against the nationalisation of major banks by an ordinance. He felt social control of banks would regulate their functioning and make them accountable.
Y B Chavan (1971-1975)
Yashwantrao Balwantrao Chavan’s 1973 Budget was called the ‘Black Budget’. The color black was the media’s symbolic reference to the budget speech set during a time-period of immense economic turmoil. The term black-budget remains an inglorious reference to the hardships of 1973.
The immediate observation made from Chavan’s speech was a massive deficit of Rs 550 crores. What complicated the situation was the situation of drought coupled with the war in Bangladesh or East Pakistan.
Chavan also announced the nationalisation of coal mines. The decision, many believe, had an adverse effect on coal production in the long run. Bundling of coal assets under a single government-owned entity meant there was no scope for competition with the market. India has since been an importer of coal.
In 1974, he brought down the maximum marginal rate of tax by 20 percentage points from 97.75 per cent to 77 per cent. The move was to set the template for a key part of direct tax reforms in the decades ahead.
C Subramaniam (1975-1977)
Chidambaram Subramaniam was the man who ushered in an era of self-sufficiency in food production in India. C. Subramaniam also took forward the tax reforms started by his predecessor Chavan.
Even as the country was reeling under Emergency, Subramaniam further lowered tax rates, bringing down the maximum marginal rate by another 11 percentage points to 66%. He scaled down wealth tax rates as well.
Another change he carried out was the 1976 amendments in tax laws where he introduced the concept of source-based taxation. These changes echoed over three decades later, when Vodafone fought – and won – its protracted legal battle with tax authorities over the latter’s right to tax its indirect acquisition of a majority stake in an Indian telecom firm.
H M Patel (1977-1979)
H.M. Patel was appointed the Finance Minister by the new PM Morarji Desai, who was leading India’s first non-Congress administration. He changed many socialist economic policies, ending barriers to foreign investment and reducing tariffs, while protecting home industries. He was also responsible for the policy that all foreign companies must form corporations with an Indian company holding 50% stake, which caused companies like Coca Cola to pull out of India.
Along with the then Prime Minister, Morarji Desai and Reserve Bank of India Governor I. G. Patel, Hirubhai M. Patel was considered one of the key architects in the development and execution of India’s first demonetisation in 1978.
The government scrapped high denomination notes of Rs 1,000, Rs 5,000 and Rs 10,000 notes.
Chaudhary Charan Singh (1979-1980)
Singh’s budget, more than any other in history, changed the face of fiscal federalism in the country. It accepted recommendations of the 7th Finance Commission and absorbed the impact, which doubled the share of states in Union excise duties from 20% to 40%.
The budget also sowed the seeds of indirect tax reforms. Even though it stopped short of a major restructuring of excise, this Budget initiated a recast of the rates on a wide range of consumer and finished products. Importantly, it brought down the list to a mere 16 from a few hundred commodities.
Finally, value added tax first appeared in this budget, although in a very primitive form. The budget extended pro forma credit facilities in respect of duty on inputs in the manufacture of finished products. This was done as an experiment for the engineering industry, where duty on inputs was high.
Ramaswamy Venkataraman (1980-1982)
In his 1980-81 Budget, Venkataraman undid all that Charan Singh had done in excise. Life-saving drugs were exempted from excise duties, and so were cycles and parts, toothpaste, sewing machines, pressure-cookers and cheap varieties of soaps.
He also progressively increased the income-tax exemption ceiling from Rs 8,000 to Rs 12,000 and then to Rs 15,000, in his second Budget. The exemption, at today’s price levels, stands at Rs 1,50,000. After two of his Budgets, the inflation was down to 2.5%.
Pranab Mukherjee (1982-1984)
Pranab Mukherjee rose through a series of cabinet posts to become the Finance Minister of India from 1982 to 1984. He was the first Rajya Sabha member to hold the Finance portfolio.
