When I was the FM - R Venkataraman

RUN UP TO THE BUDGET 2004-05

Budgets presented: 1980-81 and 1981-82

MOMENT OF TRIUMPH
In 1979-80, Charan Singh introduced heavy excise duties on goods of mass consumption like tea, coffee, chocolates and biscuits. This resulted in the prices shooting up by 21 per cent.

In my 1980-81 Budget, I 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.

Hence, there was a euphoric reception. I progressively increased the income-tax exemption ceiling from Rs 8,000 to Rs 12,000 and then to Rs 15,000, in my second Budget. The exemption, at today's price levels, stands at Rs 1,50,000. After my two Budgets, the inflation was down to 2.5 per cent.

TRYING MOMENTS
I had some problems in matters allied to the Budget. For example, I introduced the bearer bonds scheme to suck excess money from the economy. The bonds offered 2 per cent interest to the subscribers and the money was frozen for 10 years.

The revenue department collected Rs 1,000 crore (Rs 10,000 crore at today's price levels). This met with severe criticism by the Opposition who shouted that tax evaders were being given a free exit. I used the money for development purposes.

Another decision which required hard-selling was an IMF loan of $5 billion, which I took as a safeguard against an exchange crisis that was developing.

PRIME MINISTER'S ROLE AND THAT OF THE PMO
During both the Budgets, I personally took the proposals to Indira (Gandhi). She read through it fully, sought certain explanations, and finally approved it.

The PMO never interfered with my work. They might have had some idea only if Indira shared it with them. At that time, we had a good economist, Arjun Sengupta, in the PMO. We used to have long sessions in between.

WERE THE MARKETS FAIR IN THEIR ASSESSMENT?
The stockmarket was very enthusiastic. I had not levied any taxes, and on the contrary, provided concessions. For example, I raised the exemption limit from Rs 50,000 to Rs 1.5 lakh for the estate duty. It was welcomed by the people as the exemption of Rs 50,000 was too low.

IF YOU WERE TO PRESENT THE BUDGET TODAY, WHAT WOULD BE YOUR PRIORITIES?
I follow orthodox canons of taxation. In the older days, there used to be an item in the Budget called "surplus from current revenues". It has disappeared in the last 20 years. On the contrary, the current revenues are able to meet only 60 per cent of current expenditure.

The first aim of the government should be to progressively reduce the gap between current expenditure and current revenues.

Second, we are not raising revenues where it is possible. It's a blatant violation of canons of taxation and equity that people with income levels of Rs 1.5 lakh and Rs 10 crore a year, both be taxed at the same rate of 30 per cent.

Every civilised society levies a tax on the assets left by a deceased person. The tax is called death duty or estate duty or inheritance tax according to the point at which it is levied.

India also enacted an Estate Duty Act earlier and levied a tax on assets over Rs 50,000. In the 1981-82 Budget, I raised the exemption to Rs 1.5 lakh.

The valuable source of revenue had been given up later. I see no validity in the abolition of estate duty and increasing the yawning deficit. Nor is it equitable that revenue should forgone when the financial situation is desperate.

Third, there is unconscionable lavishness in expenditure. When I raised the exemption limits, 14 lakh people went out of the assessment net. Despite this, the revenue department brought to me a proposal to recruit 300 more clerks. I simply rejected it.