Budget 2024 Primer – Amazing facts about Indian budgets

12 Jan 2024 , 09:29 AM

Most of us know about Indian budgets only since 1947 when Shanmukham Chetty presented India’s first Union Budget in the year 1947. However, budgets in India have been around since 1860 when the Indian state came directly under the crown during the reign of Queen Victoria. Over the years, there have been the share of funny and quirky factors about the budget, which just adds to its aur and makes the process so much more interesting and also a lot more exciting.

Long and short of the Union Budget

There are some finance ministers who compete with others when it comes to the length of the budget speech. Then there is our current finance minister, Nirmala Sitharaman, who prefers to compete with herself when it comes to the length of the budget. At the peak of the COVID crisis, when Nirmala Sitharaman presented the Union Budget on February 1, 2020; she set the record for the longest speech ever. She spoke for two hours and forty-two minutes in all. Incidentally, she just broke her own record during the July 2019 budget after the Modi government had been re-elected. In her budget speech in July 2019, Nirmala Sitharaman spoke for a full 2 hours and 17 minutes. 

Clearly, the current finance minister prefers to compete with herself; however, subsequent budgets have taken less time. But, did you know which was the shortest budget ever. The shortest budget in free India was presented by H M Patel in the year 1977, when the Janata government had just come to power. His entire budget speech contained just about 800 words, so it would have taken less than 10 minutes in all. That was an example of Brevity being the soul of wit. 

Which budget was the longest in terms of words?

At times people love to obsess themselves with trivial pieces of data, so here is one on the number of words in a union budget. Did you know that the epochal budget presented by Dr Manmohan Singh in 1991 under the PVN regime, was the longest budget in terms of words used. While Dr Manmohan Singh is known to be a very reticent man, but that did not really reflect in the length of his budget speech in 1991. It was, perhaps, the most important budget in independent India and ran to a full 18,650 words. That record still holds after 33 years and the next longest budget was presented by Arun Jaitley in the year 2018 and just fell short of the epochal budget at 18,604 words. Interestingly, Nirmala Sitharaman has the distinction of making the longest budget speech, but she had much fewer words. Needless to say, the shortest budget was the 800 word budget presented by HM Patel in 1977.

When PM was forced to present the Union Budget

What happens if the finance minister is not able to present the Union Budget due to a sudden change in circumstances. In that case, it is the prime minister can present the union budget, if the time is too short to appoint a new finance minister. Incidentally, this has happened thrice in the past. The 1958 Union Budget was presented by Pandit Jawaharlal Lal Nehru, becoming the first Indian Prime Minister to present a union Budget. That was because, the then Finance Minister, TT Krishnamachari, had resigned due to his alleged involvement in the Haridas Mundhra scandal. Back in 1958, the relentless attack by Feroze Gandhi and other members of the opposition resulted in the resignation of TTK. Hence, Pandit Nehru had to present the Union Budget. 

This once again repeated in the year 1970. Back then, Morarji Desai, who holds the record of presenting maximum number of budgets in India, had resigned abruptly in the aftermath of the bank nationalization in 1969. It may be recollected that Indira Gandhi had nationalized Indian banks in two tranches. She had first nationalized 14 banks in 1969 and later nationalized another 6 banks in 1980. Since Morarji had resigned protesting against bank nationalize, the then Prime Minister Indira Gandhi had presented the union budget in the year 1970. Morarji Desai resigned was peeved that the nationalization of banks had been done without consulting him, although he was the finance minister. This repeated again in 1987, when Prime Minister Rajiv Gandhi presented the budget since the Finance Minister VP Singh had resigned in the aftermath of the BOFORS scandal.

Hindi language and Blue Sheet secret

For a nation that prides in having Hindi as its national language, you would be surprised to know that the Union Budget was only presented in English language till the year 1955. It was only from the year 1955, that the Union Budget was presented simultaneously in English and in Hindi. Most finance ministers have, however, still preferred to present the union budget speech in English than in Hindi to cater to the upmarket audience, which comprises the budget intelligentsia that analyses the budget. It was only in 1955 that the union government decided to print the budgets in English and Hindi languages. It was also a signal that the budget had arrived as a common man’s document.

Let us quickly shift to understanding what is the Blue Sheet in the entire budget making process. The Blue Sheet is also considered to be the blueprint of the Union Budget document. In terms of its utility, the blue sheet acts as the starting point of the budget. The blue sheet has all the key numbers pertaining to receipts, expenditure, deficits, borrowings, disinvestments etc. This is a highly classified and highly confidential document and the sold custodian of the Blue Sheet is the joint secretary of the budget.

Have you heard of Carrot & Stock Budget and Dream Budget

By now most are familiar with the epochal budget that Manmohan Budget that was presented by Dr Manmohan Singh in 1991. However, did you know that there are 2 more such budgets with very atypical names.

