10 BUDGETS THAT CHANGED INDIA

BUSINESS TODAY and KPMG collaborated together and came out with a list of ten budgets that changes INDIA. Here is the list of ten budgets that had a very strong impact on the Indian economic scenario.

1947: INDEPENDENT INDIA'S FIRST BUDGET

With the Partition of India and the emergence of two independent governments, the Budget for 1947-48 passed by the Legislature the previous March ceased to be operative.

New Delhi could have authorized the expenditure necessary for the rest of the financial year, but it was felt that the newly freed country would like a budget to be presented at the earliest.

The Budget Estimate for total revenues was Rs 171.15 crore. Of this, notably, Rs 15.9 crore was to come from the Posts and Telegraphs Department.

The total expenditure for the year was estimated at Rs 197.39 crore, of which the defense budget was Rs 92.74 crore.

A large burden was thrown on this budget by the unavoidable expenditure on rehabilitating refugees of the Partition and the payment of subsidies for food grains in a year of food crisis.

The only tax proposal in the budget was an increase in the export duty of three per cent on cotton cloth and yarn by an additional amount of four annas per square yard on cotton cloth and six annas a pound on cotton yarn.

1951: THE FIRST BUDGET OF THE REPUBLIC OF INDIA

This budget laid down the roadmap for the creation of the Planning Commission. The Commission was entrusted with the responsibility of formulating phased plans for effective and balanced use of resources.

A large part of the blame or the credit - whatever way it is looked at - for the Indian growth model goes to the Planning Commission.

This budget reduced the maximum rate of income tax from five annas per rupee, or 30 per cent, to four annas or 25 per cent. Incomes above Rs 1.21 lakh attracted a super-tax rate of 8.5 annas per rupee. The maximum rate of personal taxation was 12.5 annas or about 78 per cent.

1957: THE 'KRISHNAMACHARI-KALDOR' BUDGET

Put severe restrictions on imports through an import licensing system; withdrew budgetary allocation for non-core projects, set up Export Risk Insurance Corp to protect exporters against payment risks.

 Brought in wealth tax, a tax on expenditure and a tax on railway passenger fee. Raised peak excise to 400 per cent.

First attempt to distinguish between active income (salaries or business) and passive income (interest or rent). Raised income tax rates.

1968: PEOPLE-SENSITIVE BUDGET

Ended the requirement of stamping and assessment by the Excise Department authorities of goods right at the factory gate and introduced the system of self assessment by all big and small manufacturers, a system still in use.

 Today, except for some goods such as cigarettes and alcoholic preparations most products are on the self-removal mode for the levy of excise duty.

Self removal of goods was a major procedure relaxation that went a long way in boosting manufacturing. Administrative convenience in removal of goods made the process less complicated and tedious.

1973: THE BLACK BUDGET

Provided Rs 56 crore for the nationalisation of the general insurance companies, Indian Copper Corp and coal mines. This was a huge sum: the estimate for the budget deficit for 1973-74 was Rs 550 crore.

It is argued that nationalisation of coal mines had an adverse impact on coal production in the long run. The coal assets were bundled together under a single government-owned entity with no scope for market 

competition.

 There was little incentive for deployment of efficient production techniques and introduction of new technologies. India has been a net importer of coal over the past 40 years.

1986: THE CARROT & STICK BUDGET

Introduced MODVAT credit. This allowed credit/ set-off of duty paid on raw materials against the duty on final products.

This was a modest beginning at major indirect tax reform that will culminate in the shift to the Goods & Services Tax regime. 

With the introduction of Cenvat Credit Rules in 2004, cross credit between service tax and excise was allowed for the first time, reducing effective tax costs and boosting industry.

1987: THE GANDHI BUDGET

Introduced provisions related to minimum corporate tax, better known today as MAT or Minimum Alternate Tax.

It was brought in with the primary objective of bringing into the tax net highly profitable companies that were legally managing to avoid paying income tax.

The budget estimates for collections of this tax were modest (Rs 75 crore) but it has since become a major source of revenue, though the figures are no longer revealed.

1991: THE EPOCHAL BUDGET

Overhauled the import-export policy, slashed import licensing and went for vigorous export promotion and optimal import compression to expose Indian industry to competition from abroad.

Began rationalization of duty structures by pruning the peak customs duty from 220 per cent to 150 per cent.

Service tax in the 1994 Budget to tap into the fastest growing sector of the economy then. Service tax today fetches Rs 58,000 crore against Rs 400 crore in 1994.

1997: THE DREAM BUDGET

Made tax rates moderate for individuals as well as companies.

Allowed companies to adjust MAT paid in earlier years against tax liability in subsequent years.

Launched the Voluntary Disclosure of Income Scheme or VDIS, to bring out black money. Phased out ad hoc treasury bills used for financing the budget deficit.

2000: THE MILLENNIUM BUDGET

Had intended to promote India as a major software development centre in the world. The introduction of this tax holiday to software export sector was followed by exceptional growth in Indian IT industry.