At the very beginning of Mukherjee’s tenure, he faced a major problem. The country had just emerged from a bitter period of inflation, whose rate of increase reached an all-time high of 21% during Chaudhury Charan Singh’s tenure as Finance Minister.
His term was noted for India not withdrawing a $ 1.1 billion instalment of an IMF loan. His predecessor, R Venkataraman, had signed that agreement with the IMF for an SDR of US $5 billion in November-December 1981.
V P Singh (1985-1987)
V.P. Singh is remembered for hounding top industrialists and even arresting some of them, even though he pushed the economic liberalisation agenda in his 1985 Budget. High-profile raids on suspected evaders – including Dhirubhai Ambani – forced Rajiv Gandhi to divest Singh of the portfolio.
He introduced modified value added tax (MODVAT), which allowed credit/ set-off of duty paid on raw materials against the duty on final products. This was the base of a major indirect tax reform that would later culminate to the Goods & Services Tax regime.
Rajiv Gandhi (1987-1988)
Rajiv Gandhi introduced provisions related to minimum corporate tax, better known today as MAT or Minimum Alternate Tax. The aim was to bring highly profitable companies within the tax net which were otherwise legally managing to avoid paying income tax.
The exercise in zero-based budget began in 1987-88. The zero-based budgeting is a process of review, analysis and evolution for each budget request in order to justify its inclusion or exclusion from the integrated whole budget before it is finally approved.
Yashwant Sinha (1991-1992, 1998-2002)
Sinha is widely credited for pushing through several major reforms that put the Indian economy on a firm growth trajectory. Those include lowering real interest rates, introducing tax deduction for mortgage interest, freeing up the telecommunications sector, helping fund the National Highways Authority, and deregulating the petroleum industry.
Sinha is also known for being the first Finance Minister to break the 53-year tradition of presenting the budget at 5 pm, a practice held over from British Rule days that sought to present the Indian budget at a time convenient to the British Parliament rather than India’s Parliament.
Manmohan Singh (1991-1996)
Having inherited arguably India’s worst balance of payments crisis, Singh presided over a transformation in policy making. The small steps on liberalisation of the previous decade were followed by bolder steps in the face of a crisis.
Singh opened up the Indian economy to the world. The ground-breaking 1991 Budget overhauled the import-export policy, slashed import licensing and went for vigorous export promotion.
Fiscal tools were used to boost sunrise industries; software companies were given concessions to make them internationally competitive. Taxes on dividends and long-term capital gains were cut. SEBI was given statutory powers and private sector entry into mutual funds was allowed. Stifling controls over interest rates were reduced in phases.
The Manmohan Singh Budget opened the Indian industries to foreign competition and his economic reforms laid the foundation for the rapid growth of the Indian economy.
P Chidambaram (1997-1998, 2004- 2008, 2012- 2014)
Chidambaram’s 1997 Budget was the clockmaker’s budget. It was aimed at building an institutional structure and a regulatory framework. Its theme was centred around creating and aligning the regulatory framework with the open economy.
During his second stint, his 2005 Budget set the tone for UPA, which remained at the center for ten years. Bharat Nirman was the main pitch of this government. After NDA’s India Shining campaign fell flat apart, UPA focused on the aam aadmi and announced big-ticket schemes like the National Rural Health Mission and NREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme).
Arun Jaitley (2014-2019)
Under PM Modi-led NDA rule, multiple large-scale programmes were started. Some of them include the Rs 7,060 crore smart cities project, Atal Pension Yojna for all citizens in the unorganised sector, Digital India, and the Make in India programme to give a push to indigenous industries.
In line with the NDA bid to curtail corruption and black money, the government in 2016 announced the demonetisation drive, phasing out the Rs 500 and Rs 1000 notes, instead introducing a new Rs 500 series, Rs 200 notes and Rs 2000 notes.
In 2017, under Jaitley, the Goods and Services Tax was also introduced. GST replaced several taxes like central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi. Even other levies which were applicable on inter-state transportation of goods were also done away with.