1. Did you know that the 1986 budget presented by VP Singh was better known as the “Carrot and Stick Budget” and the reasons are not hard to fathom. It was the first major step towards dismantling the licence raj in India; although it actually happened only in 1991. The 1986 budget was called the “Carrot and Stick budget” as it offered both rewards and punishment. To lower the cascading effect of indirect taxes, the budget introduced MODVAT (Modified Value Added Tax) credit. This reduced the costs substantially. However, at the same time, the budget also announced a massive drive against smugglers, black marketers, and tax evaders. That actually became quite controversial and corporate interests finally ensured his removal from the FM’s post.

    

2. Another budget with an interesting name is the “Dream Budget” presented by the articulate Mr Chidambaram for fiscal year 1997-98. For the first time the finance minister used the highly popular Laffer Curve principle to lower tax rates. The argument was that if the rates were reasonable, it would prompt more people to comply with tax payments. That eventually turned out to be true as tax collections went up multi-fold from that point. Chidambaram slashed maximum marginal income tax rate for individuals from 40% to 30% and for domestic companies to 35%. That budget also had the controversial VDIS (voluntary disclosure of income scheme) to recover black money. The 1997 budget had also slashed customs duty to 40% and simplified excise structure.

Leaked Budget, Millennium Budget, and Rollback Budget

Having seen the nuances of the epochal budget, dream budget and the carrot & stick budget, let us look at some more such weird names associated with specific budgets. Here are 3 such budgets with possibly dubious distinctions.

• For the first time and also for the last time, the Union Budget was leaked in the year 1950. It has not happened since, which is testimony to the sanctity of the budget process. The real reason was not disclosed, but it had something to do with the printing location. Till 1950, the Union Budget was printed at the Rashtrapati Bhavan. However, after this leak, it was decided that the printing of the budget document be shifted to a press at Minto Road in New Delhi. Eventually, in 1980, a dedicated government press was set up in the North Block’s basement to ensure the entire process is smooth and event-free. The core budget team, including the finance minister, stays locked in the premises for the last week till the budget is finalized.

   

• Another significant budget was presented at the turn of the millennium by Yashwant Sinha in the year 2000. This was special because it was the first time that the Union Budget was moving away from the colonial hangover of presenting the budget in the evening. Effective the year 2000, India started presenting the Union Budget on the floor of the house at 11.00 am, a practice that has now continued for close to a quarter of a century. The Millennium Budget was also significant for a very important provision and it came just after the technology meltdown in 1999 and 2000. Sinha believed that the answer was to make Indian IT competitive and also empower them to grow. In that budget, Sinha laid out the roadmap for the growth of India’s Information Technology (IT) industry. On the one side, it phased out incentives on software exporters but also lowered customs duty on 21 items such as computers and computer accessories. The result was an explosive growth in the IT sector in India; in exports and valuations.

   

• On a lightly more dubious note, the Union Budget for fiscal year 2002-03 acquired the dubious distinction of earning the nickname of “Rollback Budget”. Several proposals, including the withdrawal of capital gains tax exemptions, proposed in the budget had to be later withdrawn or rolled back under political pressure.

On a more serious note, who puts the Union Budget together?

We just thought of inserting some serious stuff amidst all the lighter stuff, so people are aware about the budget process. The primary responsibility of drafting the Union Budget lies with the Department of the Economic Affairs. That is a division of the Ministry of Finance and it is tasked with the entire budget process. The final Budget is put together by experts of the Ministry of Finance, the respective spending ministries, and the NITI Aayog (which was formerly known as the Planning Commission). Of course, the entire budget drafting process also involves multiple consultations with the Department of Expenditure, Union Ministries, stakeholders including economists, farming communities, FIIs, investors, etc. Once the budget provisions are made, there is a final review done by the core team at the Department of Economic affairs, directly under the stewardship of the finance minister. Normally, the budget also has the blessings of the prime minister become it is presented by the Finance Minister on the floor of the house.

Finally, some budget provisions were truly eccentric

There have been several announcements in previous budgets, which may sound outright eccentric. Here are three such examples.

• The union budget for the fiscal year 1955-56 had proposed different tax exemption slabs for married and unmarried people. What exactly was that, and why? That was never explained, but subsequently,  the idea was given a quiet burial.

   

• In 1962, ahead of the Indo-China war, the Union Budget sharply increased the tax rates with a clear intent of putting steep rates of tax on the rich and wealthy. In fact, the peak rate of income tax stood at a staggering level of 72.5%. This only encouraged evasion.

   

• Did you know that the Union Budget of fiscal year 1972-73 proposed a 34.5% tax on rewards earned from solving crossword puzzles. For people addicted to solving these puzzles; it was at best, ridiculous.

Finally, did you know how many budgets have been presented in independent India till date? Till date a total of 74 full Union budgets, 14 Interim budgets and 4 Special Budgets have been presented.