History of the Union Budget in India: Evolution and Key Milestones

Budget-making as we know it today has to be looked at through two different eras – pre-independent when it was to serve the British interests and post-independent. The first-ever Indian Budget in pre-independent India that was presented was by James Wilson who was appointed as the Finance Minister of the India Council that advised the Indian Viceroy. He was a Scottish businessman, acknowledged for his understanding of business and finance and was the founder of the well-known magazine, The Economist, as well as that of the Standard Chartered bank. He was a member of the British Parliament and the Finance Secretary to the UK Treasury as well as the Vice President of the Board of Trade. He presented India’s first Budget on February 18, 1869.

Independent India’s first annual Budget was presented by R.K. Shanmukham Chetty on February 28, 1948, three months after his interim stock-taking of the country’s financial and economic position on November 26, 1947. The interim Budget was effective for barely four months.

Chetty was succeeded by John Matthai who presented the next Budget on February 28, 1949. His subsequent Budget, presented on February 28, 1950, was the first Budget of the Republic of India.

Some of the lesser-known facts of the Union Budget

• Jawaharlal Nehru’s February 13 to March 13 tenure in 1958 was the shortest for any finance minister. 
• Indira Gandhi is the only Prime Minister to have presented the Budget also as a finance minister when she did so in 1970. She did it as her finance minister Morarji Desai resigned, protesting her move to nationalize banks. She was also the first woman to have delivered the Union Budget. But hers was a role in addition to the all-important job of being the country’s Prime Minister. Finance Minister Nirmala Sitharaman was the first full-time female finance minister of the country. She became finance minister for the first time in 2019.
• India always had a separate Railway Budget till it was merged with the main Union Budget in 2017. Minister Suresh Prabhu presented the country’s last Railway Budget on February 25, 2016. 
• The Union Budgets were presented in the evening at 5 so that the details could be also presented to the British Parliament which used to be sitting for its session at the same time. This practice continued till 1998, a full 51 years after independence. From the 1999 Union Budget, the finance minister has presented it at 11am on February 28. 2017 onwards, the date of presentation of the Budget was shifted to February 1. 
• The ‘halwa’ ceremony marks the official communication of the final stages of the Budget preparation. It is usually held around a week a before the presentation of the Budget. As a custom, the finance minister attends the ceremony to lend a helping hand in preparation and distribution of the halwa. The ceremony means all the key members of the Budget team will now be holed up in the North Block, blocked from all external interaction – physical or virtual. This is to ensure secrecy of the Budget documents.
• Finance Minister Nirmala Sitharaman ditched the briefcase to carry the 2019-20 Budget papers for presenting them to the Parliament. In its place came the traditional 'bahikhata' – a red bag. It has been the norm since in all her Budgets.

List of Union Budgets in India

How budgets can change the course of the future

The one Union Budget that changed India’s future and was responsible for putting India on the road to accelerated growth was the Budget of 1991-92, presented by the then Finance Minister, Dr. Manmohan Singh. Under the leadership of P.V. Narasimha Rao, Dr. Manmohan Singh opened up India’s economy to foreign investors and eased up trade blockages. It set India on a high growth path, unleashing the animal spirit of the Indian entrepreneurs. It is thanks to the 1991 liberalisation that India is today the world’s fifth-largest economy and should be the third-largest before the decade ends.

• Finance Minister John Mathai attempted to present his 1950-51 Budget a little differently, distributing a White Paper along with the regular papers, while keeping his speech short. He did this to speak “somewhat informally on the matters.”
  
  This was the first time a finance minister attempted to be totally transparent about the financial health of the Indian economy. Mathai’s attempt was also a departure from the usual long speeches that most finance ministers indulge in.
• Arguably, the most historic Budget was presented by Finance Minister Dr. Manmohan Singh in 1991. Dr. Singh’s budget came in the backdrop of a severe economic crisis amid dwindling foreign exchange reserves and high interest rates.
  
  It did away with the licence-permit-quota raj that had kept the free private Indian enterprise chained. It reduced taxes and made imports easier, opening domestic companies to foreign competition. The Indian economy hasn’t looked back since.
• 3. P. Chidambaram’s 1997-98 Budget will forever be known as the ‘Dream Budget’ as it reduced the maximum marginal income tax rate for individuals to 30% from 40% and that for domestic companies to 35%. It also introduced a ‘Voluntary Disclosure of Income Scheme’ (VDIS) to unearth black money.
  
  The VDIS was successful in unearthing a sizeable amount of black money but it ended there, while failing to eradicate it. It invited criticism for being unfair to honest taxpayers.
  
  It remains etched in memory as a ‘Dream Budget’ because it made a genuine attempt to ease the tax burden on the middle class. Barring some tinkering here and there, the personal income tax has since not been reduced.
• 4. Union Budgets used to be political statements at one point. No more. Over the years, the ‘masala’ element from the Budgets has also reduced, particularly after the introduction of Goods and Services tax in 2017 which means most excise duty- and VAT-related announcements are no longer needed in the Budget. Many of the exemptions have been withdrawn, and new ones are a select few.
  
  The GST rates are decided by a GST Council that includes finance ministers of all the states in India. Decisions are taken based on majority vote in case there’s no consensus. Most products and services have been brought under the GST net. Exceptions include jet fuel, petrol and diesel, alcohol, exports, eggs, fresh milk among others.